4. The Laffer curve Government-imposed taxes cause reductions in the activity that is being taxed, which has important implications for revenue collections. To understand the effect of such a tax, consider the monthly market for champagne, which is shown on the following graph. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. PRICE (Dollars per case) Show Transcribed Text Suppose the government imposes $10-per-case tax on suppliers. At this tax amount, the equilibrium quantity of champagne is TAX RE VENUE (Dollars) 1000 900 800 700 600 300 200 0 10 20 30 40 50 60 70 80 90 100 QUANTITY (Cases) 100 0 0 Supply Demand Now calculate the government's tax revenue if it sets a tax of $0, $10, $20, $25, $30, $40, or $50 per case. (Hint: To find the equilibrium quantity after the tax, adjust the "Quantity" field until the Tax equals the value of the per-unit tax.) Using the data you generate, plot a Laffer curve by using the green points (triangle symbol) to plot total tax revenue at each of those tax levels. Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically. 5 O True 10 O False Graph Input Tool Market for Champagne Quantity (Cases) 15 20 25 30 35 TAX (Dollars per case) 40 45 Demand Price (Dollars per case) Tax (Dollars per case) 50 A Suppose the government is currently imposing a $15-per-case tax on champagne. 40 Laffer Curve 30.00 cases, and the government collects S 10.00 Supply Price (Dollars per case) True or False: The government can raise its tax revenue by increasing the per-unit tax on champagne. (?) 20.00 in tax revenue.
4. The Laffer curve Government-imposed taxes cause reductions in the activity that is being taxed, which has important implications for revenue collections. To understand the effect of such a tax, consider the monthly market for champagne, which is shown on the following graph. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. PRICE (Dollars per case) Show Transcribed Text Suppose the government imposes $10-per-case tax on suppliers. At this tax amount, the equilibrium quantity of champagne is TAX RE VENUE (Dollars) 1000 900 800 700 600 300 200 0 10 20 30 40 50 60 70 80 90 100 QUANTITY (Cases) 100 0 0 Supply Demand Now calculate the government's tax revenue if it sets a tax of $0, $10, $20, $25, $30, $40, or $50 per case. (Hint: To find the equilibrium quantity after the tax, adjust the "Quantity" field until the Tax equals the value of the per-unit tax.) Using the data you generate, plot a Laffer curve by using the green points (triangle symbol) to plot total tax revenue at each of those tax levels. Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically. 5 O True 10 O False Graph Input Tool Market for Champagne Quantity (Cases) 15 20 25 30 35 TAX (Dollars per case) 40 45 Demand Price (Dollars per case) Tax (Dollars per case) 50 A Suppose the government is currently imposing a $15-per-case tax on champagne. 40 Laffer Curve 30.00 cases, and the government collects S 10.00 Supply Price (Dollars per case) True or False: The government can raise its tax revenue by increasing the per-unit tax on champagne. (?) 20.00 in tax revenue.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Please help with this question three pictures included one question. please complete the graphs as well thank you.
4. The Laffer curve
Government-imposed taxes cause reductions in the activity that is being taxed, which has important implications for revenue collections.
To understand the effect of such a tax, consider the monthly market for champagne, which is shown on the following graph.
Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph.
Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly.
PRICE (Dollars per case)
50
45
40
35
TAX REVENUE (Dollars)
30
Show Transcribed Text
Suppose the government imposes a $10-per-case tax on suppliers.
At this tax amount, the equilibrium quantity of champagne is
1000
900
800
700
600
500
400
300
200
0 10 20 30 40 50 60 70 80 90 100
QUANTITY (Cases)
100
0
Now calculate the government's tax revenue if it sets a tax of $0, $10, $20, $25, $30, $40, or $50 per case. (Hint: To find the equilibrium quantity
after the tax, adjust the "Quantity" field until the Tax equals the value of the per-unit tax.) Using the data you generate, plot a Laffer curve by using
the green points (triangle symbol) to plot total tax revenue at each of those tax levels.
Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.
0
Supply
Demand
5
O True
10
O False
15 20 25 30 35
TAX (Dollars per case)
Graph Input Tool
Market for Champagne
Quantity
(Cases)
40
45
Demand Price
(Dollars per case)
Tax
(Dollars per case)
50
A
Suppose the government is currently imposing a $15-per-case tax on champagne.
cases, and the government collects $
Laffer Curve
Ĉ
40
30.00
10.00
Supply Price
(Dollars per case)
(?
True or False: The government can raise its tax revenue by increasing the per-unit tax on champagne.
(?)
20.00
in tax revenue.
Transcribed Image Text:Consider the deadweight loss generated in each of the following cases: no tax, a tax of $20 per case, and a tax of $40 per case.
On the following graph, use the black curve (plus symbols) to illustrate the deadweight loss in these cases. (Hint: Remember that the area of a
triangle is equal to × Basex Height. In the case of a deadweight loss triangle found on the graph input tool, the base is the amount of the tax
and the height is the reduction in quantity caused by the tax.)
DEADWEIGHT LOSS (Dollars)
1000
900
800
700
600
500
400
300
200
100
0
0
5
10
15 20 25 30
TAX (Dollars per case)
35
As the tax per case increases, deadweight loss
Ĉ
40
45 50
Deadweight Loss
?
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