In markets where the government imposes an excise tax on unit sales, it also has a tendency to dabble with restrictions on advertising (for example, cigarettes and hard liquor). Do potential (or actual) restrictions on advertising in these markets serve the interest of a government that is interested in maximizing its tax revenue from the sale of these products? Explain your answer
In the case of the examples given, demand is quite inelastic, so restrictions on advertising are not likely to have a large impact on total sales but may have an impact on the distribution of sales across brand names. As such, government revenue is largely unaffected if the tax is on unit sales.
You might also like to view...
Answer the following statement(s) true (T) or false (F)
1. A monopoly's supply curve is the portion of its marginal cost curve that lies above its average variable cost curve. 2. A simple profit-maximizing monopoly will choose its price and quantity from the elastic portion of its demand curve. 3. Unlike perfectly competitive firms, monopolies do not produce where marginal revenue equals marginal cost, thus leading to deadweight loss. 4. In practice, many monopolists are required to earn zero economic profit. 5. If a natural monopoly charged the competitive price, it would earn a negative profit.
To move along a production possibilities curve from one point to another requires additional resources
Indicate whether the statement is true or false
As hourly wages have risen in the United States in the twentieth century, the number of hours of labor supplied by most wage workers has
a. fallen. b. stayed roughly constant. c. risen. d. generally risen, but has fallen during periods of recession.
Recall the Application about productivity in the nation of Latvia in the 1990s to answer the following question(s). According to this Application, workers in the European Community were more productive than workers in Latvia in the 1990s, yet despite this, the European Community chose to buy timber from Latvia. If EU governments decide to buy timber only from the European Community, then:
A. its citizens will be better off while their producers may be worse off. B. its citizens and producers will be worse off. C. its citizens and producers will be better off. D. its citizens will be worse off and producers will be better off.