At current income tax rates, marginal revenue of taxation is the same for Suzi and Billy. Marginal utility of consumption is equal to 2 for Suzi and equal to 10 for Billy. Which of the following would reduce total deadweight loss without reducing revenue? O Increase tax on Billy and reduce tax on Suzi. Increase tax on Suzi and reduce tax on Billy. O Reduce taxes on both Billy and Suzi. O Increase taxes on both Billy and Suzi. 22

At current income tax rates, marginal revenue of taxation is the same for Suzi and Billy. Marginal utility of consumption is equal to 2 for Suzi and equal to 10 for Billy. Which of the following would reduce total deadweight loss without reducing revenue? O Increase tax on Billy and reduce tax on Suzi. Increase tax on Suzi and reduce tax on Billy. O Reduce taxes on both Billy and Suzi. O Increase taxes on both Billy and Suzi. 22

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter8: Application: The Cost Of Taxation

Section: Chapter Questions

Problem 3CQQ

See similar textbooks

Similar questions

22. If the government decide to increase taxes on sugar, who do you think will carry the burden of taxation? Please justify your answer and explain.
If the government wants to increase the tax revenue they collect from sellers, then it should O Tax goods that have low elasticity of demand and high elasticity of supply. O Tax goods that have high elasticity of demand and supply. Tax goods that have high elasticity of demand and low elasticity of supply. O Tax goods that have low elasticity of demand and supply.
Government levied a tax on good D. The elasticity of the supply changed without changing the no-tax equilibrium point. Because of the change, the buyers’ tax incidence rose. Answer how the elasticity changed: More elastic or Less elastic, and answer how the after-tax equilibrium quantity would change: Decrease or Increase. Hint: If you are not sure, draw a figure with two demand curves. Elasticity: After-tax equilibrium quantity:
Imagine there is a tax on cigarettes and that consumers and producers each bear some portion of the tax. Assume that when vape pens were introduced, they were not taxed. How would you expect that introduction of vape pens to affect the distribution of the tax burden associated with the cigarette tax? O It will decrease the consumer tax burden because demand for cigarettes will become more elastic. O It will increase the consumer tax burden because demand for cigarettes will become more elastic. O It will decrease the consumer tax burden because demand for cigarettes will become more inelastic. O It will increase the consumer tax burden because demand for cigarettes will become more inelastic.
Suppose the government places a tax on a product. How does the cost of the tax compare with the revenue raised? The cost of the tax to buyers and sellers is less than the revenue raised from the tax by the government. O Without additional information, such as the elasticity of demand for this product, it is impossible to compare tax cost with tax revenue. The loss of surplus to buyers and sellers exceeds the revenue raised from the tax by the government. The cost of the tax to buyers and sellers equals the revenue raised from the tax by the government.
Suppose that your state raises its sales tax from5 percent to 6 percent The state revenue commissionerlo~asts a 20 percent increase in sales tax revenue.Is this plausible? Explain.
Suppose that your state raises its sales taxfrom 5 percent to 6 percent. The state revenuecommissioner forecasts a 20 percent increase insales tax revenue. Is this plausible? Explain.
Suppose the demand for grape jelly is perfectlyelastic (because strawberry jelly is a goodsubstitute), while the supply is unit elastic. A tax ongrape jelly would have _________ deadweight losses,and the burden of the tax would fall entirely on the_________ of grape jelly.a. sizable; consumersb. sizable; producersc. no; consumersd. no; producers
suppose the government levles an excise tax of $3.00 per pack on cigarette buyers. Draw after-tax curve and the tax revenue that will be collected by the government.
Why would consumers prefer that the government tax products with elastic, rather than inelastic, demand? O The share of a tax ultimately paid by consumers is lower. O The share of a tax ultimately paid by producers is lower.
Figure 8-24. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. Tax Revenue F 765YMN1 Refer to Figure 8-24. For an economy that is currently at point D on the curve, a decrease in the tax rate would a decrease consumer surplus. b. decrease producer surplus. c. increase tax revenue. d. increase the deadweight loss of the tax. Tax Size
Suppose that the government has decided to place a $2 per litre tax on soft drinks. In this market, assuming that demand and supply curve have roughly the same responsiveness at their point of intersection, how is the incidence of the tax burden split between consumers and producers? Assuming next that the demand curve is less elastic. How does the tax incidence change?