Governmentimposed 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 beer, 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. 50 45 40 35 30 25 20 15 PRICE (Dollars per case) 10 WNW ____-+ ______+ ____-+ Demand 7 14 21 28 35 42 49 56 63 70 QUANTITY (Cases) Graph Input Tool Market for Beer Quantity (Cases) Demand Price (Dollars per case) Tax (Dollars per case) 30.00 10.00 EU | Price (DE/gr}; per case) 2000 Suppose the government imposes a $10-per-case tax on suppliers. At this tax amount, the equilibrium quantity of beer is :] cases, and the government collects :] in tax revenue. Now calculate the government's tax revenue if it sets a tax of $0/ $10, $20, $25, $30, $40, or $50 per case. (Hint: To nd 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. \\ C71; 550 A 504 7 448 7 Laer CuNe 392 , 336 , 230 - 224 , TAX REVENUE (Dollars) 158 , 112 , U I I I I I I I I I I 0 5 1 U 1 5 20 25 30 35 40 45 50 TAX (Dollars per case) Homework (Ch 08) 112 56 u . . l . l l . . l l l 0 5 1D 1 5 20 25 30 35 40 45 50 TAX (Dollars per case) Suppose the government is currently imposing a $10-per-case tax on beer. True or False: The government can raise its tax revenue by increasing the per-unit tax on beer. 0 True O False Consider the deadweight loss generated in each of the fallowing cases: no tax, a tax of $20 per case, and a tax of $40 per case. 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.) /2\\ 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.) 700 630 v 560 Deadweig ht L055 490 420 350 180 210 DEADWEIGHT LOSS (Dollars) 140 70 0 5 1 D 15 20 15 30 35 40 45 50 TAX (Dollars per case) As the tax per case increases, deadweig ht loss Y