As of 2013, the feral specific tax on gasoline is 18.4 cents per gallon, and state specific taxes ranges from 8 cents in Alaska to 43 cents in California. A statistical study (Chouinard and Perloff, 2004) found that the incidence (chapter) of the federal specific tax on consumers is substantially lower than that from state specific taxes. When the federal specific tax increases by 1 cent, the retail price rises by about 0.5 cents. Retial consumers bear half the tax incidence. In contrast, when a state that uses regular gasoline increases it specific taxt by one cent,, the incidence of the tax falls almost entirely on consumers: The retail price rises by nearly 1 cent.a.) What are the incidences of the federal and state specific gasoline taxes on firms?B.) Explain why the incidence on consumers differes between a federal and state specific gasoline tax assuming the market is competitive. (Hint: Consider the residual supply curve facing a state compared to the supply curve facing the nation.)C.) Using the residual suppy equation (Equation), estimate how much more elastic is the residual supply elasticity to ne state than is the national supply elasticity. From simplicity, assume all 50 states are idntical.Equation:S'(p)=S(p)-D^o(p)

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As of 2013, the feral specific tax on gasoline is 18.4 cents per gallon, and state-specific taxes ranges from 8 cents in Alaska to 43 cents in California. A statistical study (Chouinard and Perloff, 2004) found that the incidence (chapter) of the federal specific tax on consumers is substantially lower than that from state specific taxes. When the federal specific tax increases by 1 cent, the retail price rises by about 0.5 cents. Retial consumers bear half the tax incidence. In contrast, when a state that uses regular gasoline increases it specific taxt by one cent,, the incidence of the tax falls almost entirely on consumers: The retail price rises by nearly 1 cent.

a.) What are the incidences of the federal and state-specific gasoline taxes on firms?

B.) Explain why the incidence on consumers differes between a federal and state specific gasoline tax assuming the market is competitive. (Hint: Consider the residual supply curve facing a state compared to the supply curve facing the nation.)

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C.) Using the residual suppy equation (Equation), estimate how much more elastic is the residual supply elasticity to ne state than is the national supply elasticity. From simplicity, assume all 50 states are idntical.

Equation:

S'(p)=S(p)-D^o(p)

 

 

 

As of 2013, the feral specific tax on gasoline is 18.4 cents per gallon, and state specific taxes ranges from 8 cents in Alaska to 43 cents in California. A statistical study (Chouinard and Perloff, 2004) found that the incidence (chapter) of the federal specific tax on consumers is substantially lower than that from state specific taxes. When the federal specific tax increases by 1 cent, the retail price rises by about 0.5 cents. Retial consumers bear half the tax incidence. In contrast, when a state that uses regular gasoline increases it specific taxt by one cent,, the incidence of the tax falls almost entirely on consumers: The retail price rises by nearly 1 cent.a.) What are the incidences of the federal and state specific gasoline taxes on firms?B.) Explain why the incidence on consumers differes between a federal and state specific gasoline tax assuming the market is competitive. (Hint: Consider the residual supply curve facing a state compared to the supply curve facing the nation.)C.) Using the residual suppy equation (Equation), estimate how much more elastic is the residual supply elasticity to ne state than is the national supply elasticity. From simplicity, assume all 50 states are idntical.Equation:S'(p)=S(p)-D^o(p)

 

As of 2013, the feral specific tax on gasoline is 18.4 cents per gallon, and state specific taxes ranges from 8 cents in Alaska to 43 cents in California. A statistical study (Chouinard and Perloff, 2004) found that the incidence (chapter) of the federal specific tax on consumers is substantially lower than that from state specific taxes. When the federal specific tax increases by 1 cent, the retail price rises by about 0.5 cents. Retial consumers bear half the tax incidence. In contrast, when a state that uses regular gasoline increases it specific taxt by one cent,, the incidence of the tax falls almost entirely on consumers: The retail price rises by nearly 1 cent.a.) What are the incidences of the federal and state specific gasoline taxes on firms?B.) Explain why the incidence on consumers differes between a federal and state specific gasoline tax assuming the market is competitive. (Hint: Consider the residual supply curve facing a state compared to the supply curve facing the nation.)C.) Using the residual suppy equation (Equation), estimate how much more elastic is the residual supply elasticity to ne state than is the national supply elasticity. From simplicity, assume all 50 states are idntical.Equation:S'(p)=S(p)-D^o(p)

 

As of 2013, the feral specific tax on gasoline is 18.4 cents per gallon, and state specific taxes ranges from 8 cents in Alaska to 43 cents in California. A statistical study (Chouinard and Perloff, 2004) found that the incidence (chapter) of the federal specific tax on consumers is substantially lower than that from state specific taxes. When the federal specific tax increases by 1 cent, the retail price rises by about 0.5 cents. Retial consumers bear half the tax incidence. In contrast, when a state that uses regular gasoline increases it specific taxt by one cent,, the incidence of the tax falls almost entirely on consumers: The retail price rises by nearly 1 cent.a.) What are the incidences of the federal and state specific gasoline taxes on firms?B.) Explain why the incidence on consumers differes between a federal and state specific gasoline tax assuming the market is competitive. (Hint: Consider the residual supply curve facing a state compared to the supply curve facing the nation.)C.) Using the residual suppy equation (Equation), estimate how much more elastic is the residual supply elasticity to ne state than is the national supply elasticity. From simplicity, assume all 50 states are idntical.Equation:S'(p)=S(p)-D^o(p)

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