The tax rate on the product group chocolate and confectionery has been determined on the basis...

The tax rate on the product group chocolate and confectionery has been determined on the basis of fiscal considerations. The tax includes goods that are considered typical sweets, such as chocolate, candies, caramels, and some types of biscuits. Ice cream, baked goods, and some types of biscuits are exempt from the tax.

e) Briefly explain in words what we mean by fiscal taxes. Discuss and illustrate graphically how the tax on chocolate and confectionery affects the quantity sold in the market for chocolate and confectionery, as well as the state's tax revenue.

f) Explain and illustrate graphically why a fiscal tax results in a loss of efficiency (loss of deadweight).

g) Economists in an expert committee believe that a fiscal tax should cover the entire product group of chocolate and confectionery. Explain the financial rationale for their attitude.

Expert Solution

Rahul Sunny answered 1 year ago

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