MID TERM ECON HW QUESTIONS 5

(Figure and Table: The Market for Taxi Rides) Use Figure and Table: The Market for Taxi Rides. If the government imposes an excise tax of $1 per ride (causing the supply curve to shift upward by that amount), then people who ride taxis will pay _____ of each $1 tax. -$0.00 -$0.50 -$1 -$0.25

$0.50

(Figure: The Market for Hamburgers) Use Figure: The Market for Hamburgers. If the market is originally in equilibrium and the government imposes an excise tax of $0.80 per unit of the good sold, consumer surplus will be reduced by: -105 -175 -240 -90

$175

(Figure: The Market for Music Downloads) Use Figure: The Market for Music Downloads. If the government imposes a tax of $3 in this market, the deadweight loss will equal: -$26.25. -$0. -$52.50. -$22.50.

$22.50

(Figure: The Market for Hamburgers) Use Figure: The Market for Hamburgers. If the market is originally in equilibrium and the government imposes an excise tax of $0.80 per unit of the good sold, the government's revenue from the tax will be: -$240. -$175. -$90. -$105.

$240

(Figure: The Market for Music Downloads) Use Figure: The Market for Music Downloads. If the government imposes a tax of $3 in this market, the government will receive tax revenue of: -$60. -$30. -$75. -$20.

$30

Suppose the absolute value of the price elasticity of demand for yachts equals 4.04, while the price elasticity of supply for yachts equals 0.22. If Congress reinstates a luxury tax on yachts, who will pay more of the tax? -Yacht builders will pay more. -yacht buyers will pay more. -Yacht builders and buyers will pay equally. -It's impossible to tell without additional information.

Yacht builders will pay more.

(Figure: The Market for Blue Jeans) Use Figure: The Market for Blue Jeans. The government recently levied a $10 tax on the producers of blue jeans. What area or areas in the graph identify consumer and producer surplus after the tax was levied? -a + f -a + b + c -a + b + c + d + e + f -d + e + f

a + f

(Figure: The Market for Blue Jeans) Use Figure: The Market for Blue Jeans. The government recently levied a $10 tax on the producers of blue jeans. What area or areas in the graph identify tax revenue? -d + e + f -c + e -b + d -a + b + c

b + d

If demand is inelastic, then deadweight loss will: -be maximized if supply is also inelastic. -be minimized if supply is also inelastic. -increase if supply becomes more inelastic. -decrease if demand becomes more elastic.

be minimized if supply is also inelastic.

(Figure: The Market for Blue Jeans) Use Figure: The Market for Blue Jeans. The government recently levied a $10 tax on the producers of blue jeans. What area or areas in the graph identify deadweight loss? -b + d -d + e + f -c + e -a + b + c

c + e

An excise tax causes inefficiency if the number of transactions in a market is reduced as a result of the tax. Because the tax discourages mutually beneficial transactions, there is a(n) _____ from a tax. -quota rent -increased producer surplus -increased consumer surplus -deadweight loss

deadweight loss

If demand and supply are both very inelastic, a decrease in the rate of an excise tax will likely: -not affect government revenue. -increase government revenue -decrease government revenue. -make demand and supply both elastic.

decrease government revenue.

If the government removed the excise tax on gasoline, assuming that neither demand nor supply is perfectly inelastic, which effect would NOT occur? -an increase in total surplus -an increase in consumer surplus -decrease in producer surplus -increase in producer surplus

decrease in producer surplus

If an excise tax is imposed on automobiles and collected from consumers, the: -equilibrium quantity demanded will increase relative to the pretax level. -equilibrium quantity supplied will increase relative to the pretax level. -demand curve will shift downward by the amount of the tax. -supply curve will shift upward by the amount of the tax.

demand curve will shift downward by the amount of the tax.

Given any upward-sloping supply curve for a good, the more inelastic the demand curve, the _____ equilibrium output will fall and the _____ will be the deadweight loss when the government imposes an excise tax. -less; smaller -more; smaller -less; larger -more; larger

less; smaller

If the government wants to minimize the deadweight loss from taxes, it should tax goods for which the: -price elasticity of demand is low. -price elasticity of demand is high. -price elasticity of supply is high. -demand is high.

price elasticity of demand is low.

If the government imposes a $5 excise tax on leather shoes and the price of leather shoes increases by $2: -The quantity of shoes sold will increase. -the government will receive less tax revenue than anticipated. -producers are paying more of the tax than are the consumers -consumers are paying more of the tax than the producers.

producers are paying more of the tax than are the consumers

(Figure: An Excise Tax) Use Figure: An Excise Tax. If an excise tax equal to $1.10 is imposed on this good, then the price paid by consumers will: -not rise. -rise by $1.33. -rise by $1.10. -rise by $0.50.

rise by $0.50.

An excise tax that the government collects from the producers of a good: -shifts the supply curve upward. -reduces revenue for the government. -has an effect similar to that of a tax subsidy. -shifts the supply curve downward.

shifts the supply curve upward.

Suppose the government imposes a $10 excise tax on the sale of sweaters by charging suppliers $10 for each sweater sold. If the demand curve is downward-sloping and the supply curve is upward-sloping: -the price of sweaters will increase by less than $10. -consumers of sweaters will bear the entire burden of the tax. -the price of sweaters will decrease by $10. -the price of sweaters will increase by $10.

the price of sweaters will increase by less than $10.