28. Soda is produced in the market shown in the graph below. Answer the following questions based on the information given in the graph. Price per case g 8. 7 6 5 4 3 2 1- 0 1 2 3 4 5 S D 678 9 10 Quantity (millions of cases) A. To reduce the consumption of soda, suppose the government places-a $2 per unit tax. i. Will the price of soda increase by the full amount of the tax? Explain. ii. Calculate the tax revenue the government collects from the sale of soda. Show your work. iii. Will consumer surplus increase, decrease, or remain the same after the sales tax? iv. Calculate the deadweight loss created by the tax. Show your work. B. Suppose that instead of imposing a per unit tax, the government sets a price ceiling of $7. Identify the quantity of soda that will be exchanged in the market as a result of the price ceiling. Explain.

28. Soda is produced in the market shown in the graph below. Answer the following questions based on the information given in the graph. Price per case g 8. 7 6 5 4 3 2 1- 0 1 2 3 4 5 S D 678 9 10 Quantity (millions of cases) A. To reduce the consumption of soda, suppose the government places-a $2 per unit tax. i. Will the price of soda increase by the full amount of the tax? Explain. ii. Calculate the tax revenue the government collects from the sale of soda. Show your work. iii. Will consumer surplus increase, decrease, or remain the same after the sales tax? iv. Calculate the deadweight loss created by the tax. Show your work. B. Suppose that instead of imposing a per unit tax, the government sets a price ceiling of $7. Identify the quantity of soda that will be exchanged in the market as a result of the price ceiling. Explain.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter5: Elastic And Its Application

Section: Chapter Questions

Problem 10PA

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Similar questions

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