1.

Taxes and Subsidies: End of Chapter Problem Suppose your state government has decided to tax donuts. Currently, in your state, 300,000 donuts are sold every day. Three possible taxes are being considered by lawmakers: a 20-cent per donut tax, which would decrease donut sales by 50,000 per day; @ Macmillan Learning a 25-cent per donut tax, which would decrease donut sales by 100,000 per day; and a 50-cent per donut tax, which would decrease donut sales by 150,000 donuts per day. a. Calculate the amount of tax revenue generated by each tax and the deadweight loss caused by each tax. Revenue from the $0.20 tax: $ Deadweight loss from the $0.20 tax: $ Revenue from the $0.25 tax: $ Deadweight loss from the $0.25 tax: $ Revenue from the $0.50 tax: $ Deadweight loss from the $0.50 tax: $ b. If the goal of your state government is to raise tax revenue in the most efficient manner (with the least deadweight loss Which tax is preferred? per dollar of revenue), which tax is preferable? $0.20 O $0.25 O $0.50Taxes and Subsidies: End of Chapter Problem Suppose your state government has decided to tax donuts. Currently, in your state, 300,000 donuts are sold every day. Three possible taxes are being considered by lawmakers: a 20-cent per donut tax, which would decrease donut sales by 50,000 per day; @ Macmillan Learning a 25-cent per donut tax, which would decrease donut sales by 100,000 per day; and a 50-cent per donut tax, which would decrease donut sales by 150,000 donuts per day. a. If the goal of your state government is simply to raise the most tax revenue, which tax is preferable? O $0.50 O $0.25 O $0.20 b. What other goal might your state government have when creating this kind of tax besides raising tax revenue? O benefit donut producers. O redistribute income. O balance the federal budget. O reduce donut consumption