问题：

1.Suppose the government currently raises $100 million
through a $0.01 tax on widgets, and another $100
million through a $0.10 tax on gadgets. If the
government doubled the tax rate on widgets and
eliminated the tax on gadgets, would it raise more
money than today, less money, or the same amount of
money? Explain.

答案：

The government will raise less money.Before it changes the tax the total revenue raised is $200 million. After it double the tax rate on widgets and eliminated the tax on gadgets due to the theory that taxes cause buyers to consume less and sellers to produce less,the maximum revenue will be 0.01*2*($100/0.01)+0(tax on gadets)=$200.But the real tax can never reach the maximum unless the demand is perfectly inelastic,so the adjustment in tax will cause the government raise less money.

 

 

2.Most states tax the purchase of new cars. Suppose that
New Jersey currently requires car dealers to pay the
state $100 for each car sold, and plans to increase the tax
to $150 per car next year.
a. Illustrate the effect of this tax increase on the
quantity of cars sold in New Jersey, the price paid
by consumers, and the price received by producers.

b. Create a table that shows the levels of consumer
surplus, producer surplus, government revenue,
and total surplus both before and after the tax
increase.

c. What is the change in government revenue? Is it
positive or negative?

d. What is the change in deadweight loss? Is it
positive or negative?

e. Give one reason why the demand for cars in New
Jersey might be fairly elastic. Does this make the
additional tax more or less likely to increase

government revenue? How might states try to
reduce the elasticity of demand?

 

答案：

a.When the government levies a tax on a good, the equilibrium quantity of the good falls. That is, a tax on a market shrinks the size of the market.A tax on a good places a wedge between the price paidby buyers and the price received by sellers. When the market moves to the new equilibrium, buyers pay more for the good and sellers receive less for it.

b.A tax increase on a good reduces the welfare of buyers and sellers of the good, and the reduction in consumer and producer surplus usually exceeds the revenue raised by the government. So before the tax increase the consumer surplus and producer surplus and total surplus will be higher than after the tax increase.The level of goverment revenue will depend on the size of the tax.Tax revenue first rises with the size of a tax. Eventually, however, a larger tax reduces tax revenue.A tax increase of 50% is relatively large and the demand and supply are both elasitc so it may reduce the government revenue.

c.A tax increase of 50% is relatively large and the demand and supply are both elasitc so the government revenue is negative.

d.Because the demand and supply are both elastic so the deadweight loss is possitive.

e.People can take good use of public transportation so the demand for cars might be fairly elastic.And this make the additional tax less likely to increase government revenue.The government can reduce the tax on gas and raise the fare on public transportation so the demand for car will increase in order to compensate the loss.

 

 

3.Several years ago the British government imposed a
“poll tax” that required each person to pay a flat
amount to the government independent of his or her
income or wealth. What is the effect of such a tax on
economic efficiency? What is the effect on economic
equity? Do you think this was a popular tax?

 

答案：

If an allocation of resources maximizes total surplus, we say that the allocation exhibits efficiency.equity—the fairness of the distribution of well-being among the various buyers and sellers.Flat amount- to assign a specific and unchanging dollar value from your life insurance to a beneficiary following your death.Poll tax is not a tax on good or service so it is totally efficient and it did not confict with economic equity. I think it will not be a popular tax because it cost poor people higher percentage of his income. 

 

 

4.This chapter analyzed the welfare effects of a tax on a
good. Consider now the opposite policy. Suppose that
the government subsidizes a good: For each unit of the
good sold, the government pays $2 to the buyer. How
does the subsidy affect consumer surplus, producer
surplus, tax revenue, and total surplus? Does a subsidy
lead to a deadweight loss? Explain.

 

答案： To analyze how any event influences a market, we use the supply-and-demand diagram to examine how the event affects the equilibrium price and quantity. To do this we follow three steps. First, we decide whether the event shifts the supply curve or the demand curve (or
both). Second, we decide which direction the curve shifts. Third, we compare the new equilibrium with the old equilibrium.If the government pays $2 to the buyer this will shift the demand curve to the right and raise the equilibrium. Then both the consumer surplus and producer surplus will be increased.Due to the increase in supply quantity the tax revenue will rise too. The sum of consumer surplus,producer surplus and tax revenue is the total surplus which will certainly be increased. The deadweight loss is the reduction in total surplus due to the tax.The deadweight loss is an area of a triangle, and an area of a triangle depends on the square of its size.The base is the tax and it remains the same while the height is not certain so we are not sure whether it will lead to a deadweight loss or not.

 

 

5.(This problem uses some high school algebra and is
challenging.) Suppose that a market is described by the
following supply and demand equations:
QS = 2P
QD = 300 P
a. Solve for the equilibrium price and the equilibrium
quantity.
b. Suppose that a tax of T is placed on buyers, so the
new demand equation is
QD = 300 (P T).
Solve for the new equilibrium. What happens to the
price received by sellers, the price paid by buyers,
and the quantity sold?
c. Tax revenue is T Q. Use your answer to part (b)
to solve for tax revenue as a function of T. Graph
this relationship for T between 0 and 300.
d. The deadweight loss of a tax is the area of the
triangle between the supply and demand curves.
Recalling that the area of a triangle is 1/2 base
height, solve for deadweight loss as a function of T.
Graph this relationship for T between 0 and 300.
(Hint: Looking sideways, the base of the
deadweight loss triangle is T, and the height is the
difference between the quantity sold with the tax
and the quantity sold without the tax.)
e. The government now levies a tax on this good of
$200 per unit. Is this a good policy? Why or why
not? Can you propose a better policy?

 

答案：

a.The equilibrium price is 100;The equilibrium quantity is 200;
b.The new equilibrium price is 100-T/3;The new equilibrium quantity is 200-2T/3;The price received by seller will be less and the price paid by buyers will be increased. And the quantity sold will be decreased.
c.Tax revenue=200T-2/3T*T-T*T(200-2T/3)/(300-T)
d.deadweight loss=T*T(200-2T/3)/2(300-T)

e.deadweight loss=60000/3;Tax revenue=40000/3;Tax revenue is less than deadweight loss. The tax is too high and it affect the tax revenue negatively. So it's not a good policy.I think a reduction on tax will increase the tax revenue meanwhile give the market a good incentive.