Micro Final - Chapter 7

The U.S. government would like to help the American auto industry compete against foreign automakers that sell trucks in the United States. It can do this by imposing an excise tax on each foreign truck sold in the United States. c) CALC GOVT REVENUE FROM THE TAX

200,000 x 3000 = 600 million

The US imposes an excise tax on the sale of domestic airline tickets a. what is the govt tex revenute in 2013 for the excise tax

6.10 X 630 million = 3,843 million

You are advising the government on how to pay for national defense. There are two proposals for a tax system to fund national defense. Under both proposals, the tax base is an individual's income. Under proposal A, all citizens pay exactly the same lump - sum tax, regardless of income. Under proposal B, individuals with higher incomes pay a greater proportion of their income in taxes. a)Is the tax in proposal A progressive, proportional, or regressive? What about the tax in proposal B?

Proposal A is regressive, proposal B is progressive bc higher income pays more taxes

The US imposes an excise tax on the sale of domestic airline tickets b) On january 1 the excise tax increases to 6.20 per ticket. what is the quantity of tickets transacted now? what is the average ticket price? what us 2014 govt tax revenue?

The equilibrium quantity now falls to 629 million, with the price rising to $337.02. Tax revenue rises to $6.20 per trip × 629 million trips = $3,899.80 million.

The U.S. government would like to help the American auto industry compete against foreign automakers that sell trucks in the United States. It can do this by imposing an excise tax on each foreign truck sold in the United States. D) How does the excise tax on imported trucks benefit American automakers? Whom does it hurt? How does inefficiency arise from this government policy?

The tax leads to a rise in the price of imported trucks. since american trucks are subs, demand for american trucks go up leading to a larger price. as a result buyers pay higher prices for trucks

The U.S. government would like to help the American auto industry compete against foreign automakers that sell trucks in the United States. It can do this by imposing an excise tax on each foreign truck sold in the United States. B)assume that the govt puts a tax of 3000 on each truck. how many trucks are purchased and at what price how much does the automaker recieve

a tax of $3,000 per truck puts a wedge between the price paid by consumers, or the demand price ($31,000), and the price received by producers, or the supply price ($28,000). The quantity bought and sold is 200,000 trucks. The foreign automaker receives $28,000 per truck (after tax).

Assess the following four tax policies in terms of the benefits principle versus the ability - to - pay principle. D)reduction int he amount of income tax paid on the number of dependent children in the household

ability to pay - people who have more dependent children will have higher expenses

Assess the following four tax policies in terms of the benefits principle versus the ability - to - pay principle. b) tax on imported goods valued in excess of $800 per household brought in on passenger flights

ability to pay since the ppl paying the tax will be the people who are buying items abroad and then importing them

In each of the following cases involving taxes, explain: (i) whether the incidence of the tax falls more heavily on consumers or producers, (ii) why government revenue raised from the tax is not a good indicator of the true cost of the tax, and (iii) how deadweight loss arises as a result of the tax. a)Textbooks

after the tax producers bear more weight////Poor estimate since it doesnot take into account all of the new potential customers who they are alienating///comsumers and producers lose surplus not captured by government revenue

Assess the following four tax policies in terms of the benefits principle versus the ability - to - pay principle. c)airline flight landing fees that pay for air traffic control

benefits - airlines pay the fee and are also the beneficiary of air traffic control services

Assess the following four tax policies in terms of the benefits principle versus the ability - to - pay principle. a) tax on gas that finaces state roads

benefits since those who use the roads will be paying the tax

Assume that the demand for gasoline is inelastic and supply is relatively elastic. The government imposes a sales tax on gasoline. The tax revenue is used to fund research into clean fuel alternatives to gasoline, which will improve the air we all breathe. a). Who bears more of the burden of this tax, consumers or producers? Show in a diagram who bears how much of the excess burden.

burden is borne more by the consumers

In each of the following cases involving taxes, explain: (i) whether the incidence of the tax falls more heavily on consumers or producers, (ii) why government revenue raised from the tax is not a good indicator of the true cost of the tax, and (iii) how deadweight loss arises as a result of the tax. c) toothbrushes

consumers pay more///1.2 ppl not buying///inefficient bc loss of revenue

You are advising the government on how to pay for national defense. There are two proposals for a tax system to fund national defense. Under both proposals, the tax base is an individual's income. Under proposal A, all citizens pay exactly the same lump - sum tax, regardless of income. Under proposal B, individuals with higher incomes pay a greater proportion of their income in taxes. c)in terms of efficency which tax is better

in terms of efficiency A is better due to the marginal tax rate being zero

The US imposes an excise tax on the sale of domestic airline tickets Does this increase in the excise tax increase or decrease government tax revenue?

increase in the excise tax increases govt tax revenue

Assume that the demand for gasoline is inelastic and supply is relatively elastic. The government imposes a sales tax on gasoline. The tax revenue is used to fund research into clean fuel alternatives to gasoline, which will improve the air we all breathe. b) Is this tax based on the benefits principle or the ability - to - pay principle? Explain.

neither really ut mostly ability to pay

In 1990, the United States began to levy a tax on sales of luxury cars. For simplicity, assume that the tax was an excise tax of $6,000 per car. The accompanying figure shows hypothetical demand and supply curves for luxury cars. b)after tax reduction price payed, price recieved, and tax revenue

price paid - 54,000 price recieved - 48,500 Tax revenue - 270 million

In 1990, the United States began to levy a tax on sales of luxury cars. For simplicity, assume that the tax was an excise tax of $6,000 per car. The accompanying figure shows hypothetical demand and supply curves for luxury cars. a)under the tac what is the price payed by cosumers, price recieved by producers, and tax revenue now

price payed by consumers - 54,000 recieved by producers - 48,000 tac revenue - 240 million

You are advising the government on how to pay for national defense. There are two proposals for a tax system to fund national defense. Under both proposals, the tax base is an individual's income. Under proposal A, all citizens pay exactly the same lump - sum tax, regardless of income. Under proposal B, individuals with higher incomes pay a greater proportion of their income in taxes. b)are the tax proposals ability to pay or benefits

proposal a is benefits since everyone benefits from national defense B is ability to pay -higher income are able to pay more taxes

In each of the following cases involving taxes, explain: (i) whether the incidence of the tax falls more heavily on consumers or producers, (ii) why government revenue raised from the tax is not a good indicator of the true cost of the tax, and (iii) how deadweight loss arises as a result of the tax. b) airline tickets

tax is plit///poor bc it does not take into the account of the 1.5 million ppl///producers and consumers lose surplus not captured as govt revenue

The U.S. government would like to help the American auto industry compete against foreign automakers that sell trucks in the United States. It can do this by imposing an excise tax on each foreign truck sold in the United States. a)

the equilibrium price w/o govt interference ia 30,000 and the quantity is 300,000

In 1990, the United States began to levy a tax on sales of luxury cars. For simplicity, assume that the tax was an excise tax of $6,000 per car. The accompanying figure shows hypothetical demand and supply curves for luxury cars. c) compare the tax revenues. what accounts for the change in tax revenue from the reduction on the excise tax?

the reduction in the excise tax led to the result of the reduction demand and supply of luxury cars are highly elastic, reducing the tax leadds to a large increase in the quantity of luxury autos bought and sold