Exam 8: Application the Cost of Taxation: Part A

Figure 8-26 -Refer to Figure 8-26.Suppose the government places a $3 tax per unit on this good.What price will sellers receive for the good after the tax is imposed?

A tax is imposed on a certain good.The tax produces revenue of $5,000 for the government.The tax reduces consumer surplus by $3,000 and it reduces producer surplus by $4,000.What is the amount of the deadweight loss of the tax?

Figure 8-25 -Refer to Figure 8-25.Suppose the government increases the size of the tax on this good from $4 per unit to $6 per unit.Will the tax revenue collected from the tax increase,decrease,or stay the same?

Scenario 8-3 Suppose the market demand and market supply curves are given by the equations: -Refer to Scenario 8-3.Suppose that a tax of T is placed on buyers so that the demand curve becomes: What quantity will be bought and sold after the tax is imposed?

Figure 8-26 -Refer to Figure 8-26.Suppose the government places a $3 tax per unit on this good.How much is consumer surplus after the tax is imposed?

Figure 8-25 -Refer to Figure 8-25.Suppose the government places a $4 tax per unit on this good.What price will sellers receive for the good after the tax is imposed?

Scenario 8-3 Suppose the market demand and market supply curves are given by the equations: -Refer to Scenario 8-3.Suppose that a tax of T is placed on buyers so that the demand curve becomes: If T = 40,how much will be the deadweight loss from this tax?

Suppose the demand curve and the supply curve in a market are both linear,and suppose the price elasticity of supply is 0.5.Will the deadweight loss from a $3 tax per unit be larger if the price elasticity of demand is 0.3 or if the price elasticity of demand is 0.7?

Figure 8-25 -Refer to Figure 8-25.Suppose the government places a $4 tax per unit on this good.How much is the deadweight loss from this tax?

Figure 8-26 -Refer to Figure 8-26.How much is consumer surplus at the market equilibrium?

Provide several examples of important taxes on labor in the United States.For a typical worker,what is the marginal tax rate on labor income once all the labor taxes are summed?

Figure 8-25 -Refer to Figure 8-25.Suppose the government places a $4 tax per unit on this good.How many units of this good will be bought and sold after the tax is imposed?

Using demand and supply diagrams,show the difference in deadweight loss between (a)a market with inelastic demand and supply and (b)a market with elastic demand and supply.

Suppose that the market for product X is characterized by a typical,downward-sloping,linear demand curve and a typical,upward-sloping,linear supply curve.If a $2 tax per unit results in a deadweight loss of $200,how large would be the deadweight loss from a $4 tax per unit?

Figure 8-25 -Refer to Figure 8-25.How much is consumer surplus at the market equilibrium?

Figure 8-26 -Refer to Figure 8-26.How much is producer surplus at the market equilibrium?

Figure 8-25 -Refer to Figure 8-25.Suppose the government places a $4 tax per unit on this good.How much is consumer surplus after the tax is imposed?

The demand for energy drinks is more elastic than the demand for milk.Would a tax on energy drinks or a tax on milk have a larger deadweight loss? Explain.

John has been in the habit of mowing Willa's lawn each week for $20.John's opportunity cost is $15,and Willa would be willing to pay $25 to have her lawn mowed.What is the maximum tax the government can impose on lawn mowing without discouraging John and Willa from continuing their mutually beneficial arrangement?

Figure 8-26 -Refer to Figure 8-26.Suppose the government places a $3 tax per unit on this good.How much is the deadweight loss from this tax?