Micro Exam 2

In the early 1980s, which of the following countries had a marginal tax rate of about 80%?

Sweden

which of the following will cause an increase in consumer surplus?

a technological improvement in the production of a good

Suppose that equilibrium price in the market for widgets is $5. If a law reduced the maximum legal price for widgets to $4

any possible increase in consumer surplus would be smaller than the loss of producer surplus

On a graph, consumer surplus is represented by the area

below the demand curve and above price paid

The demand for salt is inelastic and supply for salt is elastic. The demand for caviar is elastic and the supply of caviar is inelastic. Suppose that 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 most of the burden of taxes will fall on

buyers of salt and sellers of caviar

The price paid by buyers in a market will decrease if the government

decreases a binding price floor in that market

The price received by sellers in a market will increase if the government

decreases a tax on the good sold in that market

Advocates for minimum wage

emphasize the low annual incomes of those who work for the minimum wage

When a country is on the downward sloping side of the Laffer curves, a cut in tax rate will

increase tax revenue and decrease the deadweight loss

A deadweight loss is a consequence of tax on a good because the tax

induces buyers to consume less, and sellers to produce less

If a tax is levied on the buyers of a product, then there will be

movement up and to the right along the supply curve

The price received by sellers in a market if the government

none of the above, increases binding price ceiling in that market, decreases a tax on the good sold in that market, increases a binding price floor in that market

In order for Henry George's single tax on land not to distort economic incentives the tax would have to be on

raw land

Labor taxes may distort labor markets greatly if

the number of hours many part-time workers want to work is very sensitive to the wage rate

When a tax is placed on the sellers of cell phones

the size of the cell phone market decreases, but the price paid by buyers increases

Buyers of a good bear the larger share of the tax burden when a tax is placed on a product for which

the supply is more elastic than the demand

In which of the following instances would deadweight loss of the tax on airline tickets increase by a factor of 9?

the tax on airline tickets increases from $20 per per ticket to $60 per ticket

If a tax is levied on the sellers of a product, then there will be a(n)

upward shift in supply curve

Total Surplus in a market equals to

value to buyers - cost of sellers