MicroChapter17HW - NAME DATE GRADE Micro Chapter Seventeen...

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NAME: DATE: GRADE: Micro Chapter Seventeen HW – Public Choice Theory and the Economics of Taxation 1. In Florida, sunscreen and sunglasses are vital items. If the sales tax on them is doubled, who will pay most of the sales tax increase: buyers or sellers? Will the tax increase halve the quantity of sunscreen and sunglasses bought? Explain why or why not. 2. Table 2 shows the demand schedule and the supply schedule of toothpaste. Draw the Demand / Supply graph. If the government put a $1.50 a tube tax on toothpaste. a. What price would the buyer pay for toothpaste? b. What price would the seller receive? c. How much tax revenue would the government collect? d. What is the deadweight loss created by the tax? 3. In exercise 2, suppose that when the government imposes a $1.50 tax on a tube of toothpaste, all the toothpaste manufacturers announce that to counteract the government's outrageous action, they are going to cut the price they charge for a tube of toothpaste by $1. a. Are the toothpaste manufacturers making a generous move to support oral hygiene or just seeking credit for market forces that are outside their control? Explain your answer using an appropriate graph.
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This note was uploaded on 05/18/2008 for the course ECON 251 taught by Professor Spencer during the Spring '08 term at Northampton Community College.

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MicroChapter17HW - NAME DATE GRADE Micro Chapter Seventeen...

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