1. To encourage inner-city youths to spend more time playing sports, the government introduces a super income tax of 10% on professional basketball players and plans to use the revenue to improve inner-city sports facilities.
a. Will the super income tax raise much revenue for the government?
b. Who will pay most of the tax: the players or the team owners?
c. Will the tax create a large or a small excess burden?
2. In an attempt to raise more revenue, the government decides to increase the tax on buyers of coffee.
a. What will determine how much more Starbucks charges for a coffee?
b. How will the quantity of coffee bought in coffee shops change?
c. Will the government raise much revenue from the coffee tax?