3. Relationship between tax revenues, deadweight loss, and demand elasticity The government is considering levying a tax of $25 per unit on suppliers of either windbreakers or bucket hats. The supply curve for each of these two goods is identical, as you can see on each of the following graphs. The demand for windbreakers is shown by Dw (on the first graph), and the demand for bucket hats is shown by DB (on the second graph). Suppose the government taxes windbreakers. The following graph shows the annual supply and demand for this good. It also shows the supply curve (S+Tax) shifted up by the amount of the proposed tax ($25 per windbreaker). On the following graph, use the green rectangle (triangle symbols) to shade the area that represents tax revenue for windbreakers. Then use the black triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax. (?) PRICE (Dollars per windbreaker) 60 55 50 45 40 35 30 25 20 15 10 - 5 0 Windbreakers Market S+Tax Supply Dw 0 50 100 150 200 250 300 350 400 450 500 550 600 QUANTITY (Windbreakers) Tax Revenue Deadweight Loss

3. Relationship between tax revenues, deadweight loss, and demand elasticity The government is considering levying a tax of $25 per unit on suppliers of either windbreakers or bucket hats. The supply curve for each of these two goods is identical, as you can see on each of the following graphs. The demand for windbreakers is shown by Dw (on the first graph), and the demand for bucket hats is shown by DB (on the second graph). Suppose the government taxes windbreakers. The following graph shows the annual supply and demand for this good. It also shows the supply curve (S+Tax) shifted up by the amount of the proposed tax ($25 per windbreaker). On the following graph, use the green rectangle (triangle symbols) to shade the area that represents tax revenue for windbreakers. Then use the black triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax. (?) PRICE (Dollars per windbreaker) 60 55 50 45 40 35 30 25 20 15 10 - 5 0 Windbreakers Market S+Tax Supply Dw 0 50 100 150 200 250 300 350 400 450 500 550 600 QUANTITY (Windbreakers) Tax Revenue Deadweight Loss

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter12: The Cost Of Production

Section: Chapter Questions

Problem 8PA

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Similar questions

In a market where the supply curve is perfectly inelastic how does an excise tax affect the price paid by consumers and the quantity bought and sold?
Under which circumstances does line tax burden fall entirely on consumers?
To raise funds aimed at providing more support for public schools, a state government has just imposed a unit excise tax equal to $4 for each monthly unit of cell services sold by each company operating in the state. The following diagram depicts the positions of the demand and supply curves for cell services before the unit excise tax was imposed. Use this diagram to determine the position of the new market supply curve now that the tax hike has gone into effect. a. Does imposing the $4-per-month unit excise tax cause the market price of cell services to rise by $4 per month? Why or why not? b. What portion of the $4-per-month unit excise tax is paid by consumers? What portion is paid by providers of cell services?
Suppose 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.
Is thinking about levying a per-unit tax of $60 on firms supplying either ski passes or subway tickets. The supply curves for both of the two goods are identical, as given by the following graphs. The demand for ski passes is given by De (on the first graph), and the demand for subway tickets is given by Dr (on the second graph). Suppose the government decides to tax ski passes. The following graph plots the yearly demand and supply for this good. It also plots another supply curve (S+ Tax) shifted upward by the proposed tax amount ($60 per pass). On the following graph, use the green rectangle (triangle symbols) to shade the area that represents tax revenue for ski passes. Then use the black triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax. PRICE (Dollars per pass) 2 8 2 2 2 2 2 2 2 2 20 120 110 100 90 60 40 30 20 10 4 Ski Passes Market S+Tax Supply De 0 50 100 150 200 250 300 350 400 450 500 550 600 Tax Revenue Deadweight Loss
Doyle and Samphantharak (2008) find that when a 5% gas tax is implemented, prices consumers pay for gas increase by about 4%. What role does demand elasticity play in determining the size of this price change? That is, under what demand elasticity cases would the price change be closer to 5%, or closer to 0%? Illustrate and explain using supply-and-demand graph(s)..
7.04 Review Suppose a tax of $20 is placed on televisions. If this market's supply and demand curves' are elastic, the burden of this tax falls on: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a the sellers b the buyers both the sellers and the buyers.
3. Relationship between tax revenues, deadweight loss, and demand elasticity The government is considering levying a tax of $120 per unit on suppliers of either pickleball paddles or metro cards. The supply curve for each of these two goods is identical, as you can see on each of the following graphs. The demand for pickleball paddles is shown by Dr (on the first graph), and the demand for metro cards is shown by Dy (on the second graph). Suppose the government taxes pickleball paddles. The following graph shows the annual supply and demand for this good. It also shows the supply curve (S+ Tax) shifted up by the amount of the proposed tax ($120 per paddle). On the following graph, use the green rectangle (triangle symbols) to shade the area that represents tax revenue for pickleball paddles. Then use the black triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax. PRICE (Dollars per paddle) 240 220 200 160 140 120 80 40 0 0 Pickleball…
Suppose a $1 excise or commodity tax is placed on the purchasers of cans of soda. Use the graph to illustrate the impact this tax would have on the soda market and answer the questions. Be certain to shift the entire curve, endpoint to endpoint. Price per can (5) 10 9 8 7 3 2 1 0 1 deadweight loss: $ 0123456789 10 11 12 13 14 15 16 17 18 19 20 Cans of soda per day (in tens of thousands) Calculate the deadweight loss of the tax. Enter the answer in thousands. Supply Demand deadweight loss: $ 0123456789 10 11 12 13 14 15 16 17 18 19 20 Cans of soda per day (in tens of thousands) Demand Calculate the deadweight loss of the tax. Enter the answer in thousands. The tax would affect a household's Choose the answer that best describes the impact this tax would have on a household's economic income and whether it would cause a large change in the household's consumption of soda. This sort of change in behavior is called tax shifting. O uses side, but tax shifting is not likely to occur. O…
38. The following graph shows the market for the long-distance bus rides. In the absence of taxes, the equilibrium price of a ride is $5 and the equilibrium quantity is 10 million rides. Suppose that regulator levies an excise tax on bus service providers. The amount of excise tax equals $2 per ride. What will be consumer’s tax incidence (i.e. extra price increase faced by consumers)? $2 $1 $0 $0.50
a. The market demand and supply functions for VCR movie rentals are:QD=10-0.04P and QS=3.8P+4.Suppose that VCR movie rentals are taxed at $0.25 per unit. Calculate:i. the equilibrium quantity and price, point elasticity of demand in equilibrium andproducer surplus without tax.ii. the revenues generated by the tax, the loss in producer surplus and percentageof the burden of the tax falls on producers?b. Determine the "rule-of-thumb" price when the monopolist has a marginal cost of $25and the price elasticity of demand of -3.0.
The demand and supply equations for a product are: Q^d=300-6p and Q^x=-40+6p. . Determine the market Equilibrium and draw graphs. Suppose that the government decides to impose a flat tax of 10% on each unit sold. Show that the price that consumers pay would be the same if the government imposed a tax of Rs. 1.70 per unit sold. Draw graph and explain . Also calculate the total revenue earned by sellers before and after the tax, the tax revenue raised by the government, changes in consumer and producers surplus and dead weight loss