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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 vodka. With no tax, the equilibrium quantity is 90 bottles. The following table shows the equilibrium quantity produced and sold in the market for various per unit taxes. Тах Quantity (Dollars per bottle) (Bottles) 90 20 72 40 54 50 45 60 36 80 18 100 Suppose the government imposes a $20-per-bottle tax on suppliers. At this tax amount, the equilibrium quantity of vodka is bottles, and the govermment collects s in tax revenue. Now calculate the government's tax revenue if it sets a tax of $0, $20, $40, $50, $60, $80, or $100 per bottle. 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.

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 vodka. With no tax, the equilibrium quantity is 90 bottles. The following table shows the equilibrium quantity produced and sold in the market for various per unit taxes. Тах Quantity (Dollars per bottle) (Bottles) 90 20 72 40 54 50 45 60 36 80 18 100 Suppose the government imposes a $20-per-bottle tax on suppliers. At this tax amount, the equilibrium quantity of vodka is bottles, and the govermment collects s in tax revenue. Now calculate the government's tax revenue if it sets a tax of $0, $20, $40, $50, $60, $80, or $100 per bottle. 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.

Microeconomics: Principles & Policy
Microeconomics: Principles & Policy
14th Edition
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:William J. Baumol, Alan S. Blinder, John L. Solow
Chapter6: Demand And Elasticity
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macroeconmics question 11

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 vodka. With no tax, the equilibrium quantity is 90 bottles. The following table shows the equilibrium quantity produced and sold in the market for various per unit taxes. Тах Quantity (Dollars per bottle) (Bottles) 90 20 72 40 54 50 45 60 36 80 18 100 Suppose the government imposes a $20-per-bottle tax on suppliers. At this tax amount, the equilibrium quantity of vodka is bottles, and the govermment collects s in tax revenue. Now calculate the government's tax revenue if it sets a tax of $0, $20, $40, $50, $60, $80, or $100 per bottle. 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.
Transcribed Image Text: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 vodka. With no tax, the equilibrium quantity is 90 bottles. The following table shows the equilibrium quantity produced and sold in the market for various per unit taxes. Тах Quantity (Dollars per bottle) (Bottles) 90 20 72 40 54 50 45 60 36 80 18 100 Suppose the government imposes a $20-per-bottle tax on suppliers. At this tax amount, the equilibrium quantity of vodka is bottles, and the govermment collects s in tax revenue. Now calculate the government's tax revenue if it sets a tax of $0, $20, $40, $50, $60, $80, or $100 per bottle. 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.
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