3. Relationship between tax revenues, deadweight loss, and demandelasticity The government is considering levying a tax of $100 per unit on suppliers of either leather jackets or smartphones. The supply curve for each of these two goods is identical, as you can see on each of the following graphs. The demand for leather jackets is shown by Dy (on the first graph), and the demand for smartphones is shown by Ds (on the second graph). Suppose the government taxes leather jackets. The following graph shows the annual supply and demand for this good. It also shows the supply curve ( S + Tax) shifted up by the amount of the proposed tax ($100 per jacket). On the following graph, use the green rectangle (triangle symbols) to shade the area that represents tax revenue for leather jackets. Then use the black triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax.Leather Jackets Market 240 Supply 220 Tax Revenue 200 S+Tax 180 160 Deadweight Loss 140 120 PRICE (Dollars per jacket) 100 DL 80 60 40 20 0 0 50 100 150 200 250 300 350 400 450 500 550 600 QUANTITY (Jackets) Instead, suppose the government taxes smartphones. The following graph shows the annual supply and demand for this good, as well as the supply curve shifted up by the amount of the proposed tax ($100 per phone).On the following graph, do the same thing that you did on the graph for leather jackets. Use the green rectangle (triangle symbols) to shade the area that represents tax revenue for smartphones. Then, use the black triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax. Smartphones Market 240 220 Supply 200 S+Tax Tax Revenue 180 160 Deadweight Loss 140 PRICE (Dollars per phone) 120 100 80 60 20 0 0 50 100 150 200 250 300 350 400 450 500 550 600 QUANTITY (Phones)Complete the following table with the tax revenue collected and deadweight loss caused by each of the tax proposals. Tax Revenue Deadweight Loss If the Government Taxes... (Dollars) (Dollars) Leather jackets at $100 per jacket Smartphones at $100 per phone Suppose the government wants to tax the good that will generate more tax revenue at a lower welfare cost. In this case, it should tax because, all else held constant, taxing a good with a relatively elastic demand generates larger tax revenue and smaller deadweight loss.4. The Laffer curve Governments often place so-called sin taxes on goods or services such as cigarettes and alcohol. These kinds of taxes are popular with politicians because they are usually more palatable to voters than income taxes. To understand the effect of such a tax, consider the monthly market for cigarettes, which is shown on the following graph. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly.Graph Input Tool 20 Market for Cigarettes 18 Supply I Quantity 48 (Packs) 16 Demand Price 12.00 Supply Price 8.00 14 (Dollars per pack) (Dollars per pack) 12 Tax Wedge 4.00 (Dollars per pack) 10 PRICE (Dollars per pack) Demand N 0 12 24 36 48 60 72 84 96 108 120 QUANTITY (Packs) Suppose the government imposes a $4-per-pack tax on suppliers. At this tax amount, the equilibrium quantity of cigarettes is packs, and the government collects $ in tax revenue.Now calculate the government's tax revenue if it sets a tax of $0, $4, $8, $10, $12, $16, or $20 per pack. (Hint: To find the equilibrium quantity after the tax, adjust the "Quantity" field until the Tax Wedge equals the value of the per-unit tax.) Using the data you generate, plot a Laffer curve by using the green points (triangle symbol) to plot total tax revenue at each of those tax levels. Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically. 300 A 270 Laffer Curve 240 210 180 TAX REVENUE (Dollars) 150 120 gr 60 30 2 6 B 10 12 14 16 18 20 TAX (Dollars per pack)Suppose the government is currently imposing a $12-per-pack tax on cigarettes. True or False: The government can raise its tax revenue by decreasing the per-unit tax on cigarettes. O True False Consider the deadweight loss generated in each of the following cases: no tax, a tax of $8 per pack, and a tax of $16 per pack. On the following graph, use the black curve (plus symbols) to illustrate the deadweight loss in these cases. (Hint: Remember that the area of a triangle is equal to - X Base X Height. In the case of a deadweight loss triangle found on the graph input tool, the base is the amount of the tax and the height is the reduction in quantity caused by the tax.)480 432 Deadweight Loss 384 336 288 DEADWEIGHT LOSS (Dollars) 240 192 144 96 18 2 6 B 10 12 14 16 18 20 TAX (Dollars per pack) As the tax per pack increases, deadweight loss