Government-imposed taxes cause reductions in the activity that is being ta xed, which has important implications for revenue collections. To understand the effect of such a tax, consider the monthly market for gin, 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 100 Market for Gin 90 Supply 40 80 70 Quantity (Bottles) Demand Price (Dollars per bottle) Tax (Dollars per bottle) 60.00 Supply Price (Dollars per bottle) 40.00 1 60 20.00 50 PRICE (Dollars per bottle) I ULI II 1 1 40 30 Demand Tax (Dollars per bottle) 20.00 50 PRICE (Dollars per bal 40 30 Demand 20 10 0 0 10 20 30 40 50 60 70 80 90 100 QUANTITY (Bottles) Suppose the government imposes a $20-per-bottle tax on suppliers. At this tax amount, the equilibrium quantity of gin is bottles, and the government collects in tax revenue. Now calculate the government's tax revenue if it sets a tax of so, $20, $40, $50, S60, S80, 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. 1250 1125 Laffer Curve 1000 875 750 TAX REVENUE (Dollars) 625 500 375 250 125+ 0 0 10 20 RO 10 100 30 40 50 60 70 TAX (Dollars per bottle) Suppose the government is currently imposing an $80-per-bottle tax on gin. True or False: The government can raise its tax revenue by decreasing the per-unit tax on gin. True 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 } * 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 1000 1600 Deadweight Loss 2000 1800 1600 Deadweight Loss 1400 1200 DEADWEIGHT LOSS (Dollars) 1000 800 600 400 200 0 0 10 20 80 90 100 30 40 50 60 70 TAX (Dollars per bottle) s the tax per bottle increases, deadweight loss Government-imposed taxes cause reductions in the activity that is being ta xed, which has important implications for revenue collections. To understand the effect of such a tax, consider the monthly market for gin, 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 100 Market for Gin 90 Supply 40 80 70 Quantity (Bottles) Demand Price (Dollars per bottle) Tax (Dollars per bottle) 60.00 Supply Price (Dollars per bottle) 40.00 1 60 20.00 50 PRICE (Dollars per bottle) I ULI II 1 1 40 30 Demand Tax (Dollars per bottle) 20.00 50 PRICE (Dollars per bal 40 30 Demand 20 10 0 0 10 20 30 40 50 60 70 80 90 100 QUANTITY (Bottles) Suppose the government imposes a $20-per-bottle tax on suppliers. At this tax amount, the equilibrium quantity of gin is bottles, and the government collects in tax revenue. Now calculate the government's tax revenue if it sets a tax of so, $20, $40, $50, S60, S80, 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. 1250 1125 Laffer Curve 1000 875 750 TAX REVENUE (Dollars) 625 500 375 250 125+ 0 0 10 20 RO 10 100 30 40 50 60 70 TAX (Dollars per bottle) Suppose the government is currently imposing an $80-per-bottle tax on gin. True or False: The government can raise its tax revenue by decreasing the per-unit tax on gin. True 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 } * 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 1000 1600 Deadweight Loss 2000 1800 1600 Deadweight Loss 1400 1200 DEADWEIGHT LOSS (Dollars) 1000 800 600 400 200 0 0 10 20 80 90 100 30 40 50 60 70 TAX (Dollars per bottle) s the tax per bottle increases, deadweight loss