Principles of Macroeconomics 7Th Edition Gregory Mankiw Solutions Manual Full Chapter PDF

Principles of Macroeconomics 7th
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Chapter 8
8
of Taxation
APPLICATION: THE COSTS OF

TAXATION
WHAT’S NEW IN THE SEVENTH EDITION:
A new In the News box on “The Tax Debate” has been added.
LEARNING OBJECTIVES:
By the end of this chapter, students should understand:
➢ how taxes reduce consumer and producer surplus.
➢ the meaning and causes of the deadweight loss from a tax.
➢ why some taxes have larger deadweight losses than others.
➢ how tax revenue and deadweight loss vary with the size of a tax.
CONTEXT AND PURPOSE:
Chapter 8 is the second chapter in a three-chapter sequence dealing with welfare economics. In the
previous section on supply and demand, Chapter 6 introduced taxes and demonstrated how a tax affects
the price and quantity sold in a market. Chapter 6 also described the factors that determine how the
burden of the tax is divided between the buyers and sellers in a market. Chapter 7 developed welfare
economics—the study of how the allocation of resources affects economic well-being. Chapter 8
combines the lessons learned in Chapters 6 and 7 and addresses the effects of taxation on welfare.
Chapter 9 will address the effects of trade restrictions on welfare.
The purpose of Chapter 8 is to apply the lessons learned about welfare economics in Chapter 7 to the
issue of taxation that was addressed in Chapter 6. Students will learn that the cost of a tax to buyers and
sellers in a market exceeds the revenue collected by the government. Students will also learn about the
factors that determine the degree by which the cost of a tax exceeds the revenue collected by the
government.
144
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Chapter 8 /Application: The Costs of Taxation ❖ 145
KEY POINTS:
• A tax on a good reduces the welfare of buyers and sellers of the good, and the reduction in
consumer and producer surplus usually exceeds the revenue raised by the government. The fall in
total surplus—the sum of consumer surplus, producer surplus, and tax revenue—is called the
deadweight loss of the tax.
• Taxes have deadweight losses because they cause buyers to consume less and sellers to produce
less, and these changes in behavior shrink the size of the market below the level that maximizes total
surplus. Because the elasticities of supply and demand measure how much market participants
respond to market conditions, larger elasticities imply larger deadweight losses.
• As a tax grows larger, it distorts incentives more, and its deadweight loss grows larger. Because a tax
reduces the size of a market, however, tax revenue does not continually increase. It first rises with
the size of a tax, but if the tax gets large enough, tax revenue starts to fall.
CHAPTER OUTLINE:
I. The Deadweight Loss of Taxation
A. Remember that it does not matter who a tax is levied on; buyers and sellers will likely share in
the burden of the tax.
B. If there is a tax on a product, the price that a buyer pays will be greater than the price the seller
receives. Thus, there is a tax wedge between the two prices and the quantity sold will be smaller
if there was no tax.
Figure 1
146 ❖ Chapter 8 /Application: The Costs of Taxation
C. How a Tax Affects Market Participants
1. We can measure the effects of a tax on consumers by examining the change in consumer
surplus. Similarly, we can measure the effects of the tax on producers by looking at the
change in producer surplus.
2. However, there is a third party that is affected by the tax—the government, which gets total
tax revenue of T × Q. If the tax revenue is used to provide goods and services to the public,
then the benefit from the tax revenue must not be ignored.
If you spent enough time covering consumer and producer surplus in Chapter 7,
students should have an easy time with this concept.
Figure 2
3. Welfare without a Tax
Figure 3
a. Consumer surplus is equal to: A + B + C.
b. Producer surplus is equal to: D + E + F.
c. Total surplus is equal to: A + B + C + D + E + F.
4. Welfare with a Tax
a. Consumer surplus is equal to: A.
b. Producer surplus is equal to: F.
c. Tax revenue is equal to: B + D.
d. Total surplus is equal to: A + B + D + F.
5. Changes in Welfare
a. Consumer surplus changes by: –(B + C).
b. Producer surplus changes by: –(D + E).
c. Tax revenue changes by: +(B + D).
d. Total surplus changes by: –(C + E).
6. Definition of deadweight loss: the fall in total surplus that results from a market
distortion, such as a tax.
D. Deadweight Losses and the Gains from Trade
Figure 4
1. Taxes cause deadweight losses because they prevent buyers and sellers from benefiting from
trade.
2. This occurs because the quantity of output declines; trades that would be beneficial to both
the buyer and seller will not take place because of the tax.
Show the students that the nature of this deadweight loss stems from the reduction
in the quantity of the output exchanged. Stress the idea that goods that are not
produced, consumed, or taxed do not generate benefits for anyone.
3. The deadweight loss is equal to areas C and E (the drop in total surplus).
4. Note that output levels between the equilibrium quantity without the tax and the quantity
with the tax will not be produced, yet the value of these units to consumers (represented by
the demand curve) is larger than the cost of these units to producers (represented by the
supply curve).
II. The Determinants of the Deadweight Loss
Figure 5
A. The price elasticities of supply and demand will determine the size of the deadweight loss that
occurs from a tax.
1. Given a stable demand curve, the deadweight loss is larger when supply is relatively elastic.
2. Given a stable supply curve, the deadweight loss is larger when demand is relatively elastic.
B. Case Study: The Deadweight Loss Debate
1. Social Security tax and federal income tax are taxes on labor earnings. A labor tax places a
tax wedge between the wage the firm pays and the wage that workers receive.
2. There is considerable debate among economists concerning the size of the deadweight loss
from this wage tax.
3. The size of the deadweight loss depends on the elasticity of labor supply and demand, and
there is disagreement about the magnitude of the elasticity of supply.
a. Economists who argue that labor taxes do not greatly distort market outcomes believe
that labor supply is fairly inelastic.
b. Economists who argue that labor taxes lead to large deadweight losses believe that labor
supply is more elastic.
Activity 1—Labor Taxes
Type: In-class discussion

Topics: Deadweight loss, taxation
Materials needed: None
Time: 10 minutes
Class limitations: Works in any size class
Purpose
Most students have not spent a great deal of time considering the effects of taxation on labor
supply. This in-class exercise gives them the opportunity to consider the effects of proposed
tax rates on their own willingness to supply labor.
Instructions
Ask students to assume that they are full-time workers earning $10 per hour, $80 per day,
$400 per week, $20,000 per year.
Ask them if they would quit their jobs or keep working if the tax rate was 10%, 20%, 30%,
… (up to 100%).
Keep a tally as they show hands indicating that they are leaving the labor force.
Ask students what they think the “best” tax rate is.
Points for Discussion

Many students have no idea that current marginal tax rates are greater than 30% for many
taxpayers.
Students will likely say that a tax rate of zero would be best, but remind them that there
would be no roads, libraries, parks, or national defense without at least some revenue raised
by the government.
III. Deadweight Loss and Tax Revenue as Taxes Vary
Figure 6
A. As taxes increase, the deadweight loss from the tax increases.
B. In fact, as taxes increase, the deadweight loss rises more quickly than the size of the tax.
1. The deadweight loss is the area of a triangle and the area of a triangle depends on the
square of its size.
2. If we double the size of a tax, the base and height of the triangle both double so the area of
the triangle (the deadweight loss) rises by a factor of four.
C. As the tax increases, the level of tax revenue will eventually fall.
D. Case Study: The Laffer Curve and Supply-Side Economics
1. The relationship between the size of a tax and the level of tax revenues is called a Laffer
curve.
2. Supply-side economists in the 1980s used the Laffer curve to support their belief that a drop
in tax rates could lead to an increase in tax revenue for the government.
3. Economists continue to debate Laffer’s argument.
a. Many believe that the 1980s refuted Laffer’s theory.
b. Others believe that the events of the 1980s tell a more favorable supply-side story.
c. Some economists believe that, while an overall cut in taxes normally decreases revenue,
some taxpayers may find themselves on the wrong side of the Laffer curve.
ALTERNATIVE CLASSROOM EXAMPLE:

Draw a graph showing the demand and supply of paper clips. (Draw each curve as a 45-
degree line so that buyers and sellers will share any tax equally.) Mark the equilibrium price
as $0.50 (per box) and the equilibrium quantity as 1,000 boxes. Show students the areas of
producer and consumer surplus.
Impose a $0.20 tax on each box. Assume that sellers are required to “pay” the tax to the
government. Show students that:
▪ the price buyers pay will rise to $0.60.

▪ the price sellers receive will fall to $0.40.
▪ the quantity of paper clips purchased will fall (assume to 800 units).
▪ tax revenue would be equal to $160 ($0.20  800).
Have students calculate the area of deadweight loss. (You may have to remind students how
to calculate the area of a triangle.)
Show students that as the tax increases (to $0.40, $0.60, and $0.80), tax revenue rises and
then falls, and the deadweight loss increases.
E. In the News: The Tax Debate
1. Recently, policymakers have debated the effects of increasing the tax rate, particularly on
higher-income taxpayers.
2. These two opinion pieces from The Wall Street Journal present both sides of the issue.
Activity 2—Tax Alternatives
Type: In-class assignment

Topics: Taxes and deadweight loss
Materials needed: None
Time: 20 minutes
Class limitations: Works in any size class
Purpose
The market impact of taxes can be a new concept to many students. This exercise helps them
think about the effects of taxes on different goods. Taxes that may be appealing for equity
reasons can be distortionary from a market perspective.
Instructions
Tell the class, “The state has decided to increase funding for public education. They are
considering four alternative taxes to finance these expenditures. All four taxes would raise the
same amount of revenue.” List these options on the board:
1. A sales tax on food.
2. A tax on families with school-age children.
3. A property tax on vacation homes.
4. A sales tax on jewelry.
Ask the students to answer the following questions. Give them time to write an answer, and
then discuss their answers before moving to the next question:
A. Taxes change incentives. How might individuals change their behavior because of
each of these taxes?
B. Rank these taxes from smallest deadweight loss to largest deadweight loss. Explain.
C. Is deadweight loss the only thing to consider when designing a tax system?
Common Answers and Points for Discussion

A. Taxes change incentives. How might individuals change their behavior because of
each of these taxes?
1. A sales tax on food: At the margin, some consumers will purchase less food.
Overall food purchases will not decrease substantially because the tax will be
spread over a large number of consumers and demand is relatively inelastic.
2. A tax on families with school-age children: No families would put their children up
for adoption to avoid taxes. A large tax could have implications for family
planning; couples may choose not to have children, or to have fewer children,
over time. A more realistic concern would be relocation to other states by mobile
families to avoid the tax.
3. A property tax on vacation homes: This tax would be concentrated on fewer
households. A large tax would discourage people from buying vacation homes.
Developers would build fewer vacation homes in the long run. In many areas,
people could choose an out-of-state vacation home to avoid the tax.
4. A sales tax on jewelry: This tax would also be relatively concentrated. People
would buy less jewelry, or they would buy jewelry in other states with lower
taxes.
B. Rank these taxes from smallest deadweight loss to largest deadweight loss.
Lowest deadweight loss—tax on children, very inelastic
Then—tax on food. Demand is inelastic; supply is elastic.
Third—tax on vacation homes Demand is elastic; short-run supply is inelastic.
Most deadweight loss—tax on jewelryDemand is elastic; supply is elastic.
C. Is deadweight loss the only thing to consider when designing a tax system?
No. This can generate a lively discussion. There are a variety of equity or fairness
concerns. The taxes on children and on food would be regressive. Each of the taxes
would tax certain households at much higher rates than other households with similar
incomes.
SOLUTIONS TO TEXT PROBLEMS:
Quick Quizzes
1. Figure 1 shows the supply and demand curves for cookies, with equilibrium quantity Q1 and
equilibrium price P1. When the government imposes a tax on cookies, the price to buyers
rises to PB, the price received by sellers declines to PS, and the equilibrium quantity falls to
Q2. The deadweight loss is the triangular area below the demand curve and above the supply
curve between quantities Q1 and Q2. The deadweight loss shows the fall in total surplus that
results from the tax.
Figure 1
2. The deadweight loss of a tax is greater the greater is the elasticity of demand. Therefore, a
tax on beer would have a larger deadweight loss than a tax on milk because the demand for
beer is more elastic than the demand for milk.
3. If the government doubles the tax on gasoline, the revenue from the gasoline tax could rise
or fall depending on whether the size of the tax is on the upward or downward sloping
portion of the Laffer curve. However, if the government doubles the tax on gasoline, you can
be sure that the deadweight loss of the tax rises because deadweight loss always rises as the
tax rate rises.
Questions for Review
1. When the sale of a good is taxed, both consumer surplus and producer surplus decline. The
decline in consumer surplus and producer surplus exceeds the amount of government
revenue that is raised, so society's total surplus declines. The tax distorts the incentives of
both buyers and sellers, so resources are allocated inefficiently.
2. Figure 2 illustrates the deadweight loss and tax revenue from a tax on the sale of a good.
Without a tax, the equilibrium quantity would be Q1, the equilibrium price would be P1,
consumer surplus would be A + B + C, and producer surplus would be D + E + F. The
imposition of a tax places a wedge between the price buyers pay, PB, and the price sellers
receive, PS, where PB = PS + tax. The quantity sold declines to Q2. Now consumer surplus is
A, producer surplus is F, and government revenue is B + D. The deadweight loss of the tax is
C+E, because that area is lost due to the decline in quantity from Q1 to Q2.
Figure 2
3. The greater the elasticities of demand and supply, the greater the deadweight loss of a tax.
Because elasticity measures the responsiveness of buyers and sellers to a change in price,
higher elasticity means the tax induces a greater reduction in quantity, and therefore, a
greater distortion to the market.
4. Experts disagree about whether labor taxes have small or large deadweight losses because
they have different views about the elasticity of labor supply. Some believe that labor supply
is inelastic, so a tax on labor has a small deadweight loss. But others think that workers can
adjust their hours worked in various ways, so labor supply is elastic, and thus a tax on labor
has a large deadweight loss.
5. The deadweight loss of a tax rises more than proportionally as the tax rises. Tax revenue,
however, may increase initially as a tax rises, but as the tax rises further, revenue eventually
declines.
Quick Check Multiple Choice

1. a
2. b
3. c
4. a
5. b
6. a
Problems and Applications
1. a. Figure 3 illustrates the market for pizza. The equilibrium price is P1, the equilibrium
quantity is Q1, consumer surplus is area A + B + C, and producer surplus is area D + E +
F. There is no deadweight loss, as all the potential gains from trade are realized; total
surplus is the entire area between the demand and supply curves: A + B + C + D + E +
F.
Figure 3
b. With a $1 tax on each pizza sold, the price paid by buyers, PB, is now higher than the
price received by sellers, PS, where PB = PS + $1. The quantity declines to Q2, consumer
surplus is area A, producer surplus is area F, government revenue is area B + D, and
deadweight loss is area C + E. Consumer surplus declines by B + C, producer surplus
declines by D + E, government revenue increases by B + D, and deadweight loss
increases by C + E.
c. If the tax were removed and consumers and producers voluntarily transferred B + D to
the government to make up for the lost tax revenue, then everyone would be better off
than without the tax. The equilibrium quantity would be Q1, as in the case without the
tax, and the equilibrium price would be P1. Consumer surplus would be A + C, because
consumers get surplus of A + B + C, then voluntarily transfer B to the government.
Producer surplus would be E + F, because producers get surplus of D + E + F, then

voluntarily transfer D to the government. Both consumers and producers are better off
than the case when the tax was imposed. If consumers and producers gave a little bit
more than B + D to the government, then all three parties, including the government,
would be better off. This illustrates the inefficiency of taxation.
2. a. The statement, "A tax that has no deadweight loss cannot raise any revenue for the
government," is incorrect. An example is the case of a tax when either supply or demand
is perfectly inelastic. The tax has neither an effect on quantity nor any deadweight loss,
but it does raise revenue.
b. The statement, "A tax that raises no revenue for the government cannot have any
deadweight loss," is incorrect. An example is the case of a 100% tax imposed on sellers.
With a 100% tax on their sales of the good, sellers will not supply any of the good, so
the tax will raise no revenue. Yet the tax has a large deadweight loss, because it reduces
the quantity sold to zero.
3. a. With very elastic supply and very inelastic demand, the burden of the tax on rubber
bands will be borne largely by buyers. As Figure 4 shows, consumer surplus declines
considerably, by area A + B, but producer surplus decreases only by area C+D..
Figure 4 Figure 5
b. With very inelastic supply and very elastic demand, the burden of the tax on rubber
bands will be borne largely by sellers. As Figure 5 shows, consumer surplus does not
decline much, just by area A + B, while producer surplus falls substantially, by area C +
D. Compared to part (a), producers bear much more of the burden of the tax, and
consumers bear much less.
4. a. The deadweight loss from a tax on heating oil is likely to be greater in the fifth year after
it is imposed rather than the first year. In the first year, the demand for heating oil is
relatively inelastic, as people who own oil heaters are not likely to get rid of them right
away. But over time they may switch to other energy sources and people buying new
heaters for their homes will more likely choose gas or electric, so the tax will have a
greater impact on quantity. Thus, the deadweight loss of the tax will get larger over
time.
b. The tax revenue is likely to be higher in the first year after it is imposed than in the fifth
year. In the first year, demand is more inelastic, so the quantity does not decline as
much and tax revenue is relatively high. As time passes and more people substitute away
from oil, the quantity sold declines, as does tax revenue.
5. Because the demand for food is inelastic, a tax on food is a good way to raise revenue
because it leads to a small deadweight loss; thus taxing food is less inefficient than taxing
other things. But it is not a good way to raise revenue from an equity point of view, because
poorer people spend a higher proportion of their income on food. The tax would affect them
more than it would affect wealthier people.
6. a. This tax has such a high rate that it is not likely to raise much revenue. Because of the
high tax rate, the equilibrium quantity in the market is likely to be at or near zero.
b. Senator Moynihan's goal was probably to ban the use of hollow-tipped bullets. In this
case, the tax could be as effective as an outright ban.
7. a. Figure 6 illustrates the market for socks and the effects of the tax. Without a tax, the
equilibrium quantity would be Q1, the equilibrium price would be P1, total spending by
consumers equals total revenue for producers, which is P1 x Q1, which equals area B + C
+ D + E + F, and government revenue is zero. The imposition of a tax places a wedge
between the price buyers pay, PB, and the price sellers receive, PS, where PB = PS + tax.
The quantity sold declines to Q2. Now total spending by consumers is PB x Q2, which
equals area A + B + C + D, total revenue for producers is PS x Q2, which is area C + D,
and government tax revenue is Q2 x tax, which is area A + B.
b. Unless supply is perfectly elastic or demand is perfectly inelastic, the price received by
producers falls because of the tax. Total receipts for producers fall, because producers
lose revenue equal to area B + E + F.
Figure 6
c. The price paid by consumers rises, unless demand is perfectly elastic or supply is
perfectly inelastic. Whether total spending by consumers rises or falls depends on the
price elasticity of demand. If demand is elastic, the percentage decline in quantity
exceeds the percentage increase in price, so total spending declines. If demand is
inelastic, the percentage decline in quantity is less than the percentage increase in price,
so total spending rises. Whether total consumer spending falls or rises, consumer surplus
declines because of the increase in price and reduction in quantity.
8. Figure 7 illustrates the effects of the $2 subsidy on a good. Without the subsidy, the
equilibrium price is P1 and the equilibrium quantity is Q1. With the subsidy, buyers pay price
PB, producers receive price PS (where PS = PB + $2), and the quantity sold is Q2. The
following table illustrates the effect of the subsidy on consumer surplus, producer surplus,
government revenue, and total surplus. Because total surplus declines by area D + H, the
subsidy leads to a deadweight loss in that amount.
Before After Subsidy Change

Subsidy
Consumer
Surplus A+B A+B+E+F+G +(E + F + G)
Producer
Surplus E+I B+C+E+I +(B + C)
Government
Revenue 0 –(B + C + D + E + F + G + H) –(B + C + D + E + F + G + H)
Total Surplus A+B+E+I A+B–D+E–H+I –(D + H)
Figure 7
9. a. Figure 8 shows the effect of a $10 tax on hotel rooms. The tax revenue is represented by
areas A + B, which are equal to ($10)(900) = $9,000. The deadweight loss from the tax
is represented by areas C + D, which are equal to (0.5)($10)(100) = $500.
Figure 8 Figure 9
b. Figure 9 shows the effect of a $20 tax on hotel rooms. The tax revenue is represented by
areas A + B, which are equal to ($20)(800) = $16,000. The deadweight loss from the tax
is represented by areas C + D, which are equal to (0.5)($20)(200) = $2,000.
When the tax is doubled, the tax revenue rises by less than double, while the deadweight
loss rises by more than double. The higher tax creates a greater distortion to the market.
10. a. Setting quantity supplied equal to quantity demanded gives 2P = 300 – P. Adding P to
both sides of the equation gives 3P = 300. Dividing both sides by 3 gives P = 100.
Substituting P = 100 back into either equation for quantity demanded or supplied gives Q
= 200.
b. Now P is the price received by sellers and P +T is the price paid by buyers. Equating
quantity demanded to quantity supplied gives 2P = 300 − (P+T). Adding P to both sides
of the equation gives 3P = 300 – T. Dividing both sides by 3 gives P = 100 –T/3. This is
the price received by sellers. The buyers pay a price equal to the price received by sellers
plus the tax (P +T = 100 + 2T/3). The quantity sold is now Q = 2P = 200 – 2T/3.
c. Because tax revenue is equal to T x Q and Q = 200 – 2T/3, tax revenue equals 200T −
2T 2 /3. Figure 10 (on the next page) shows a graph of this relationship. Tax revenue is
zero at T = 0 and at T = 300.
Figure 10 Figure 11
d. As Figure 11 shows, the area of the triangle (laid on its side) that represents the
deadweight loss is 1/2 × base × height, where the base is the change in the price, which
is the size of the tax (T) and the height is the amount of the decline in quantity (2 T/3).
So the deadweight loss equals 1/2 × T × 2T/3 = T 2 /3. This rises exponentially from 0
(when T = 0) to 30,000 when T = 300, as shown in Figure 12.
Figure 12
e. A tax of $200 per unit is a bad policy, because tax revenue is declining at that tax level.
The government could reduce the tax to $150 per unit, get more tax revenue ($15,000
when the tax is $150 versus $13,333 when the tax is $200), and reduce the deadweight
loss (7,500 when the tax is $150 compared to 13,333 when the tax is $200).
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between the tropics. Several species (P. vulgaris, P. auriga, P.
bocagii) occur in the Mediterranean and the neighbouring parts of
the Atlantic; one (P. argyrops) is well known on the coasts of the
United States under the names of “Scup,” “Porgy,” or “Mishcup,” and
one of the most important food fishes, growing to a length of 18
inches and a weight of 4 lbs.; another (P. unicolor) is one of the best-
known sea-fishes of Southern Australia and New Zealand, where it is
called “Snapper;” it is considered very good eating, like all the other
species of this genus, and attains, like some of them, a length of
more than 3 feet and a weight exceeding 20 lbs.
Pagellus.—Body oblong, compressed, with scales of moderate
size. Jaws without canines; molars on the sides arranged in several
series. Cheeks scaly. The spines of the dorsal fin, from eleven to
thirteen in number, can be received in a groove; anal spines three.
Seven species are known, the majority of which are European, as
P. erythrinus, common in the Mediterranean, and not rare on the
south coast of England, where it is generally termed “Becker;” P.
centrodontus, the common “Sea-bream” of the English coasts,
distinguished by a black spot on the origin of the lateral line; in the
young, which are called “Chad” by Cornish and Devon fishermen,
this spot is absent; P. owenii, the “Axillary or Spanish Sea-Bream,”
likewise from the British coasts. Pagellus lithognathus, from the
coasts of the Cape of Good Hope, attains to a length of four feet,
and is one of the fishes which are dried for export and sale to
whalers.
Chrysophrys.—Body oblong, compressed, with scales of
moderate size. Jaws with four or six canine teeth in front, and with
three or more series of rounded molars on each side. Cheeks scaly.
The spines of the dorsal fin, eleven or twelve in number, can be
received in a groove; anal spines three.
Some twenty species are known from tropical seas and the
warmer parts of the temperate zones. Generally known is Ch.
aurata, from the Mediterranean, occasionally found on the south
coast of England, where it is named “Gilthead.” The French call it
“Daurade,” no doubt from the Latin Aurata, a term applied to it by
ancient authors. The Greeks named it Chrysophrys (i.e. golden
eyebrow), in allusion to the brilliant spot of gold which it bears
between its eyes. According to Columella, the Aurata was among the
number of the fishes brought up by the Romans in their vivaria; and
the inventor of those vivaria, one Sergius Orata, is supposed to have
derived his surname from this fish. It is said to grow extremely fat in
artificial ponds. Duhamel states that it stirs up the sand with the tail,
so as to discover the shell-fish concealed in it. It is extremely fond of
mussels, and its near presence is sometimes ascertained by the
noise which it makes while breaking their shells with its teeth.
Several species found on the Cape of Good Hope attain to as large
a size as Pagellus lithognathus, and are preserved for sale like that
species. Chrysophrys hasta is one of the most common species of
the East Indian and Chinese coasts, and enters large rivers.
Fifth Group—Pimelepterina.—In both jaws a single anterior
series of cutting teeth, implanted by a horizontal posterior process,
behind which is a band of villiform teeth. Villiform teeth on the vomer,
palatines and the tongue. Vertical fins densely covered with minute
scales. Only one genus is known, Pimelepterus, with six species
from tropical seas. These fishes are sometimes found at a great
distance from the land.
Fifth Family—Hoplognathidæ.
Body compressed and elevated, covered with very small ctenoid
scales. Lateral line continuous. The bones of the jaws have a sharp
dentigerous edge, as in Scarus. The teeth, if at all conspicuous,
being continuous with the bone, forming a more or less indistinct
serrature; no teeth on the palate. The spinous portion of the dorsal
fin is rather more developed than the soft; the spines strong; anal
with three spines, similar to the soft dorsal. Ventrals thoracic, with
one spine and five soft rays.
One genus only is known, Hoplognathus, with four species from
Australian, Japanese, and Peruvian coasts.
Fig. 176.—Teeth of Hoplognathus.
Sixth Family—Cirrhitidæ.
Body oblong, compressed, covered with cycloid scales; lateral
line continuous. Mouth in front of the snout, with lateral cleft. Eye
lateral, of moderate size. Cheeks without a bony stay for the
præoperculum. Generally six, sometimes five or three
branchiostegals. Dentition more or less complete, composed of small
pointed teeth, sometimes with the addition of canines. One dorsal
fin, formed by a spinous and soft portion, of nearly equal
development. Anal with three spines, generally less developed than
the soft dorsal. The lower rays of the pectoral fins simple and
generally enlarged; ventrals thoracic, but remote from the root of the
pectorals, with one spine and five rays.
The fishes of this family may be readily recognised by their
thickened, undivided lower pectoral rays, which in some are
evidently auxiliary organs of locomotion, in others, probably, organs
of touch. They differ from the following family, the Scorpænidæ, in
lacking the bony connection between the infraorbital ring and the
præoperculum. Two groups may be distinguished in this family,
which, however, are connected by an intermediate genus
(Chironemus). The first, distinguished by the presence of vomerine
teeth, consists of Cirrhites and Chorinemus, small prettily coloured
fishes. The former genus is peculiar to the Indo-Pacific, and consists
of sixteen species; the second, with three species, seems to be
confined to the coasts of Australia and New Zealand. The second
group lacks the vomerine teeth, and comprises the following genera:
—
Chilodactylus.—One dorsal fin, with from sixteen to nineteen
spines; anal fin of moderate length; caudal forked. One of the simple
pectoral rays more or less prolonged, and projecting beyond the
margin of the fin. Teeth in villiform bands; no canines. Præoperculum
not serrated. Scales of moderate size. Air-bladder with many lobes.
Fig. 177.—Chilodactylus macropterus, from Australia.

Seventeen species are known, chiefly from the temperate parts
of the Southern Pacific, and also from the coasts of Japan and
China. They belong to the most valuable food-fishes, as they grow to
a considerable size (from five to twenty-five lbs.), and are easily
caught in numbers. At the Cape of Good Hope they are very
abundant, and preserved in large quantities for export.
Mendosoma from the coast of Chili, and Nemadactylus from
Tasmania, are allied genera.
Latris.—Dorsal fin deeply notched; the spinous portion with
seventeen spines; anal fin many-rayed. None of the simple pectoral
rays passes the margin of the fin. Teeth villiform; no canines.
Præoperculum minutely serrated. Scales small.
Two species only are known from Tasmania and New Zealand,
which belong to the most important food-fishes of the Southern
Hemisphere. Latris hecateia or the “Trumpeter,” ranges from sixty to
thirty lbs. in weight, and is considered by the colonists the best
flavoured of any of the fishes of South Australia, Tasmania, and New
Zealand, and consumed smoked as well as fresh. The second
species, Latris ciliaris, is smaller, scarcely attaining a weight of
twenty lbs., but more abundant; it is confined to the coast of New
Zealand.
Fig. 178.—Skull of Scorpæna percoides; so, Suborbital ring;

pr, Præoperculum; st, Bony stay, connecting the sub-orbital with
the præoperculum.
Seventh Family—Scorpænidæ.
Body oblong, more or less compressed, covered with ordinary
scales, or naked. Cleft of the mouth lateral or subvertical. Dentition
feeble, consisting of villiform teeth; and generally without canines.
Some bones of the head armed, especially the angle of the
præoperculum, its armature receiving additional support by a bony
stay, connecting it with the infraorbital ring. The spinous portion of
the dorsal fin equally or more developed than the soft and than the
anal. Ventrals thoracic, generally with one spine and five soft rays,
sometimes rudimentary.
This family consists of carnivorous marine fishes only; some
resemble the Sea-Perches in form and habits, as Sebastes,
Scorpæna, etc., whilst others live at the bottom of the sea, and
possess in various degrees of development those skinny
appendages resembling the fronds of seaweeds, by which they
either attract other fishes, or by which they are enabled more
effectually to hide themselves. Species provided with those
appendages have generally a coloration resembling that of their
surroundings, and varying with the change of locality. The habit of
living on the bottom has also developed in many Scorpænoids
separate pectoral rays, by means of which they move or feel. Some
of the genera live at a considerable depth, but apparently not beyond
300 fathoms. Nearly all are distinguished by a powerful armature
either of the head, or fin spines, or both; and in some the spines
have been developed into poison organs.
The only fossil representative known at present is a species of
Scorpæna from the Eocene of Oran.
Sebastes.—Head and body compressed; crown of the head scaly
to, or even beyond, the orbits; no transverse groove on the occiput.
Body covered with scales of moderate or small size, and without
skinny tentacles. Fin-rays not elongate; one dorsal, divided by a notch
into a spinous and soft portion, with twelve or thirteen spines; the anal
with three. No pectoral appendages. Villiform teeth in the jaws, on the
vomer, and generally on the palatine bones. Vertebræ more than
twenty-four.
About twenty species are known, principally from seas of the
temperate zones, as from the coasts of Northern Europe (S.
norvegicus, S. viviparus), of Japan, California, New Zealand, and
Van Diemen’s Land. All seem to prefer deep water to the surface,
and Sebastes macrochir has been obtained at a depth of 345
fathoms. In their general form they resemble the Sea-Perches, attain
to a weight of from one to four lbs., and are generally esteemed as
food.
Scorpæna.—Head large, slightly compressed, generally with a
transverse naked depression on the occiput; bones of the head armed
with spines, and generally with skinny tentacles. Scales of moderate
size. Mouth large, oblique. Villiform teeth in the jaws, and at least on
the vomer. One dorsal, 12–13/9, A. 3/5. Pectoral fins without detached
rays, large, rounded, with the lower rays simple and thickened. Air-
bladder none. Vertebræ twenty-four.
Fig. 179.—Head of Scorpæna percoides, from New Zealand.

Fig. 180.—Scorpæna bynoensis, from the coasts of Australia.
About forty species are known from tropical and sub-tropical
seas. They lead a sedentary life, lying hidden in the sand, or
between rocks covered with seaweed, watching for their prey, which
chiefly consists of small fishes. Their strong undivided pectoral rays
aid them in burrowing in the sand, and in moving along the bottom.
The type of their coloration is very much the same in all the species,
viz. an irregular mottling of red, yellow, brown, and black colours, but
the distribution of these colours varies exceedingly, not only in the
same species but also in the same individuals. They do not attain to
any considerable size, probably never exceeding a length of 18
inches. Their flesh is well flavoured. Wounds inflicted by their fin-
spines are exceedingly painful, but not followed by serious
consequences.
Glyptauchen and Lioscorpius are genera closely allied to
Scorpæna, from Australian seas.
Setarches is also allied to the preceding genera, and provided
with very large eyes, in accordance with the depth (215 fathoms)
which the two species known at present inhabit; one has been found
near Madeira, the other near the Fiji Islands.
Pterois.—Head and body compressed; scales of small or
moderate size. Bones of the head armed with numerous spinous
projections, between which often skinny tentacles are developed. The
dorsal spines and pectoral rays are more or less prolonged, passing
beyond the margin of the connecting membrane. Twelve or thirteen
dorsal spines. Villiform teeth in the jaws and on the vomer.
Nine species are known from the tropical Indo-Pacific. They
belong to the most singularly formed and most beautifully coloured
fishes of the Tropics, and formerly were believed to be able to fly, like
Dactylopterus. But the membrane connecting their pectoral rays is
much too short and feeble to enable them to raise themselves from
the surface of the water.
Apistus.—Head and body compressed, covered with ctenoid
scales of rather small size. Some bones of the head, and especially
the præorbital, are armed with spines. One dorsal with fifteen spines;
the anal with three. The pectoral fin is elongate, and one ray is
completely detached from the fin. Villiform teeth in the jaws, on the
vomer, and palatine bones. Air-bladder present. A cleft behind the
fourth gill.
Two species from the Indian Ocean. These fishes are very small,
but of interest on account of the prolongation of their pectoral fins,
which indicates that they can take long flying leaps out of the water.
However, this requires confirmation by actual observation.
Agriopus.—Head and body compressed, scaleless; head without
any, or with very feeble, armature. Cleft of the mouth small, at the end
of the produced snout. One dorsal fin, which commences from the
head, the spinous portion being formed by from seventeen to twenty-
one strong spines; anal short. Villiform teeth in the jaws, generally
none on the vomer.
Seven species. This singular genus is peculiar to the temperate
parts of the South Pacific, occurring at the Cape, on the coast of
South Australia, and Chili. The largest species (A. torvus) attains a
length of two and a half feet. Nothing is known of its mode of life.
Synanceia.—General appearance of the fish, especially of the
head, monstrous. Scales none; skin with numerous soft warty
protuberances or filaments. Mouth directed upwards, wide. Eyes
small. From thirteen to sixteen dorsal spines; pectoral fins very large.
Villiform teeth in the jaws, and sometimes on the vomer.
Four species are known from the Indo-Pacific, of which S. horrida
and S. verrucosa are the most generally distributed, and,
unfortunately, the most common. They are justly feared on account
of the great danger accompanying wounds which they inflict with
their poisoned dorsal spines, as has been already noticed above, p.
191. The greatest length to which they attain does not seem to
exceed eighteen inches. They are very voracious fishes, and their
stomach is of so great a capacity that they are able to swallow fishes
one-third of their own bulk.
Micropus.—Head and body strongly compressed, short, and
deep; no scales, but the skin is covered with minute tubercles. Snout
very short, with nearly vertical anterior profile. Præorbital, præ- and
inter-operculum with spines on the edge. Dorsal fin with seven or
eight, anal with two spines. Pectorals short, ventrals rudimentary.
Jaws with villiform teeth.
These fishes belong to the smallest of Acanthopterygians,
scarcely exceeding 1½ inches in length. Two species are known,
which are rather common on the coral reefs of the Pacific.
Chorismodactylus.—Head and body rather compressed,
scaleless, with skinny flaps. Bones of the head with prominent ridges;
the præorbital, præoperculum, and operculum armed; a depression on
the occiput. One dorsal fin, with thirteen spines; the anal with two.
Three free pectoral appendages. Ventral fins with one spine and five
rays. Villiform teeth in the jaws only.
Only one small species, Ch. multibarbis, is known, from the
coasts of India and China.
Fig. 181.—Chorismodactylus multibarbis.
To complete the list of Scorpænoid genera, we have to mention
Tænianotus, Centropogon, Pentaroge, Tetraroge, Prosopodasys,
Aploactis, Trichopleura, Hemitripterus, Minous and Pelor.
Eighth Family—Nandidæ.
Body oblong, compressed, covered with scales. Lateral line
interrupted. Dorsal fin formed by a spinous and soft portion, the
number of spines and rays being nearly equal; anal fin with three
spines, and with the soft portion similar to the soft dorsal. Ventral fins
thoracic, with one spine, and five or four rays. Dentition more or less
complete, but feeble.
This small family consists of two very distinct groups.
A. Plesiopina. Marine fishes of small size, with pseudobranchiæ
and only four ventral rays. Plesiops from the coral-reefs of the Indo-
Pacific, and Trachinops from the coast of New South Wales, belong
to this group.
B. Nandina. Freshwater fishes of small size from the East Indies,
without pseudobranchiæ, and five ventral rays. The genera are
Badis, Nandus, and Catopra.
Ninth Family—Polycentridæ.
Body compressed, deep, scaly. Lateral line none. Dorsal and
anal fins long, both with numerous spines, the spinous portion being
the more developed. Ventrals thoracic, with one spine and five soft
rays. Teeth feeble. Pseudobranchiæ hidden.
Only two genera, each represented by one or two species in the
Atlantic rivers of Tropical America, Polycentrus and Monocirrhus,
belong to this family. They are small insectivorous fishes.
Tenth Family—Teuthididæ.
Body oblong, strongly compressed, covered with very small
scales. Lateral line continuous. Eye lateral, of moderate size. A
single series of cutting incisors in each jaw; palate toothless. One
dorsal fin, the spinous portion being the more developed; anal with
seven spines. Ventral fins thoracic, with an outer and an inner spine,
and with three soft rays between.
This family consists of one very natural genus, Teuthis, readily
recognised by the singular structure of the fins. In all the species the
fin-formula is D. 13/10. A. 7/9. The incisors are small, narrow, and
provided with a serrated edge. The air-bladder is large, and forked
anteriorly as well as posteriorly. Their skeleton shows several
peculiarities: the number of vertebræ is twenty-three, ten of which
belong to the abdominal portion. The abdominal cavity is surrounded
by a complete ring of bones, the second piece of the coracoid being
exceedingly long, and extending along the whole length of the
abdomen, where it is joined to a spinous process of the first
interhæmal. The pubic bones are slender, long, firmly attached to
each other, without leaving a free space between them. They are
fastened by a long process which passes the symphysis of the radii,
and extends on to that of the humeri.
Fig. 182.—Teuthis nebulosa, Indian Ocean.

Thirty species are known, all from the Indo-Pacific; but they do
not extend eastwards beyond 140° long., or to the Sandwich Islands.
They are herbivorous, and do not exceed a length of fifteen inches.
Second Division—Acanthopterygii Beryciformes.

Body compressed, oblong, or elevated; head with large
muciferous cavities which are covered with a thin skin. Ventral fins
thoracic, with one spine and more than five soft rays (in Monocentris
with two only).
One family only belongs to this division.
Family—Berycidæ.
Body short, with ctenoid scales, which are rarely absent. Eyes
lateral, large (except Melamphaës). Cleft of the mouth lateral,
oblique; jaws with villiform teeth; palate generally toothed. Opercular
bones more or less armed. Eight (four) branchiostegals.
This family offers several points of biological interest. All its
members are strictly marine; but only two of the genera are surface-
forms (Holocentrum and Myripristis). All the others descend
considerably below the surface, and even some of the species of
Myripristis habitually inhabit depths of from 50 to 100 fathoms.
Polymixia and Beryx have been found in 345 fathoms. Melamphaës
must live at a still greater depth, as we may infer from the small size
of its eye; this fish is not likely to come nearer to the surface than to
about 200 fathoms. The other genera named have extremely large
eyes, and, therefore, may be assumed to ascend into such
superficial strata as are still lit up by a certain proportion of sun-rays.
The highly-developed apparatus for the secretion of superficial
mucus, with which these fishes are provided, is another sign of their
living at a greater depth than any of the preceding families of
Acanthopterygians. In accordance with this vertical distribution,
Berycoid fishes have a wide horizontal range, and several species
occur at Madeira as well as in Japan.
Fossil Berycoids show a still greater diversity of form than living;
they belong to the oldest Teleosteous fishes, the majority of the
Acanthopterygians found in the chalk being representatives of this
family. Beryx has been found in several species, with other genera
now extinct: Pseudoberyx, with abdominal ventrals, from Mount
Lebanon; Berycopsis, with cycloid scales; Homonotus, Stenostoma,
Sphenocephalus, Acanus, Hoplopteryx, Platycornus, with granular
scales; Podocys, with a dorsal fin extending to the neck; Acrogaster,
Macrolepis, and Rhacolepis, from the chalk of Brazil. Species of
Holocentrum and Myripristis occur in the Monte Bolca formation.
Monocentris.—Snout obtuse, convex, short; eye of moderate
size. Villiform teeth on the palatine bones, but none on the vomer.
Opercular bones without armature. Scales very large, bony, forming a
rigid carapace. Ventrals reduced to a single strong spine and a few
rudimentary rays.
Fig. 183.—Monocentris japonicus.
One species only is known (M. japonicus) from the seas off
Japan and Mauritius. It does not attain to any size, and is not
common.
Hoplostethus.—Snout very short and obtuse; eye large. Villiform
teeth on the palatine bones, but none on the vomer. Operculum
unarmed, a strong spine at the scapulary and the angle of the
præoperculum. Scales ctenoid, of moderate size; abdominal edge
serrated. One dorsal, with six spines; ventrals with six soft rays;
caudal deeply forked.
One species only is known (H. mediterraneus), which occurs in
the Mediterranean, the neighbouring parts of the Atlantic, and in the
sea off Japan.
Trachichthys.—Snout very short and obtuse, with prominent
chin; eye large. Villiform teeth on the palatine bones and on the
vomer. A strong spine at the scapulary and at the angle of the
præoperculum. Scales rather small; abdomen serrated. One dorsal,
with from three to six spines; ventral with six soft rays. Caudal forked.
Four species are known from New Zealand and Madeira.
Anoplogaster is an allied genus from tropical parts of the Atlantic;
it is scaleless.
Beryx.—Snout short, with oblique cleft of the mouth and
prominent chin; eye large. Villiform teeth on the palatine bones and
vomer. Opercular bones serrated; no spine at the angle of the
præoperculum. Scales ctenoid, of moderate or large size. One dorsal,
with several spines; ventrals with seven or more soft rays. Anal with
four spines; caudal forked.
Fig. 184.—Beryx decadactylus.

Five species are known from Madeira, the tropical Atlantic, and
the seas of Japan and Australia. The species figured is B.
decadactylus, common at Madeira, and occurring near Japan at a
depth of 345 fathoms; it attains a length of 1½ feet.
Melamphaes.—Head large and thick, with very thin bones, nearly
all the superficial bones being transformed into wide muciferous
channels. Eye small. Palate toothless; no barbels; opercles not
armed. Scales large, cycloid. One dorsal, with six spines; anal spines
very feeble; caudal forked. Ventrals with seven rays.
Two species, deep-sea fishes of the Atlantic; they are very
scarce, as only three or four specimens have been found hitherto.
Polymixia.—Snout short, with the cleft of the mouth nearly
horizontal; eye large. Two barbels at the throat. Opercles without
armature. Scales of moderate size. One dorsal. Anal with three or four
spines; caudal forked; ventrals with six or seven soft rays.
Three species are known: P. nobilis from Madeira and St. Helena,
P. lowei from Cuba, and P. japonica from Japan; the latter species
from a depth of 345 fathoms. Average size eighteen inches.
Myripristis.—Snout short, with oblique cleft of the mouth and
prominent chin; eye large or very large. Villiform teeth on the vomer
and palatine bones. Opercular bones serrated; præoperculum without
spine. Scales large, ctenoid. Two dorsals, the first with ten or eleven
spines; anal with four spines; caudal forked; ventrals with seven soft
rays. Air-bladder divided by a contraction in two parts, the anterior of
which is connected with the organ of hearing.
Eighteen species from the tropical seas of both hemispheres, the
majority living near the coast at the surface. The coloration is
(principally) red or pink on the back and silvery on the sides. They
attain a length of about 15 inches, and are esteemed as food.
Holocentrum.—Snout somewhat projecting, with the cleft of the
mouth nearly horizontal; eye large. Villiform teeth on the vomer and
palatine bones. Opercular bones and præorbital serrated; operculum
with two spines behind; a large spine at the angle of the
præoperculum. Scales ctenoid, of moderate size. Two dorsals, the
first with twelve spines; anal with four spines, the third being very long
and strong; caudal forked. Ventrals with seven soft rays.
Fig. 185.—Holocentrum unipunctatum, from the South Sea.
About thirty species are known from the tropical seas of both
hemispheres; all are surface fishes, and very common. The young
have the upper part of the snout pointed and elongate, and were
described as a distinct genus (Rhynchichthys). The coloration of the
adult is uniform; red, pink, and silvery prevailing. They attain to a
length of about 15 inches, and are esteemed as food.
Third Division—Acanthopterygii Kurtiformes.

One dorsal fin only, much shorter than the anal, which is long and
many-rayed. No superbranchial organ.
Family—Kurtidæ.
Body compressed, oblong, deep in front, attenuated behind.
Snout short. The spines of the short dorsal are few in number, if
developed. Scales small or of moderate size. Villiform teeth in the
jaws, on the vomer, and palatine bones.
This family consists of a small number of species only, which
form two distinct genera, Pempheris and Kurtus. They are shore
fishes of tropical seas. In both the air-bladder shows some
peculiarity: in Pempheris it is divided into an anterior and posterior
portion; in Kurtus it is lodged within the ribs, which are dilated,
convex, forming rings. The number of vertebræ is respectively
twenty-four and twenty-three.
Fourth Division—Acanthopterygii Polynemiformes.

Two rather short dorsal fins, somewhat remote from each other;
free filaments at the humeral arch, below the pectoral fins;
muciferous canals of the head well developed.
Family—Polynemidæ.
Body oblong, rather compressed, covered with smooth or very
feebly ciliated scales. Lateral line continuous. Snout projecting
beyond the mouth, which is inferior, with lateral cleft. Eye lateral,
large. Villiform teeth in the jaws and on the palate. Ventrals thoracic,
with one spine and five rays.
The fishes of this natural family have been divided, on slight
differences, into three genera—Polynemus, Pentanemus, and
Galeoides. They are found in rather numerous species on the coasts
between the tropics, and the majority enter brackish or even fresh
water. Very characteristic are the free filaments which in this family
are organs of touch; they are inserted on the humeral arch at some
distance from the pectoral fin; but, nevertheless, can be regarded
only as a detached portion of that fin; they can be moved quite
independently of the fin; their number varies from three to fourteen,
according to the species; in some they are exceedingly elongate,
twice as long as the fish, in others they are not longer or even
shorter than the pectoral. It is evident from the whole organisation of
these fishes that they live on muddy bottom or in thick water, such as
is found near the mouths of great rivers. Their eyes are large, but
generally obscured by a filmy skin, so that those feelers must be of
great use to them in finding their way and their food. The
Polynemoids are very useful to man: their flesh is esteemed, and
some of the species are provided with an air-bladder which yields a
good sort of isinglass, and forms an article of trade in the East
Indies. Some of these fishes attain to a length of four feet.
Fig. 186.—Pentanemus quinquarius, from the West Coast of Africa and the
West Indies.
Fifth Division—Acanthopterygii Sciæniformes.

The soft dorsal is more, generally much more, developed than
the spinous, and than the anal. No pectoral filaments; head with the
muciferous canals well developed.
Also this division is composed of one family only.
Family—Sciænidæ.
Body rather elongate, compressed, covered with ctenoid scales.
Lateral line continuous, and frequently extending over the caudal fin.

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Principles of Macroeconomics 7th

Edition Gregory Mankiw Solutions

APPLICATION: THE COSTS OF

WHAT’S NEW IN THE SEVENTH EDITION:

By the end of this chapter, students should understand:

➢ how taxes reduce consumer and producer surplus.

➢ the meaning and causes of the deadweight loss from a tax.

➢ why some taxes have larger deadweight losses than others.

CONTEXT AND PURPOSE:

I. The Deadweight Loss of Taxation

C. How a Tax Affects Market Participants

3. Welfare without a Tax

a. Consumer surplus is equal to: A + B + C.

b. Producer surplus is equal to: D + E + F.

c. Total surplus is equal to: A + B + C + D + E + F.

4. Welfare with a Tax

a. Consumer surplus is equal to: A.

b. Producer surplus is equal to: F.

c. Tax revenue is equal to: B + D.

d. Total surplus is equal to: A + B + D + F.

a. Consumer surplus changes by: –(B + C).

b. Producer surplus changes by: –(D + E).

c. Tax revenue changes by: +(B + D).

d. Total surplus changes by: –(C + E).

D. Deadweight Losses and the Gains from Trade

II. The Determinants of the Deadweight Loss

B. Case Study: The Deadweight Loss Debate

Activity 1—Labor Taxes

Type: In-class discussion

Points for Discussion

III. Deadweight Loss and Tax Revenue as Taxes Vary

A. As taxes increase, the deadweight loss from the tax increases.

D. Case Study: The Laffer Curve and Supply-Side Economics

3. Economists continue to debate Laffer’s argument.

a. Many believe that the 1980s refuted Laffer’s theory.

ALTERNATIVE CLASSROOM EXAMPLE:

▪ the price buyers pay will rise to $0.60.

E. In the News: The Tax Debate

Activity 2—Tax Alternatives

Type: In-class assignment

Common Answers and Points for Discussion

SOLUTIONS TO TEXT PROBLEMS:

Questions for Review

Quick Check Multiple Choice

Problems and Applications

Producer surplus would be E + F, because producers get surplus of D + E + F, then

Before After Subsidy Change

Fig. 177.—Chilodactylus macropterus, from Australia.

Fig. 178.—Skull of Scorpæna percoides; so, Suborbital ring;

Fig. 179.—Head of Scorpæna percoides, from New Zealand.

Fig. 182.—Teuthis nebulosa, Indian Ocean.

Second Division—Acanthopterygii Beryciformes.

Fig. 184.—Beryx decadactylus.

Third Division—Acanthopterygii Kurtiformes.

Fourth Division—Acanthopterygii Polynemiformes.

Fifth Division—Acanthopterygii Sciæniformes.

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