Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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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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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?
With the help of appropriate diagrams, explain how a tax can be used to reduce the consumption of a harmful product such as cigarettes.
What is an example of a market that govenrments should not tax for economic reasons?
Chapter 9 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
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- On a generic supply-demand graph, show the deadweight loss ( DWL) of a price ceiling that is placed below the equilibrium price for a product ( you should assume that there are NO externalities associated with the product).arrow_forwardSuppose 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_forwardAssume there is a positive externality associated with having a tertiary education. Is the deadweight loss from the subsidy increased or decreased with the introduction of the positive externality? Why?arrow_forward
- How a Pigovian tax affects consumers? Please support your explanation based on a figure.arrow_forwardWhich of the following best describes why the government is not able to decide whether it will be consumers or producers will pay a tax. a. The tax changes the equilibrium price, so that producers and consumers share the burden of the tax. b. The tax corrects an externality. c. Producers will always pass the entire tax onto consumers d. A tax on consumers will result in an increase in supplyarrow_forwardSuppose the government imposes a tax of $20 million per month on cable producers. If Comcast wants to maximize its profit, what price per subscription should it charge per month?arrow_forward
- What exactly is a Pigovian tax? Give some instances of how the Pigovian tax can be used to tackle environmental issues.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_forwardDoes the Constitution create the power for the State to tax? Justify.arrow_forward
- Which one of the two policies, a tax on pork meat consumption, or a tax on pork meat production, is more efficient? Why?arrow_forwardThe difference between a tax and a subsidy is when the government places a tax on the producers of a good, it _____ the equilibrium price and _____ the equilibrium quantity, but when the government grants a subsidy to the producers of the good, it _____ the equilibrium price and _____ the equilibrium quantity. Group of answer choices increases; increases; decreases; decreases decreases; decreases; increases; increases increases; decreases; decreases; increases decreases; increases; increases; decreases increases; does not change; does not change; increasesarrow_forwardWhat is producer and consumer surplus PRIOR to tax?arrow_forward
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