Applied Ag Econ

In response to a shortage caused by the imposition of a binding price ceiling on a market,

A. Price will no longer be the mechanism that rations scarce resources B. Long line of buyers may develop C. Sellers could ration the good or service according to their own personal biases ===> correct D. All the above

Suppose a tax of $1 per unit is imposed on a good. The more elastic the demand for the goods, other things equal

A. The larger is the decrease in quantity demanded as a result of the tax B. The smaller is the tax burden on buyers relative to the tax burden on sellers C. The larger is the deadweight loss of the tax ===>correct D. All of the above

Taxes are costly to market participants because they

A. Transfer resources from market participants to the government B. Alter Incentives C. Distort market outcomes ====> correct D. all the above

The demand for salt is inelastic, and the supply of salt is elastic. The demand for caviar is elastic, and the supply of caviar is inelastic. Suppose a tax of $1 per pound is levied on the sellers of salt, and a tax of $1 per pound is levied on the buyers of caviar. We would expect that most of the burden of these taxes will fall on

Buyers of salt and the sellers of caviar

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

C. $30

Suppose a tax of $4 per unit is imposed on a good, and the tax causes the equilibrium quantity of the good to decrease from 2,000 units to 1,700 units. The tax decreases consumer surplus by $3,000 an decreases producer surplus by $4,400. The deadweight loss of the tax is

C. $600

Suppose that the demand for digital cameras is elastic, and the supply of digital cameras is inelastic. A tax of $20 per camera levied on digital cameras will decrease the effective price received by sellers of digital cameras by

C. Between $10 and $20

Suppose a tax of $1 per unit is imposed on a good. The more elastic the supply of the good, other things equal, the

C. Larger is the deadweight loss of the tax

Since the amount of land is fixed, the total supply of land is

C. Perfectly inelastic

If the tax on a good is doubled, the deadweight loss of the tax

C. Quadruples

If the supply of land is fixed, the burden of a tax on land falls

D. Entirely on landowners

A binding price floor causes a shortage in the market

False

A tax on insulin is likely to cause a very large deadweight loss to society

False

Efficiency refers to whether a market outcome is fair, while equality refers to whether the maximum amount of output was produced from a given number of inputs

False

If Darby values a soccer ball at $50, and she pays $40 for it, her consumer surplus is $90

False

If a tax is imposed on the buyers of a product, then the tax burden will fall entirely on the buyers

False

If the government imposes a binding price floor in a market, then the consumer surplus in that market will increase

False

Taxes affect market participants by increasing the price paid by the buyer and received by the seller.

False

The more inelastic are demand and supply, the greater is the deadweight loss of a tax

False

When a good is taxed, the tax revenue collected by the government equals the decrease in the welfare of buyers and sellers caused buy the tax

False

When a tax is imposed on sellers, producer surplus decreases but consumer surplus increases

False

A price floor set above the equilibrium price causes a surplus in the market

True

A tax on a market with elastic demand and elastic supply will shrink the market more than a tax on a market with inelastic demand and inelastic supply will shrink the market

True

A tax on sellers and an increase in input prices affect the supply curve in the same way

True

All else equal, an increase in demand will cause an increase in producer surplus

True

All else equal, an increase in supply will cause an increase in consumer surplus

True

As the price elasticities of supply and demand increase, the deadweight loss from a tax increase

True

As the size of a tax increases, the government's tax revenue rises, then falls

True

Because taxes distort incentives, they cause markets to allocate resources inefficiently

True

If a good or service is sold in a competitive market free of government regulation, then the price of the good or service adjusts to balance supply and demand.

True

If a price ceiling of 1.50 per gallon is imposed on gasoline, and the market equilibrium price is $2, then the price ceiling is a binding constraint on the market

True

If a tax did not induce buyers or sellers to change their behavior, it would not cause a deadweight loss

True

If producing a soccer ball cost Jake $5, and he sells it for $40, his producer surplus is $35

True

In a competitive market, sales go to those producers who are willing to supply the product at the lowest price

True

Suppose there is an increase in supply that reduces market price. Consumer surplus increases because (1) consumer surplus received by existing buyers increases and (2) new buyers enter the market

True

Taxes affect market participants by increasing the price paid by the buyer and decreasing the price received by the seller

True

Taxes cause deadweight losses because they prevent buyers and sellers from realizing some of the gains from trade

True

The area below the price and above the supply curve measures the producer surplus in a market

True

The burden of a luxury tax most likely falls more heavily on sellers because demand is more elastic and supply is more inelastic

True

The deadweight loss of a tax rises even more rapidly than the size of the tax

True

The laffer curve is the curve showing how tax revenue varies as the size of the tax varies

True

The term tax incidence refers to how the burden of a tax is distributed among the various people who make up the economy

True

The willingness to pay is the maximum amount that a buyer will pay for a good and measures how much the buyer values the good

True

When a binding price ceiling is imposed on a market for a good, some people who want to buy the good cannot do so.

True

When a tax is imposed, the loss of consumer surplus and producer surplus as a result of the tax exceeds the tax revenue collected by the government

True

When demand increases so that market price increases, producer surplus increases because (1) producer surplus received by existing sellers increases, and (2) new sellers enter the market

True