EBK MICROECONOMICS
2nd Edition
ISBN: 9780134458496
Author: List
Publisher: VST
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Question
Chapter 9, Problem 7Q
To determine
The meaning of Pigouvian taxes or subsidies and when will the government levy Pigouvian taxes or subsidies.
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Discuss and provide two examples of how subsidies can be economically harmful.
e. What happens when government imposes a tax of 60 cents per gallon on buyers?
If the government wants to use a Pigouvian tax to alleviate the problem of obesity contagion, what should it tax? What factors go into deciding the size of the tax?
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- What is pigovian tax. Explain in detail.arrow_forwardwhy do comsumers pay the tax on goods if the elasticity of demand is less than the elasticty of supply?arrow_forwardIf the government imposes a tax of 8% on luxury cars that the consumer must pay, why does the consumer not actually pay the full 8%? How is it determined how much the consumer will pay and how much the producer will pay? Is it possible for an 8% tax the government imposes on the consumer to actually have 1% paid by the consumer and 7% by the producer? Why or why not?arrow_forward
- Suppose government impose a tax of 1 dollar per bottle on sellers of industrial detergent. Explain 3 dimensions in which you can explain the effect of this tax.arrow_forwardSuppose the price elasticity of demand for smartphones is 0.5 (absolute value), while the price elasticity of supply is 1.9. If the government imposes a per-unit tax of $100 on the sellers of smartphones, how will the price and quantity transacted of smartphones change? Will the sellers or the buyers bear a larger tax burden? Will the market be able to achieve economic efficiency after the tax is imposed? Explain with a diagram.arrow_forwardDaniel Patrick Moynihan, the late senator from New York, once introduced a bill that would levy a 10,000 percent tax on certain hollow-tipped bullets. A 10,000 percent tax on bullet ___ is not/is___ likely to generate a lot of revenue. Why might Senator Moynihan have proposed it? To boost the manufacturing industry of hollow-tipped bulletsTo raise revenue to support law enforcementTo discourage the use of hollow-tipped bulletsarrow_forward
- How a Pigovian tax affects consumers? Please support your explanation based on a figure.arrow_forwardThe demand for beer is more elastic than the demand for milk. Would a tax on beer or a tax on milk have a larger deadweight loss? Why?arrow_forwardSuppose that the government wants to tax wealthy people. They notice that only wealthypeople buy yachts. So the government decides to tax yachts. Is this an effective way to tax thewealthy? Explain your answerarrow_forward
- Consider the market below where the government has imposed a $12 excise tax on this product. P $33 $24 $18 $15 $12 $3 A B D F QE₁ 18 с E Siafter tax So before tax < Q QE₂ QE。 30 42 What area on the graph represents the total amount of DEADWEIGHT LOSS that results from the imposition of the tax?arrow_forwardWhy does the government ass excise taxes to certain products?arrow_forwardWhat are three reasons that a government might want to intervene in markets?arrow_forward
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