4. Suppose that the government can raise the same amount of money by imposing a tax...
4. Suppose that the government can raise the same amount of
money by imposing a tax of $5 per shirt sold in years 1 and 2 or a
tax of $10 per shirt sold in year 1 and $0 per shirt sold in year
2. Draw a supply-demand diagram for shirts for year 1 and another
for year 2.
a. Impose a tax of $5 per shirt in each year and show on the graph
the resulting excess
burden.
b. Impose a tax of $10 per shirt in year 1 and $0 in
year 2. Show graphically the excess burden.
c. In which case is the excess burden higher?
Why?
Homework Answers
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4. Suppose that the government can raise the same amount of
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Suppose the government imposes a $4-per-pack tax on suppliers.
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