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Exam 8: Applications: the Costs of Taxation

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Question 241

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Figure 8-29 -Refer to Figure 8-29. As the size of the tax increases from $3 to $6 to $9, what happens to the deadweight loss from the tax?

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When the tax is $3, deadweight loss is 0...

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Question 242

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When the government imposes taxes on buyers or sellers of a good, society

A) loses some of the benefits of market efficiency.
B) gains efficiency but loses equality.
C) is better off because the government's tax revenues exceed the deadweight loss.
D) moves from an elastic supply curve to an inelastic supply curve.

E) A) and B)
F) All of the above

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Question 243

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Figure 8-25 -Refer to Figure 8-25. How much is consumer surplus at the market equilibrium?

Supply-side economics is a term associated with the views of

Figure 8-14 -Refer to Figure 8-14. Which of the following statements is correct?

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. The tax causes consumer surplus to decrease by the area

Tom walks Bethany's dog once a day for $50 per week. Bethany values this service at $60 per week, while the opportunity cost of Tom's time is $30 per week. The government places a tax of $35 per week on dog walkers. After the tax, what is the total surplus?

When a tax is imposed on buyers, consumer surplus and producer surplus both decrease.

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. The per-unit burden of the tax on sellers is

Figure 8-14 -Refer to Figure 8-14. Which of the following combinations will maximize the deadweight loss from a tax?

When a tax on a good is enacted,

Suppose that instead of a supply-demand diagram, you are given the following information: Q_s = 100 + 3P Q_d = 400 - 2P From this information compute equilibrium price and quantity. Now suppose that a tax is placed on buyers so that Q_d = 400 - 2(P + T). If T = 15, solve for the new equilibrium price and quantity. (Note: P is the price received by sellers and P + T is the price paid by buyers.) Compare these answers for equilibrium price and quantity with your first answers. What does this show you?

When a tax is imposed on a good, consumer surplus decreases and producer surplus remains unchanged.

Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much is producer surplus after the tax is imposed?

Deadweight loss is the

Suppose the government increases the size of a tax by 20 percent. The deadweight loss from that tax

The more elastic are supply and demand in a market, the greater are the distortions caused by a tax on that market, and the more likely it is that a tax cut in that market will raise tax revenue.

Scenario 8-3 Suppose the market demand and market supply curves are given by the equations: -Refer to Scenario 8-3. Suppose that a tax of T is placed on buyers so that the demand curve becomes: If T = 40, what price will buyers pay and what price will sellers receive?

The benefit to buyers of participating in a market is measured by

Suppose a tax of $5 per unit is imposed on a good, and the tax causes the equilibrium quantity of the good to decrease from 200 units to 100 units. The tax decreases consumer surplus by $450 and decreases producer surplus by $300. The deadweight loss from the tax is