Principles of Macroeconomics (MindTap Course List)
Principles of Macroeconomics (MindTap Course List)
7th Edition
ISBN: 9781285165912
Author: N. Gregory Mankiw
Publisher: Cengage Learning
Question
Chapter 8, Problem 4QCMC
To determine

The impact of increased tax on peanut butter.

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Q)Economics If the tax elasticity of supply is 0.16, by how much will the quantity supplied increase when the marginal tax rate decreases from 40 to 36 percent?
Government levied a tax on good A. The less elastic the demand is, the greater or the smaller the tax burden consumers bear? Also, is the after-tax equilibrium quantity the greater or smaller? Consumers’ tax burden: After-tax equilibrium quantity:
Peanut butter has an upward-sloping supplycurve and a downward-sloping demand curve. If a10 cent per pound tax is increased to 15 cents,the government’s tax revenuea. increases by less than 50 percent and may evendecline.b. increases by exactly 50 percent.c. increases by more than 50 percent.d. The answer depends on whether supply ordemand is more elastic.
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