CH 8 HW

Refer to Figure 8-14. Panel (a) and Panel (b) each illustrate a $2 tax placed on a market. In comparison to Panel (b), Panel (a) illustrates which of the following statements?

When demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic.

Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by J represents

consumer surplus after the tax.

Other things equal, the deadweight loss of a tax

increase as the size of the tax increase, and the increase in the deadweight loss is more rapid than the increase in the size of the tax

In which of the following cases is it most likely that an increase in the size of a tax will decrease tax revenue?

The price elasticity of demand and the price elasticity of supply are both large.

Refer to Figure 8-9. The loss of consumer surplus as a result of the tax is a. $2,000. b. $8,000. c. $4,000. d. $6,000.

$8,000

In the market for widgets, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. The equilibrium quantity in the market for widgets is 200 per month when there is no tax. Then a tax of $5 per widget is imposed. As a result, the government is able to raise $750 per month in tax revenue. We can conclude that the equilibrium quantity of widgets has fallen by

50 per month.

Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. Total surplus after the tax is measured by the area

J+K+L+M.

Refer to Figure 8-8. The government collects tax revenue that is the area a. B+D. b. L. c. C+F. d. F+G+L.

B+D.

Refer to Figure 8-5. The loss in total surplus that results from the tax is represented by area

C+H

Assume the price of gasoline is $2.00 per gallon, and the equilibrium quantity of gasoline is 10 million gallons per day with no tax on gasoline. Starting from this initial situation, which of the following scenarios would result in the largest deadweight loss?

The price elasticity of demand for gasoline is 0.2; the price elasticity of supply for gasoline is 0.6; and the gasoline tax amounts to $0.30 per gallon.