7.1. Evaluate the following taxes from the standpoint of vertical and horizontal equity:
a. A 25-cent per-gallon tax on milk
b. A tax on stock market transactions
c. A sales tax on men’s clothing
d. A tax on cigarettes
7.2. Suppose the demand for toothbrushes is perfectly inelastic, at Qd = 3,000. The market supply curve is perfectly elastic and is equal to p = 2.00. What would be the deadweight loss associated with a $0.20 tax on toothbrushes? Based on the Ramsey rule, would this be a good product to tax?
7.4. True or false; explain your answer: “The new stadium was entirely privately funded because the city contributed only a 50-acre lot on which to build it.”
7.5. Suppose the International Olympic Committee announced that it would hold all of its Summer Games in Athens, Greece and all of its Winter Games in Sapporo, Japan. What is the likely impact on the monopoly power of the IOC, the IOCs ability to exploit an all-or-nothing demand curve, and the winners curse?
7.7. Your city is committed to raising $100 million for a new arena. The mayor suggests putting a tax on taxicab rides since out-of-towners disproportionately use taxicabs. Evaluate the wisdom of this policy decision.
7.10. Suppose New York wants to build a new facility to replace Madison Square Garden. Assume that the cost of building a new arena in midtown Manhattan is $2 billion and that all the costs occur right away. Also assume that New York will receive annual benefits of $100 million for the next 30 years, after which the new arena becomes worthless. Does it make financial sense to build the new facility if interest rates are 5 percent?