The government is considering plan to double tax

Assignment Help Business Economics

Reference no: EM13896591

The market for tennis shoes has a horizontal supply curve and a linear, downward-sloping demand curve. Currently the government imposes a tax of t on every pair of tennis shoes sold and does not tax other goods. The government is considering a plan to double the tax on tennis shoes, while leaving other goods untaxed. Which of the following statements is correct? Justify your answer graphically. If the tax is doubled, then

1. the total deadweight loss caused by the doubled tax will be exactly twice the original deadweight loss.

2. the total deadweight loss caused by the doubled tax will be more than twice the original deadweight loss.

3. the total deadweight loss caused by the doubled tax will be less than twice the original deadweight loss.

4. to know if doubling the tax would more than double the deadweight loss, we would have to know the slope of the demand curve.

Reference no: EM13896591

Questions Cloud

Number of television broadcasts : Let G be the number of television broadcasts each day. Consider 3 individuals with preferences UA =G/4 UB =2–G^(3/4) UC =G–(G^2)/2 a) Show that the 3 consumers have single-peaked preferences

Production function-labour-days with rental rate on machine : Primo Salt, Inc., manufactures salt, according to the following production function: Q(K, L) = 2L 1/2K 1/3 , where output Q is measured in tonnes, L in labour-days, and K in machine-days. Give the wage rate w (in $/labour-day), the number of machine-..

Production function for hogwarts remover-anti-magic potion : The production function for Hogwarts Remover, an anti-magic potion, has the form Q = K 0.5L 0.5 , where Q is in bottles per period and K and L are in machine-days and labour-days per period, respectively. a. Graph the unit isoquant (Q = 1) and the is..

Short run aggregate supply-aggregate demand : Place the items into the columns according to whether a change in the item would cause the curve to shift. If an item\'s change shifts more than one curve, place it in a single column according to this order: Long Run Aggregate Supply - Short Run Agg..

The government is considering plan to double tax : The market for tennis shoes has a horizontal supply curve and a linear, downward-sloping demand curve. Currently the government imposes a tax of t on every pair of tennis shoes sold and does not tax other goods. the total deadweight loss caused by th..

What is income elasticity-own price elasticity for good qt : The given utility function is U= 100 Qt 0.5 Qc 0.5, the individual’s dual problem is to minimize E=Pt Qt +Pc Qc (show all the works and steps) What is the compensated demand function for Qt? What is income elasticity for good Qt? What is own price e..

Developing countries often claim that growth and trade : Developing countries often claim that growth and trade have left them no better off or perhaps worse off. How might you explain this result theoretically? Could this result obtain if the countries tended to be relatively small? Why or why not?

What is the equilibrium quantity sold : The demand curve for salted codfish (saltfish) is D(p) = 200 − 5p and the supply curve is S(p) = 5p. 1 (a) On a graph with saltfish on the horizontal axis and the price of saltfish on the vertical, draw the demand and supply curves. What is the equil..

The demand function for rye bread : In a certain kingdom, the demand function for rye bread was q = 381 − 3p and the supply function was q = 5 + 7p, where p is the price in zlotys and q is loaves of bread. The king made it illegal to sell rye bread for a price above 32 zlotys per loaf...

User Account

All Pages