Chapter 9: Privatization (page 327)
Why have recent successive UK governments prefferred a PFI over PPPs?
Advantages in borrowing, solving fiscal issues and spending.
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Among the tax proposals regularly considered by Congress is an additional tax on distilled liquors. The tax would not apply to beer. The price elasticity of supply of liquor is 4.0, and the price elasticity of demand is -0.2. The cross-elasticity of demand for beer with respect to the price of liquor is 0.1.
a. If the new tax is imposed, who will bear the greater burden—liquor suppliers or liquor consumers? Why?
b. Assuming that beer supply is infinitely elastic, how will the new tax affect the beer market?
In Example 9.1 (page 332), we calculated the gains and losses from price controls on natural gas and found that there was a deadweight loss of \(5.68 billion. This calculation was based on a price of oil of \)50 per barrel.
a. If the price of oil were \(60 per barrel, what would be the free-market price of gas? How large a deadweight loss would result if the maximum allowable price of natural gas were \)3.00 per thousand cubic feet?
b. What price of oil would yield a free-market price of natural gas of $3?
Currently, the social security payroll tax in the United States is evenly divided between employers and employees. Employers must pay the government a tax of 6.2 percent of the wages they pay, and employees must pay 6.2 percent of the wages they receive. Suppose the tax were changed so that employers paid the full 12.4 percent and employees paid nothing. Would employees be better off?
What is 1 advantage of public ownership?
You know that if a tax is imposed on a particular product, the burden of the tax is shared by producers and consumers. You also know that the demand for automobiles is characterized by a stock adjustment process. Suppose a special 20-percent sales tax is suddenly imposed on automobiles. Will the share of the tax paid by consumers rise, fall, or stay the same over time? Explain briefly. Repeat for a 50-cents-per-gallon gasoline tax.
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