Principles+of+Economics+7th+Edition+Mankiw-Solution+Manual Chapter 08

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1、Chapter8/Application:TheCostsofTaxation❖1598Chapter8APPLICATION:THECOSTSOFTAXATIONofTaxationWHAT’SNEWINTHESEVENTHEDITION:AnewIntheNewsboxon“TheTaxDebate”hasbeenadded.LEARNINGOBJECTIVES:Bytheendofthischapter,studentsshouldunderstand:Øhowtaxesreduceconsumerandproducer

2、surplus.Øthemeaningandcausesofthedeadweightlossfromatax.Øwhysometaxeshavelargerdeadweightlossesthanothers.Øhowtaxrevenueanddeadweightlossvarywiththesizeofatax.CONTEXTANDPURPOSE:Chapter8isthesecondchapterinathree-chaptersequencedealingwithwelfareeconomics.Intheprevio

3、ussectiononsupplyanddemand,Chapter6introducedtaxesanddemonstratedhowataxaffectsthepriceandquantitysoldinamarket.Chapter6alsodescribedthefactorsthatdeterminehowtheburdenofthetaxisdividedbetweenthebuyersandsellersinamarket.Chapter7developedwelfareeconomics—thestudyofh

4、owtheallocationofresourcesaffectseconomicwell-being.Chapter8combinesthelessonslearnedinChapters6and7andaddressestheeffectsoftaxationonwelfare.Chapter9willaddresstheeffectsoftraderestrictionsonwelfare.ThepurposeofChapter8istoapplythelessonslearnedaboutwelfareeconomic

5、sinChapter7totheissueoftaxationthatwasaddressedinChapter6.Studentswilllearnthatthecostofataxtobuyersandsellersinamarketexceedstherevenuecollectedbythegovernment.Studentswillalsolearnaboutthefactorsthatdeterminethedegreebywhichthecostofataxexceedstherevenuecollectedb

6、ythegovernment.©2012CengageLearning.AllRightsReserved.Maynotbescanned,copiedorduplicated,orpostedtoapubliclyaccessiblewebsite,inwholeorinpart.Chapter8/Application:TheCostsofTaxation❖159KEYPOINTS:·Ataxonagoodreducesthewelfareofbuyersandsellersofthegood,andthereductio

7、ninconsumerandproducersurplususuallyexceedstherevenueraisedbythegovernment.Thefallintotalsurplus—thesumofconsumersurplus,producersurplus,andtaxrevenue—iscalledthedeadweightlossofthetax.·Taxeshavedeadweightlossesbecausetheycausebuyerstoconsumelessandsellerstoproducel

8、ess,andthesechangesinbehaviorshrinkthesizeofthemarketbelowthelevelthatmaximizestotalsurplus.Becausetheelasticitiesofsupplyanddemandmeasure