The government of Granita is thinking about imposing a very small tax on one or more of the following goods: anvils, books, and cardigans. Anvils and books are both produced in competitive markets with constant marginal costs, while cardigans are produced by a monopoly with constant marginal costs. The elasticities of demand forthe three goods are –3, –1.5, and –1. What good or goods should the government put the very small tax on if it wants to minimize the deadweight burden?
Answer to relevant QuestionsSuppose that for every hour you work you can earn $10 before taxes. Furthermore, suppose that you can work up to 16 hours per day, 365 days per year. Draw your annual budget constraint reflecting the consumption-leisure ...How does making child care costs tax-deductible reduce the “tax wedge” associated with the fact that market work is taxed but home work is not? Does making child care costs deductible increase or decrease social ...You graduate from college and take a job at a consulting firm with a wage of $25 per hour. Your job is extremely flexible: you can choose to work any number of hours from 0 to 2,000 per year. a. Suppose there is an income ...Gale and Scholz (1994) estimate that increasing the contribution limits for Individual Retirement Accounts would have little effect on the overall rates of savings. Why do you think this might be the case? The Job Growth and Tax Relief Reconciliation Act of 2003 (JGTRRA) reduced the rate at which capital gains are taxed, but it included a “sunset” provision whereby the tax rate returned to its original level in 2009. How ...
Post your question