Question
In: Economics
A student consumes beer and a composite good. Currently, the government imposes an excise tax of...
A student consumes beer and a composite good. Currently, the government imposes an excise tax of $0.50 per unit of beer. The student now purchases 20 units of beer per month. The government is considering eliminating the excise tax on beer and, instead, requiring consumers to pay $10 per month as a lump- sum tax. If the new proposal is adopted, how will the student’s beer consumption and welfare to be affected? (Assume that the student’s marginal rate of substitution of beer for other goods is diminishing.)
Show your answer with a graph.
Solutions
Rahul Sunny answered 1 year agoRelated Solutions
The federal government currently imposes an excise tax on air travel. That is, airlines are required...
The federal government currently imposes an excise tax on air
travel. That is, airlines are required to pay a tax per passenger
on each flight. Suppose this tax is equal to $4.00 per
passenger.
a. Using the model of demand and supply shows what the market
for air travel would look like without the tax. Identify on your
graph the market price, the number of passengers flown, consumer
surplus, and producer surplus.
b.Using the model of demand and supply illustrates...
The federal government currently imposes an excise tax on air travel. That is, airlines are required...
The federal government currently imposes an excise tax on air
travel. That is, airlines are required to pay a tax per passenger
on each flight. Suppose this tax is equal to $4.00 per
passenger.
Using the model of demand and supply illustrates the impact of
the $4.00 tax on the market for air travel. Identify on your graph
the price paid by consumers, the price received by producers, and
the number of passengers flown. What is the difference between the...
The federal government currently imposes an excise tax on air travel. That is, airlines are required...
The federal government currently imposes an excise tax on air
travel. That is, airlines are required to pay a tax per passenger
on each flight. Suppose this tax is equal to $4.00 per
passenger.
- Using the model of demand and supply shows what the market for
air travel would look like without the tax. Identify on your graph
the market price, the number of passengers flown, consumer surplus,
and producer surplus.
- If the price elasticity of demand for...
Suppose that the government imposes a $1 tax on a good that currently sells for a...
Suppose that the government imposes a $1 tax on a good that
currently sells for a price of $5. Also, assume that after the tax
is imposed, the good sells for $5.60. Which statement best explains
the effect this has on the tax burden?
a. The tax burden is being passed on to buyers.
b. The tax burden is being carried by sellers.
c. The tax burden is being shared between buyers and
sellers.
d. The tax burden is precisely...
1. The government imposes an excise tax on office rental space. Before the tax, the equilibrium...
1. The government imposes an excise tax on office rental space.
Before the tax, the equilibrium price of office rental space was
$3,500. After the tax is imposed consumers pay $3,600 on office
rental space, $3,200 of which producers receive.
[1] a) Calculate the excise tax on office rental space.
[1] b) What is the incidence of the tax to the consumer?
[1] c) What is the incidence of the tax to the producer?
[2] d) Illustrate your answer on...
With an excise tax of $.50 per six-pack of beer a student purchases 12 six-packs per...
With an excise tax of $.50 per six-pack of beer a student
purchases 12 six-packs per month. If the government requires the
students to pay $6.00 per month as lump sum tax instead of imposing
excise tax, how will the student’s consumption pattern and welfare
be affected? Using a graph to explain your answer.
Suppose the government imposed an excise tax of $1 per unit on a good. Suppose further...
Suppose the government imposed an excise tax of $1 per unit on a
good. Suppose further that the price elasticity of demand for the
good is 2 and the price elasticity of supply for it is 3.
1.) What percentage of the tax will be borne by the buyers?
2.) What percentage of the tax will be borne by the sellers?
3.) The price buyers pay for the good after the tax is levied
will be _____ than the price...
Consider a government that imposes a personal income tax. It is estimated that the tax will...
Consider a government that imposes a personal income tax. It is
estimated that the tax will not affect total labour supplied in the
economy. Given this, the political party advocating for the tax
argue that the tax acts as a non-distortionary, lump-sum tax, and
as such imposes no excess burden. Is this a reasonable
argument?
Consider a government that imposes a personal income tax. It is estimated that the tax will...
Consider a government that imposes a personal income tax. It is
estimated that the tax will not affect total labour supplied in the
economy. Given this, the political party advocating for the tax
argue that the tax acts as a non-distortionary, lump-sum tax, and
as such imposes no excess burden. Is this a reasonable
argument?
Suppose that a local government levies an excise tax on hotdog sellers. Before the tax, 2.5...
Suppose that a local government levies an excise tax on hotdog
sellers. Before the tax, 2.5 million hotdogs were sold at a price
of $0.80 per hotdog. With the tax in effect, 1.8 million hotdogs
are sold, consumers pay $0.95 per hotdog, and sellers receive $0.50
per hotdog.
In the scenario above, what is the amount of the tax per
hotdog?
In the scenario above, what percentage of the tax is paid by
buyers?
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