Economics - Chp. 6, 7, & 8

Which of the following will cause the deadweight loss of taxation to be bigger?

A bigger tax

When a tax is imposed, which of the following will occur?

A deadweight loss will occur in the market

Total Surplus can be calculated as follows:

Value to buyers minus cost to sellers

The producer surplus can be expressed graphically as the area:

above the supply curve and below the price

The consumer surplus can be expressed graphically as the area:

below the demand curve and above the price of the good

Suppose that a regulation is in place that does not allow the price of a good to exceed $5. If this price is below the equilibrium price in the market, this would be an example of a:

binding price ceiling

Suppose that a regulation is in place that does not allow the price of a good to fall below $10. If this price is above the equilibrium price in the market, this would be an example of a:

binding price floor

The loss of total surplus in a market resulting from a tax is called:

deadweight loss

A price increase will cause consumer surplus to ________.

decrease

When a tax is imposed, the quantity traded in a market will ________ and total surplus will ________.

decrease, decrease

If a tax is imposed on a good and the incidence of the tax ends up falling more heavily on the buyers than on the sellers, this will be because:

demand is less elastic than supply for that good

If a tax is imposed on a good and the incidence of the tax ends up falling more heavily on the sellers than on the buyers, this will be because:

demand is more elastic than supply for that good

If a tax is imposed on buyers of a good, the ________ curve of the good will shift ________ by the amount of the tax.

demand, downward

The producer surplus represents the:

difference between the price of the good and the cost to the seller

Consumer surplus is the:

difference between what the consumer is willing to pay and what the consumer has to pay

A given tax will cause a bigger deadweight loss if demand and supply are:

elastic

If a price ceiling is in place and it is binding, the market will:

experience a shortage

If a price floor is in place and it is binding, the market will:

experience a surplus

A price increase will cause producer surplus to ________.

increase

A bigger tax will cause the deadweight loss in the market to:

increase, and it might cause the tax revenue to decrease

Suppose that a regulation is in place that does not allow the price of a good to exceed $5. If this price is above the equilibrium price in the market, this would be an example of a:

not binding price ceiling

If a market is not very competitive and/or if there are externalities, we can expect the market outcome:

not to be efficient, and total surplus will not be maximized`

If a price floor is in place and it is not binding, the market will:

remain in equilibrium, unaffected by the price floor

According to the Laffer curve, if the government wants to increase its revenue from taxes:

sometimes the way to do so will be by lowering the size of the tax

If a tax is imposed on sellers of a good, the ________ curve of the good will shift ________ by the amount of the tax.

supply, upward

Total surplus in a market is usually maximized when:

the market is in equilibrium

When the size of the tax is too big, a further increase in the size of the tax will cause:

the revenue generated by the tax to decrease

Deadweight loss in a taxed market occurs because:

the tax causes the market to trade less than the optimal units, so all the surplus of the units not traded is lost

If the quantity traded in a market is less than the equilibrium quantity:

the value to consumers for additional units is greater than the cost to sellers of producing those units

All of the following occur when a tax is levied on a good, EXCEPT:

total surplus increases