Chapter_7_Answers

Chapter_7_Answers - Chapter 7 1. B 2. B 3. C 4. C 5. D 6. D...

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Chapter 7 1. B 2. B 3. C 4. C 5. D 6. D 7. C 8. D 9. B 10. A 11. B 12. C 13. A 14. B 15. C 16. A 17. A 18. D 19. B 20. D II. Short-answer Questions 1. Gasoline taxes. a. If a tax on gasoline is imposed, the price that consumers pay goes up (from P 0 * to P 1 *+T) and the amount that producers receive goes down (from P* 0 to P* 1 ).
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Q P S D Q 0 * Q 1 * P 0 * P 1 *+T P 1 * Amount consumers pay after taxes Amount producers receive CS PS TAX DWL D-T b. See above. c. See below. Q P S D Q 0 * = Q 1 * P 0 *=P 1 *+T P 1 * Amount consumers pay for gas Amount producers receive D-T CS PS TAX REVENUE d. It’s easiest to model this tax as a shift back in the demand curve for gasoline. As the graph above shows, the amount that consumers pay for gasoline is the same before and after the tax (P 0 *=P 1 *), and the amount that producers receive goes down by the exact amount of the tax (from P 0 * to P 1 *). There is no change in the equilibrium quantity of gasoline bought and sold on the market. e.
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This note was uploaded on 04/28/2011 for the course ECON 1 taught by Professor Tang during the Spring '08 term at UCSD.

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Chapter_7_Answers - Chapter 7 1. B 2. B 3. C 4. C 5. D 6. D...

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