CHAPTER 6SUPPLY, DEMAND, AND GOVERNMENT POLICIES137the quantity of beer sold. What is the differencebetween the price paid by consumers and the pricereceived by producers? Has the quantity of beersold increased or decreased?5.A senator wants to raise tax revenue and make workersbetter off. A staff member proposes raising the payrolltax paid by firms and using part of the extra revenue toreduce the payroll tax paid by workers. Would thisaccomplish the senator’s goal?6.If the government places a $500 tax on luxury cars, willthe price paid by consumers rise by more than $500, lessthan $500, or exactly $500? Explain.7.Congress and the president decide that the UnitedStates should reduce air pollution by reducing its use ofgasoline. They impose a $0.50 tax for each gallon ofgasoline sold.a.Should they impose this tax on producers orconsumers? Explain carefully using a supply-and-demand diagram.b.If the demand for gasoline were more elastic,would this tax be more effective or less effective inreducing the quantity of gasoline consumed?
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