Essentials of Economics (MindTap Course List)
8th Edition
ISBN: 9781337091992
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 8.1, Problem 1QQ
To determine
The impact of tax on
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Suppose the market for cigarette is competitive. An economist estimates the price elasticity of demand and supply for cigarette are -0.8 and 0.7 respectively.
Suppose the government imposes a per-unit tax of $45 on the cigarette sellers. By how much would buyers share the tax burden respectively? Show your calculation.
Suppose the market for cigarette is competitive. An economist estimates the price elasticity of demand and supply for cigarette are -0.8 and 0.7 respectively. Suppose the government imposes a per-unit tax of $45
Some economists believe that a sales tax, in general, is undesirable. Explain. Despite this, why do most countries still impose a tax on cigarette? Explain plausible arguments.
If the government removes a tax on a good, then the quantity of the good sold will______.
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Essentials of Economics (MindTap Course List)
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- In the graph below, click on the dashed line that indicates the quantity consumed after a tax is imposed on coffee sales. price, P 0 B A E F D S coffee, Qarrow_forwardDoes a tax on buyers affect the demand curve?arrow_forwardUse the graph to answer the following question: Which of the following statements is most true? A) Producers will pay the entire tax. B) Consumers will pay 1/3 of the tax. C) Producers will pay 1/3 of the tax. D) Consumers will pay the entire tax.arrow_forward
- The following graph shows the daily market for jeans. Suppose the government institutes a tax of $40.60 per pair. This places a wedge between the price buyers pay and the price sellers receive. 200 180 180 Demand Supply 140 120 100 Tax Wedge 80 60 40 20 50 100 150 200 250 300 350 400 450 500 QUANTITY (Pairs of jeans) PRICE (Dollars per pair)arrow_forwardHow does a tax on a good affect the price paid by buyers, price receive by sellers, and the quantity sold?arrow_forwardIf 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?arrow_forward
- Use the data below to answer the following questions: Price Quantity Supplied $4 4 $7 13 The government wants to increase production of this good. Would it make more sense to offer a subsidy or a tax? Based on your previous answers, would the government plan to increase production be likely to be effective or ineffective? Explain your answer.arrow_forwardQuestion 1 In the market for swim suits, demand is P = 58 - 0.011Q and supply is P = 5 + 0.009Q. The government imposes a tax of $2 per swim suit. Calculate the total surplus after the tax.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_forward
- Consider the market for designer purses. The following graph shows the demand and supply for designer purses before the government imposes any taxes.arrow_forwardSuppose that the government imposed a price ceiling on cows. Would you expect theprice of steak to increase, decrease, or stay the same? Explain your answer.arrow_forwardCan you explain what happens when a tax is imposed on the buyer of a product and also what would happen if a tax is imposed on the seller? arrow_forward
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