The excess burden of a tax is larger the greater are

The excess burden of a tax is larger the greater are 1) ________________________________, 2) ______________________________________, and 3) _______________________________. Fill in the blanks and explain. (Using the formula for excess burden will help fill in the blanks.) (15 points)

Solutions

Expert Solution

Excess burden of tax rate is directly dependent on advalorem tax, tax yield and price elasticity of demand.

Excess burden= 1/2 × ^C × Advalorem tax× TaxYield

Hence excess burden of tax is larger, greater are

Advalorem tax
Price elasticity of demand
Tax yield.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Why is the burden of a tax to taxpayers greater than the revenue received by the...

Why is the burden of a tax to taxpayers greater than the revenue received by the government? Should wealthy taxpayers pay more taxes than poor taxpayers? Defend your argument.

Producers will bear a larger burden of a sales tax if which statement is correct? a....

Producers will bear a larger burden of a sales tax if which statement is correct? a. demand is relatively elastic and supply is relatively inelastic. b. demand is relatively inelastic and supply is relatively elastic. c. both demand and supply are relatively inelastic. d. both demand and supply are relatively elastic. e. the tax is collected by firms rather than remitted directly to the government by consumers.

What is the 'excess burden' of a commodity tax. Explain why optimal tax theory suggests that...

What is the 'excess burden' of a commodity tax. Explain why optimal tax theory suggests that lump sum income taxes should be used rather than commodity taxes in order to raise revenue.

Tax burden

Let QD=80-P and QS=2P-100 describe the demand and supply function for a commodity. Suppose that government imposes a $3 tax per unit sold on producers. What is the tax burden (incidence) of consumers?

What is Marginal Excess Tax Burden? Please explain it using concise sentences. Give some examples of...

What is Marginal Excess Tax Burden? Please explain it using concise sentences. Give some examples of possible

The greater the magnitude of the external costs of production, a. The larger is the...

The greater the magnitude of the external costs of production, a. The larger is the deadweight loss from overproduction. b. The greater would be the optimal pollution tax. c. The further the private market solution ignoring those costs would deviate from the socially efficient level of output. d. All of the above are true.

Who will bear the burden of tax if the tax is collected from the supplies, if...

Who will bear the burden of tax if the tax is collected from the supplies, if A. Supply is perfectly elastic? B. Supply is perfectly inelastic? C. Demand is perfectly elastic? D. Demand is perfectly inelastic?

In general, the price elasticity of demand for a product will be greater (a) the larger...

In general, the price elasticity of demand for a product will be greater (a) the larger the number of close substitutes, (b) the greater the share of budget an item takes, (c) the more the item is considered to be a luxury, and (d) the narrower the market is defined (for example, a specific brand name vs. an entire market). Costco (www.costco.com) posts its sales (discount) items. Select at least 5 sales items, and evaluate the price elasticity of demand...

what determines who bears the most burden of tax

It is a common misconception that the incidence of a tax (i.e., how the burden of...

It is a common misconception that the incidence of a tax (i.e., how the burden of the tax is actually divided between consumers and producers) depends on who is legally responsible for paying the tax to the government. [2 points] Briefly explain why the legal assignment of the tax does not determine the real incidence of the tax. For example, if the government collects the tax entirely from producers (it does not collect any taxes from consumers), how do consumers...

Subjects