5. Calculating tax incidence Suppose that the local government of Corpus Christi decides to institute a tax on cider producers. Before the tax, 40,000 cases of cider were sold every week at a price of $11 per case. After the tax, 34,000 cases of cider are sold every week; consumers pay $13 per case, and producers receive $6 per case (after paying the tax). The amount of the tax on a case of cider is $ burden that falls on producers is $ per case. True or False: The effect of the tax on the quantity sold would have been smaller if the tax had been levied on consumers. O True per case. Of this amount, the burden that falls on consurhers is False per case, and the

5. Calculating tax incidence Suppose that the local government of Corpus Christi decides to institute a tax on cider producers. Before the tax, 40,000 cases of cider were sold every week at a price of $11 per case. After the tax, 34,000 cases of cider are sold every week; consumers pay $13 per case, and producers receive $6 per case (after paying the tax). The amount of the tax on a case of cider is $ burden that falls on producers is $ per case. True or False: The effect of the tax on the quantity sold would have been smaller if the tax had been levied on consumers. O True per case. Of this amount, the burden that falls on consurhers is False per case, and the

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter6: Supply, Demand And Government Policies

Section: Chapter Questions

Problem 5QR

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Under which circumstances does line tax burden fall entirely on consumers?
5. Calculating tax incidence Suppose that the local government of Santa Fe decides to institute a tax on seltzer consumers. Before the tax, 20,000 packs of seltzer were sold ever week at a price of $11 per pack. After the tax, 14,000 packs of seltzer are sold every week; consumers pay $14 per pack (including the tax), and producers receive $7 per pack. The amount of the tax on a pack of seltzer is $ burden that falls on producers is $ O True per pack. True or False: The effect of the tax on the quantity sold would have been the same as if the tax had been levied on producers. False per pack. Of this amount, the burden that falls on consumers is $ per pack, and the
5. Calculating tax incidence Suppose that the U.S. government decides to charge cola producers a tax. Before the tax, 10,000 cases of cola were sold every week at a price of $4 per case. After the tax, 4,000 cases of cola are sold every week; consumers pay $7 per case, and producers receive $1 per case (after paying the tax).
8. Suppose we want regular cars to be gradually replaced by electric cars. There are several kinds of government interventions that could be used to make this happen, or at least to push the car market to produce and sell more electric cars. Explain how a tax could be used for this purpose, and then explain how a subsidy could be used for this purpose.
1.The demand and supply schedules for coffee are given in the table. a.If there is no tax on coffee, what is the price of a cup of coffee and how much coffee is bought? b.If a tax of 75¢ a cup is introduced, what is the price of a cup of coffee and how much coffee is bought? Who pays the tax?
1. Please explain what would happen to the market-clearing prices and quantities of e- cigarettes in the U.S. under the following hypothetical scenarios. b. The federal government imposed a $1 per pack excise tax on cigarettes.
Price (dollars per gallon) S2 $5.50 3.50 2.50 D Quantity (millions of gallons per month) 30 40 45 Assume the graph above illustrates a new tax put into the market for soft drinks. S2 is the supply curve with the $2 tax in place. What price would consumers pay if the tax was placed on consumers instead of producers? 1) $2.00 O 2) $3.50 3) $2.50 4) $1.50
5. The current equilibrium price per pack of cigarettes is $4. Every day 40 million packs of cigarettes are sold. In order to recover some of the health care costs associated with smoking, the government imposes a tax of $2 per pack. This will raise the price to $5 per pack and reduce the quantity demanded to 30 million packs at that price, while the quantity supplied at$3 per pack is now 30 million packs. a. Draw a supply and demand diagram of cigarettes before the tax. Label CS and PS b. On a new diagram, show the effect that the tax has by labeling the following i. New consumer surplus ii. New producer surplus iii. Government revenue from excise tax iv. Deadweight loss
7. Effect of a tax on buyers and sellers The following graph shows the daily market for jeans. Suppose the government institutes a tax of s20.30 per pair. This places a wedge between the price buyers pay and the price sellers receive. 100 90 80 Demand Supply 70 50, 50 60 50 Тах Wedge 40 30 20 10 10 20 30 40 50 60 70 B0 90 100 QUANTITY (Pairs of jeans) Fill in the following table with the quantity sold, the price buyers pay, and the price sellers receive before and after the tax. Quantity Price Buyers Pay Price Sellers Receive (Pairs of jeans) (Dollars per pair) (Dollars per pair) Before Tax After Tax Using the data you entered in the previous table, calculate the tax burden that falls on buyers and on sellers, respectively, and calculate the price elasticity of demand and supply over the relevant ranges using the midpoint method. Enter your results in the following table. Tax Burden (Dollars per pair) Elasticity Buyers Sellers The burden of the tax falls more heavily on the elastic…
8. Suppose the total demand for wheat and the total supply of wheat per month in the Kansas City grain market are as shown in the table below. Suppose that the government estab- lishes a price ceiling of $3.70 for wheat. What might prompt the government to establish this price ceiling? Explain care- fully the main effects. Demonstrate your answer graphically. Next, suppose that the government establishes a price floor of $4.60 for wheat. What will be the main effects of this price floor? Demonstrate your answer graphically. LO3.6 Thousands of Bushels Thousands of Demanded Price per Bushel Bushels Supplied 85 $3.40 72 80 3.70 73 75 4.00 75 70 4.30 77 65 4.60 79 60 4.90 81
7. Effect of a tax on buyers and sellers The following graph shows the weekly market for handbags in some hypothetical economy. Suppose the government levies a tax of $11.60 per bag. The tax places a wedge between the price buyers pay and the price sellers receive. PRICE (Dollars per bag) 50 G 40 35 30 25 20 = 10 16 0 0 50 Tax Wedge Supply A Demand 100 150 200 250 300 350 400 450 5007 QUANTITY (Bags of handbags)
7. Effect of a tax on buyers and sellers The following graph shows the weekly market for craft beer in some hypothetical economy. Suppose the government levies a tax of $20.30 per case. The tax places a wedge between the price buyers pay and the price sellers receive. PRICE (Dollars per case) 100 90 80 Demand Supply 70 50 50 Tex Wedge 40 30 20 10 0 D 100 200 300 400 500 600 700 800 500 1000 QUANTITY (Cases of craft beer) Complete the following table by filling in the quantity sold, the price buyers pay, and the price sellers receive before and after the tax. Quantity (Cases of craft beer) Price Buyers Pay (Dollars per case) Price Sellers Receive (Dollars per case) Before Tax After Tax Using your answers from the previous table, calculate the tax burden that falls on buyers and on sellers, respectively, and calculate the price elasticity of demand and supply over the relevant ranges using the midpoint method. Enter your results in the following table. Tax Burden (Dollars per case)…