Government-imposed taxes cause reductions in the activity that is being taxed, which has important implications for revenue collections. To understand the effect of such a tax, consider the monthly market for rum, 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. 100 -- 90 on o 70 60 50 4o 30 PRICE (Dollars per bottle) 20 10 Sunply _____+ ______.!. _____+ | I I Demand I I I 10 20 30 40 50 60 70 80 90 100 QUANTITY (Bottles) Graph Input Tool Market for Rum Quantity (Bottles) Demand Price (Dollars per bottle) Tax {Dollars per bottle) 60.00 20.00 Supply Price (Dollars per bottle) 40'00 Suppose the government imposes a $20-per-bottle tax on suppliers. At this tax amount, the equilibrium quantity of rum is bottles, and the government collects $ in tax revenue. Now calculate the government's tax revenue if it sets a tax of $0, $20, $40, $50, $60, $80, or $100 per bottle. (Hint: To find the equilibrium quantity after the tax, adjust the "Quantity" field until the Tax 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. 1250 1125 Laffer Curve 1000 875 750 625 TAX REVENUE (Dollars) 500 375 250 125 0 10 20 30 40 50 60 70 80 90 100 TAX (Dollars per bottle)Suppose the government is currently imposing an $80perbottle tax on rum. True or False: The government can raise its tax revenue by decreasing the perunit tax on rum. Tru e False Consider the deadweight loss generated in each of the following cases: no tax, a tax of $40 per bottle, and a tax of $80 per bottle. 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.) 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.) 2000 - 1800 - v 1500 Deadweight Loss 1400 - 1200 - 1000 - 800 - 600 - DEADWEIGHT LOSS (Dollars) 400 - 200 - 0 1OIIOOIIOIl 0 10 20 30 40 50 60 70 80 90 100 TAX (Dollars per bottle) As the tax per bottle increases, deadweight loss Y