ecn 2010 chap 8

The tax revenue collected from a tax on heating oil is likely to be ___[larger/smaller]___ in the first year after it is imposed than in the fifth year.

larger

After economics class, your friend suggests that taxing food would be a good way to raise revenue because the demand for food is quite inelastic. Taxing food is ___[more/less]___ efficient than taxing other things with more elastic demand.

more

A tax on a good

raises the price that buyers pay and lowers the price that sellers receive.

Suppose a tax is imposed on each new hearing aid that is sold. The supply curve is a typical upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. As a result of the tax, the equilibrium quantity of hearing aids decreases from 10,000 to 9,000, and the deadweight loss of the tax is $60,000. We can conclude that the tax on each hearing aid is

$120

Suppose a tax of $20 per 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 $18,000 and decreases producer surplus by $18,000. The deadweight loss of the tax is $4,000. The tax decreased the equilibrium quantity of the good from _______.

2,000 to 1,600

Kate is a personal trainer whose client William pays $80 per hour-long session. William values this service at $100 per hour, while the opportunity cost of Kate's time is $75 per hour. The government places a tax of $10 per hour on personal trainers. After the tax, what is likely to happen in the market for personal training?

Kate and William will agree to a new price somewhere between $85 and $100.

Which of the following statements regarding a Laffer curve is the most plausible?

Reducing a high tax rate is more likely to increase tax revenue than is reducing a low tax rate.

If T represents the size of the tax on a good and Q represents the quantity of the good that is sold, total tax revenue received by government can be expressed as

T x Q

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.

Why might Senator Moynihan have proposed it?

To discourage the use of hollow-tipped bullets

A tax affects

buyers, sellers, and the government.

Daniel Patrick Moynihan, the senator from New York from 1977 to 2001, once introduced a bill that would levy a 10,000 percent tax on certain hollow-tipped bullets. True or False: This tax would generate a lot of tax revenue because of its high rate.

false

True or False: Taxing food is a good way to raise revenue from an equality point of view because everyone consumes food.

false

The government's benefit from a tax can be measured by

tax revenue

Suppose that the government imposes a tax on heating oil. True or False: The deadweight loss from this tax would likely be larger in the fifth year after it is imposed than in the first year as demand for heating oil becomes more elastic.

true