Application: The Costs of Taxation 2229
28.
Refer to Figure 8-26. How much is producer surplus at the market equilibrium?
29.
Refer to Figure 8-26. How much is total surplus at the market equilibrium?
30.
Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. What price
will consumers
pay for the good after the tax is imposed?
31.
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?
32.
Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How many
units of this good
will be bought and sold after the tax is imposed?
33.
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?
34.
Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much
is producer
surplus after the tax is imposed?
35.
Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much
tax revenue is
collected after the tax is imposed?
36.
Refer to Figure 8-26. Suppose the government increases the size of the tax on this good from
$3 per unit to $6 per
unit. Will the tax revenue collected from the tax increase, decrease, or stay
the same?
37.
Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much
is total surplus
after the tax is imposed?
38.
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?
Figure 8-27
39.
Refer to Figure 8-27. Suppose that Market A is characterized by Demand 1 and Supply 1, and
Market B is
characterized by Demand 2 and Supply 1. If an identical tax is imposed on each
market, the tax will create a larger
deadweight loss in which market? Explain.
Application: The Costs of Taxation 2235
Figure 8-28
40.
Refer to Figure 8-28. Suppose that Market A is characterized by Demand 1 and Supply 1, and
Market B is
characterized by Demand 1 and Supply 2. If an identical tax is imposed on each
market, the tax will create a larger
deadweight loss in which market? Explain.
41.
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?
42.
Is the United States’ labor supply more inelastic or more elastic? Briefly summarize the
competing theories.
43.
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.
44.
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. Suppose the price elasticity of
supply is 0.7. Will the deadweight loss
from a $3 tax per unit be smaller if the absolute value of
the price elasticity of demand is 0.6 or if the absolute value
of the price elasticity of demand is
1.5?
45.
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?
46.
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?
47.
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 $6 tax per unit?
48.
Suppose the demand curve and the supply curve in a market are both linear. If a $2 tax per unit
results in a
deadweight loss of $200, how large would be the deadweight loss from a $3 tax per
unit?
49.
Suppose the demand curve and the supply curve in a market are both linear. To begin, there was
a $5 tax per unit,
and the $5 tax resulted in a deadweight loss of $1,500. Now, the tax per unit is
higher, with the higher tax resulting in
a deadweight loss of $6,000. What is the amount of the
new tax per unit?
Application: The Costs of Taxation 2241
Figure 8-29
50.
Refer to Figure 8-29. As the size of the tax increases from $3 to $6 to $9, what happens to tax
revenues?
51.
Refer to Figure 8-29. As the size of the tax increases from $3 to $6 to $9, what happens to the
deadweight loss
from the tax?
52.
Refer to Figure 8-29. If you were a policymaker choosing between a $3, $6, or $9 tax, which
would you choose
and why?
53.
Describe the Laffer curve.