To reduce the consumption of sugary soft drinks, suppose the government imposes a $2 per-unit sales tax on soft drinks.per-unit sales tax on soft drinks.Will the price of soft drinks increase by the full amount of the sales tax? Explain.Calculate the tax revenue the government can collect from the sale of soft drinks. Show your work.Will the consumer surplus increase, decrease, or stay the same after the tax?Calculate the deadweight loss created by the tax. Show your work.

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17-01-2022
Business

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To reduce the consumption of sugary soft drinks, suppose the government imposes a $2 per-unit sales tax on soft drinks.per-unit sales tax on soft drinks.Will the price of soft drinks increase by the full amount of the sales tax? Explain.Calculate the tax revenue the government can collect from the sale of soft drinks. Show your work.Will the consumer surplus increase, decrease, or stay the same after the tax?Calculate the deadweight loss created by the tax. Show your work.

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ogorwyne ogorwyne · Answer 1 · 2022-01-26T13:31:56+01:00

The prices of the drinks are going to rise by the same amount as the sales tax imposed on the drinks.

It would rise by this same amount if the tax burden is on the producer of the drink and not the consumer.

Calculation of the tax revenue

The tax revenue is going to be the sales tax of $2 times the number of the soft drinks that was sold.

= $2*n

Where n is the number sold.

The consumer surplus is going to fall(decrease) due to the fact that there would be decreased demand. This would shift the demand curve backward.

The deadweight loss is the fall in demand that is due to market inefficiency. This is the cost.