In order to raise revenues, the government has decided to levy taxes (T) on luxury goods...

In order to raise revenues, the government has decided to levy taxes (T) on luxury goods purchased by taxpayers with earnings higher than the average income. The demand and supply curves of yacht before taxes are follows: (20 points total) QS=0.5P QD=600-P A. Compute the existing equilibrium price (P*) and quantity (Q*). (2 points) B. i. State the new equation of demand curve. (2 points) ii. Compute new equilibrium quantity (Q’). (2 points) iii. Compute market price received suppliers (PS). (1.5 points) iv. Compute the price paid by consumers (PD) after taxation. (1.5 points) C. Compute consumer surpluses (CS), producer surplus (PS), and total surplus (TS) before tax. (2 points) D. Compute consumer surpluse (CS’), producer surplus (PS’), tax revenues (TR) and total surplus (TS’) after tax. (T=300) (3 points) E. Estimate dead-weight loss (DWL) of a tax (T=300) and state why taxes cause dead- weight loss. (3 points) F. State the function of tax revenues with respect to T. Draw the graph and its implication. Evaluate the tax policy at T=400. (3 points)

Expert Solution

Rahul Sunny answered 2 years ago

Assume a local government has determined they will increase taxes in order to raise revenue to...

Assume a local government has determined they will increase taxes in order to raise revenue to support their capital improvements plan. Contrast and compare the merits of increasing property taxes versus sales taxes. Consider the various forces which effect public budgeting in your response.

Consider a competitive industry that the government taxes in order to raise revenue (e.g., the sale...

Consider a competitive industry that the government taxes in order to raise revenue (e.g., the sale of alcoholic beverages). Show graphically that the amount of revenue generated by a per-unit tax on the industry can in principle be duplicated by reorganizing it as a state-run monopoly and using the profits as government revenue.

1. One reason governments impose taxes is to: a. spur economic growth b. raise government revenues...

1. One reason governments impose taxes is to: a. spur economic growth b. raise government revenues c. encourage more production d. increase consumer spending 2. One cost associated with the imposition of taxes is: a. shortages b. overconsumption c. scarcity d. deadweight loss 3. The total amount of surplus lost due to taxation is: a. less than the amount of revenue generated b. greater than the amount of revenue generated c. used to fund public services d. transferred to the...

Increases in government purchases of goods and services, G, and cuts in taxes, T, can have...

Increases in government purchases of goods and services, G, and cuts in taxes, T, can have a larger effect on aggregate demand. This is called the ____________________________ effect. This effect will be greater, the (higher, lower) the marginal propensity to consume is. (2 points; 1 point each) While an increase in G or a cut in T, by raising incomes and the demand for money, also raise interest rates and reduce investment spending. This effect of higher G or lower...

1. Which of the two taxes is likely to raise more money for the government and...

1. Which of the two taxes is likely to raise more money for the government and why? A. The cigarette tax, because cigarettes are more expensive than most other tobacco products. B. The cigarette tax, because people get addicted to cigarettes and are willing to pay the tax. C. The tobacco tax, since people will keep buying tobacco anyway and you can reap the tax rewards. D. The tobacco tax, because it covers a much broader variety of products to...

Legalization of marijuana can raise additional revenues by taxing marijuana to government In particular, the state...

Legalization of marijuana can raise additional revenues by taxing marijuana to government In particular, the state you are working for is considering a $5 tax on every 100 grams of marijuana but is unsure whether they should tax the buyers of marijuana or the suppliers. Advise the government on the type of tax they should impose; that is, should they tax the buyers or the sellers and what effect would it have on the market? It might be useful to...

"Taxes are a necessary evil to raise revenue for the government, towards funding expenditure on 'public...

"Taxes are a necessary evil to raise revenue for the government, towards funding expenditure on 'public goods and services'. We should aim to do this in the most effective and efficient way - with the lowest marginal tax rates, and lowest distortions possible. This could be achieved by eliminating all forms of taxes on income and replacing them with a uniform tax on expenditure on goods and services instead." Provide a critical assessment of this statement based on economic concept

discuss the tax revenues a government can raise from tourism industry and where it can spend...

discuss the tax revenues a government can raise from tourism industry and where it can spend the revenues to promote tourism?

In order to discourage the consumption of gasoline, the government is proposing to raise its price...

In order to discourage the consumption of gasoline, the government is proposing to raise its price through a gasoline tax. To what level must gasoline price be raised if the government wants to reduce consumption of gasoline by 15 million gallons? Linear demand curve: 30 = 9.75 – (-0.25)*3 Slope = -0.25 Price Elasticity = -4

16 MARKS "Taxes are a necessary evil to raise revenue for the government, towards funding expenditure...

16 MARKS "Taxes are a necessary evil to raise revenue for the government, towards funding expenditure on 'public goods and services'. We should aim to do this in the most effective and efficient way - with the lowest marginal tax rates, and lowest distortions possible. This could be achieved by eliminating all forms of taxes on income and replacing them with a uniform tax on expenditure on goods and services instead." Provide a critical assessment of this statement based on...

Question