EC 211 Ch.8

regardless of how the tax is levied

When a tax is levied on a good, the buyers and sellers of the good share the burden,...

tax creates a wedge between the price buyers effectively pay and the price sellers receive.

When a tax is levied on buyers, the...

downward by the amount of the tax.

When a tax is imposed on the buyers of a good, the demand curve shifts...

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

A $2 tax is placed on the market. What does the figure illustrate?

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

A $4 tax is placed on the market. What does the image illustrate?

decline in total surplus that results from a tax.

Deadweight loss is the...

the deadweight loss amounts to $6.

If Q1=4; Q2=7; P1=$6; P2=$8; and P3=$10. Then, when the tax is imposed...

We cannot infer anything because the shift described is not consistent with a tax.

If a tax shifts the supply curve downward (or to the right), what can we infer the tax was levied on?

5,500 to 4,500.

Suppose a tax of $5/unit is imposed on a good. The supply curve is a typical upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. The tax decreases consumer surplus by $10,000 and decreases producer surplus by $15,000. The deadweight loss of the tax is $2,500. The tax decreases equilibrium quantity from...

A+B+C.

Suppose that the government imposes a tax of P3-P1. The loss in total welfare that results from the tax is represented by area...

B+C.

Suppose that the government imposes a tax of P3-P1. The tax causes a reduction in consumer surplus that is represented by area...

L+M+Y.

Suppose the government imposes a tax of P' - P'''. The producer surplus before the tax is measured by the area...

J.

Suppose the government imposes a tax of P'-P'''. The consumer surplus after the tax is measured by the area...

J+K+I

Suppose the government imposes a tax of P'-P'''. The consumer surplus before the tax is measured by the area is...

1/2 x (P2-P8) x (Q5-Q2)

Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. The deadweight loss of the tax is...

1/2 x (P8-0) x Q2

Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. With the tax, the producer surplus is...

tax revenue decreases, and the deadweight loss increases.

Suppose the tax on liquor is increased so that the tax goes from being a "medium" tax to being a "large" tax. As a result, it is likely that...

consumer surplus.

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

producer surplus.

The benefit to sellers of participating in a market is measured by the...

-the "tax wedge". -the size of the tax. -the difference between the price paid by buyers after the tax is imposed and the price received by sellers after the tax is imposed.

The length of the line segment connecting points A and B represents...

$80, producer surplus decreases by $80, tax revenue is $120, and deadweight loss is $40.

The vertical distance between points A and B represents a tax in the marker. As a result of the tax, consumer surplus decreases by...

$250

The vertical distance between points A and B represents a tax in the market. What was the total surplus before the tax was imposed?

$4

The vertical distance between points A and B represents a tax in the market. When the tax is imposed in this market, buyers effectively pay what amount of the $10 tax?

300, and buyers effectively pay $16.

The vertical distance between points A and B represents a tax in the market. When the tax is placed on this good, the quantity sold is...

$6,000.

The vertical distance between points A and B represents a tax in the market. Without tax, total surplus in this market is...

welfare economics.

To measure the gains and losses from a tax on a good, economists use the tools of...

False

True/ False A decrease in the size of a tax always decreases the tax revenue raised by that tax.

True

True/ False: A decrease in the size of a tax always decreases the deadweight loss of that tax.

False

True/ False: An increase in the size of a tax leads to an increase in the deadweight loss of the tax only if the economy is on the upward-sloping part of the Laffer curve.

False

True/ False: Tax revenue decreases when there is a small decrease in the tax rate and the economy is on the downward-sloping part of the Laffer curve.

D. The tax on gas increases from $0.30/g to $0.60/g.

Which of the following events is consistent with an increase in the deadweight loss of the gasoline tax from $30M to $120M? A. The tax on gas increases from $0.25/g to $1.00/g. B. The tax on gas increases from $0.30/g to $0.45/g. C. The tax on gas increases from $0.25/g to $0.45/g. D. The tax on gas increases from $0.30/g to $0.60/g.

The equilibrium quantity in the market for the good, producer surplus, and the well-being of buyers of the good.

Which of the following quantities decrease in response to a tax on a good?

the size of the deadweight loss increases, but the tax revenue first increases, then decreases.

Which of the following statements correctly describes the relationship between the size of the deadweight loss and the amount of tax revenue as the size of a tax increases from a small tax to a medium tax and finally to a large tax?