Econ_101_HW_04_ch_7_Fall_2011

# Econ_101_HW_04_ch_7_Fall_2011 - Economics 101-SFSU Fall...

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Economics 101--SFSU Name: Fall 2011 Homework #4 (Chapter 7) Due Thursday, September 29, 2011 Each question is worth 3 points, plus 1 point for writing your name. Total points = 100. Refer to data in problem 2 on page 192 in the textbook to answer questions 1 to 6. When you answer these questions, remember to pay close attention to the units of measurement. 1. Draw a diagram showing the equilibrium price and quantity of imported trucks if there is no tax. Label your graph completely, including numbers. Indicate how many imported trucks are sold and how much a consumer pays for an imported truck. 2. If the government imposes a \$3000 excise tax on each imported truck, what is the new equilibrium price and quantity? In other words, how much do consumers pay in total for an imported truck, how much do imported truck suppliers receive, and how many imported trucks will be sold? 3. Calculate the government revenue raised by the excise tax in question 2. Show this revenue on your diagram for question 1.

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4. Who benefits from this tax (other than the government collecting the tax revenue)? 5. Who is harmed by this tax (name at least two groups)? 6. Explain why the tax causes inefficiency. Suppose the government imposes an excise tax on the sale of all new college textbooks. Before the tax was imposed, 1 million textbooks were sold every year at a price of \$50. After the tax is imposed, students shifted en masse to used textbooks, and only 600,000
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Econ_101_HW_04_ch_7_Fall_2011 - Economics 101-SFSU Fall...

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