《西方经济学》习题答案—答案8.docVIP

SOLUTIONS TO TEXT PROBLEMS: Quick Quizzes 1. Figure 1 shows the supply and demand curves for cookies, with equilibrium quantity Q1 and equilibrium price P1. When the government imposes a tax on cookies, the price to buyers rises to PB, the price received by sellers declines to PS, and the equilibrium quantity falls to Q2. The deadweight loss is the triangular area below the demand curve and above the supply curve between quantities Q1 and Q2. The deadweight loss shows the fall in total surplus that results from the tax. Figure 1 2. A tax on beer would have a larger deadweight loss than a tax on milk, since the demand for beer is more elastic than the demand for milk and the deadweight loss of a tax is larger the greater is the elasticity of demand. 3. If the government doubles the tax on gasoline, the revenue from the gasoline tax could rise or fall, depending on where the tax falls on the Laffer curve. However, if the government doubles the tax on gasoline, you can be sure that the deadweight loss of the tax rises, since deadweight loss always rises as the tax rate rises. Questions for Review 1. When the sale of a good is taxed, both consumer surplus and producer surplus decline. The decline in consumer surplus and producer surplus exceeds the amount of government revenue that is raised, so societys total surplus declines. The tax distorts the incentives of both buyers and sellers, so resources are allocated inefficiently. 2. Figure 2 illustrates the deadweight loss and tax revenue from a tax on the sale of a good. Without a tax, the equilibrium quantity would be Q1, the equilibrium price would be P1, consumer surplus would be A+B+C, and producer surplus would be D+E+F. The imposition of a tax places a wedge between the price buyers pay, PB, and the price sellers receive, PS, where PB = PS + tax. The quantity sold declines to Q2. Now consumer surplus is A, producer surplus is F, and government revenue is B+D. The deadweight loss of th