ch 8 practice quiz micro

Suppose a tax of $1 per unit is imposed on a good. The more elastic the demand for the good, other things equal, the larger is the decrease in quantity demanded as a result of the tax. the smaller is the tax burden on buyers relative to the tax burden on sellers. the larger is the deadweight loss of the tax. All of the above are correct.

all of the above

Deadweight loss measures the loss

in a market to buyers and sellers that is not offset by an increase in government revenue

examples of taxes on labor

medicare tax, federal income tax, social security tax

Taxes on labor encourage which of the following?

mothers to stay at home rather than work in the labor force

Suppose the government increases the size of a tax by 40 percent. The deadweight loss from that tax

increases by more than 40 percent

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 0.1; the price elasticity of supply for gasoline is 0.6; and the gasoline tax amounts to $0.20 per gallon. The price elasticity of demand for gasoline is 0.1; the price elasticity of supply for gasoline is 0.4; and the gasoline tax amounts to $0.20 per gallon. 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. There is insufficient information to make this determination.

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.

A tax placed on buyers of airline tickets shifts the

demand curve for airline tickets downward, decreasing the price received by sellers of airline tickets and causing the quantity of airline tickets to decrease.

When a tax is imposed on a good, the

equilibrium quantity of the good always decreases

When the government places a tax on a product, the cost of the tax to buyers and sellers

exceeds the revenue raised from the tax by the government.

Total surplus is always equal to the sum of consumer surplus and producer surplus.

false

For a good that is taxed, the area on the relevant supply-and-demand graph that represents government's tax revenue is

smaller than the area that represents the loss of consumer surplus and producer surplus caused by the tax.