13. "We should impose a 20 percent luxury tax on expensiveautomobiles (those with a sales price of $75,000 or more)in order to collect more tax revenue from the wealthy." Willthe burden of the proposed tax fall primarily on the wealthy?Why or why not?

Step 1: Answer: Imposing a 20 percent luxury tax on expensive automobiles, particularly those with a…

Answered: 13. "We should impose a 20 percent…

Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781305971509

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter8: Application: The Costs Of Taxation

Section: Chapter Questions

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Both a payroll tax and an excise tax on alcoholraise revenue and, respectively, shrink the marketsfor labor and alcohol. Although both have somefunctions in common, governments may havedifferent goals when levying them. What goalsdo you think motivate a payroll tax? What goalsmotivate an alcohol tax?
Comcast has a cable monopoly. The following graph shows the demand, MR, and MC curve of Comcast. Use the graph to answer questions 3 to 8. Price (P) and Costs (in dollars per subscription) $25 $22 $21 $20 $19 0 5 6.5 MC 7 MR ATC Q (Number of subscriptions in millions per month)
Suppose the government removes a tax on buyers of a good and levies a tax ofthe same size on sellers of the good. How does this change in tax policy affectthe price that buyers pay sellers for this good, the amount buyers are out ofpocket including the tax, the amount sellers receive net of tax, and the quantityof the good sold?
5. Calculating tax incidence Suppose that the Canadian government decides to charge cola consumers a per-unit tax (a tax on each unit purchased). Before the tax, 30 million cases of cola were sold every month at a price of $6 per case. After the tax, 23 million cases of cola are sold every month; consumers pay $9 per case (including the tax), and producers receive $4 per case. The amount of the tax on a case of cola is S burden that falls on producers is $ True per case. True or False: The effect of the tax on the quantity sold would have been larger if the tax had been levied on producers. False per case. Of this amount, the burden that falls on consumers is $ per case, and the
18. The U.S. Senate is considering a bill that would tax the sale of laptop computers in order to fund a computer educa- tion program for presidential hopefuls. The Congressional Budget Office (CBO) estimates that if it implements a low tax of $12 per laptop, revenue should be sufficient to exactly fund the program. The CBO also estimates that a high tax of $230 per laptop will exactly fund the program. a. How can a low tax and a high tax raise exactly enough money to fund the program? Illustrate your answer using a graph. b. Suppose that you are an economic advisor to the Senate Finance Committee, tasked with analyzing the economic impact of the tax proposals. Which proposal do you recommend, and why?
5. If a consumer has a utility function u(x1, x2) = x1x42, what fraction ofher income will she spend on good 2?6. For what kind of preferences will the consumer be just as well-off facinga quantity tax as an income tax?
5. Calculating tax incidence Suppose that the local government of Jacksonville decides to institute a tax on seltzer producers. Before the tax, 15 billion packs of seltzer were sold every year at a price of $9 per pack. After the tax, 9 billion packs of seltzer are sold every year; consumers pay $12 per pack, and producers receive $4 per pack (after paying the tax). The amount of the tax on a pack of seltzer is $ burden that falls on producers is $ per pack. True or False: The effect of the tax on the quantity sold would have been smaller if the tax had been levied on consumers. O True per pack. Of this amount, the burden that falls on consumers is $ O False per pack, and the
Suppose the government removes a tax on buyers ofa good and levies a tax of the same size on sellers ofthe good. How does this change in tax policy affectthe price that buyers pay sellers for this good, theamount buyers are out of pocket (including any taxpayments they make), the amount sellers receive (netof any tax payments they make), and the quantity ofthe good sold?
The demand for cigarettes, which create negativeexternalities through secondhand smoke, is oftenrelatively inelastic. That is, when the price of cigarettes changes, the quantity demanded changes bya smaller portion. Using this fact, explain to whatextent you think a tax on cigarettes would fulfilleach of the goals of taxation.
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Suppose that demand for gasoline is 0.5 (Ed=0.5) and the supply of gasoline pizza is 1.25 (E, = 1.25). If the government imposes a $1 per gallon excise tax on the production of gasoline, then the price that consumers pay will and the price that producers receive will O increase by more than $0.50; decrease by more than $0.50. O increase by more than $0.50, but less than $1; increase by more than $0.50, but less than $1. increase by more than $0.50, but less than $1; decrease by less than $0.50. decrease by more than $0.50, but less than $1; increase by less than $0.50. increase by less than $0.50; decrease by more than $0.50, but less than $1.

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13. "We should impose a 20 percent luxury tax on expensive automobiles (those with a sales price of $75,000 or more) in order to collect more tax revenue from the wealthy." Will the burden of the proposed tax fall primarily on the wealthy? Why or why not?