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 The Laffer curve Government-imposed taxes cause reductions in the activity that is being taxed, which has important implications for revenue collections

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 The Laffer curve 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, which is shown on the following graph. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Graph Input Tool 100 Market for Vodka 00 Supply 48 80 70 Quantity (Bottles) Demand Price (Dollars per bottle) Tax (Dollars per bottle) 60.00 Supply Price (Dollars per bottle) 40.00 20.00 PRICE (Dollars per bottle) 40 30 Demand 20 10 0 12 24 36 45 60 72 34 36 108 120 QUANTITY (Bottles)
Suppose the government imposes a $20-per-bottle tax on suppliers At this tax amount, the equilibrium quantity of vodka is bottles, and the government collects 5 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. (Hint: To find the equilibrium quantity after the tax, adjust the "Quantity" field until the Tax equals the value of the per-unit tax.) Using the date 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 the connected. Line segments will connect the points automatically 2000 A 2160 1920 Laffer Curve 180 1440 TAX REVENUE (Dollars) 1200 30 720 480 240 O 0 10 20 90 100 30 40 50 60 70 TAX (Dollars per bottle)
Suppose the government is currently imposing a $60-per-bottle tax on vodka. True or False: The government can raise its tax revenue by increasing the per-unit tax on vodka. True False Consider the deadweight loss generated in each of the following cases: no tax, a tax of $40 per bottle, and a tax of $80 per bottle. On the following graph, use the black curve (plus symbols) to Mustrate the deadweight loss in these cases. (Hint: Remember that the area of a triangle is equal to 1 x Base * Height. In the case of a deadweight loss triangle found on the graph input tool, the base is the amount of the tax and the height is the reduction in quantity caused by the tax.) 2400 2500 1920 Deadweight Loss 1680 1440 DEADWEIGHT LOSS (Dollars) 1200 720 240
Consider the deadweight loss generated in each of the following cases: no tax, a tax of $40 per bottle, and a tax of $80 per bottle. On the following graph, use the black curve (plus symbols) to Austrate the deadweight loss in these cases. (Hint: Remember that the area of a triangle is equai to x Base x Height. In the case of a deadweight loss triangle found on the graph input tool, the base is the amount of the tax and the height is the reduction in quantity caused by the tax.) 2400 2160 Deadweight Loss 1920 160 1440 DEADWEIGHT LOSS Dollars) 1200 000 400 240 10 20 30 0 100 30 40 50 60 70 TAX Dollars per bottle) As the tax per bottle increases, deadweight loss