Econ 202 Chapter 8
If a tax is placed on the product in this market, consumer surplus is the area
A
If a tax is placed on the product in this market, total surplus is the area
A + B + C + D
If there is no tax placed on the product in this market, total surplus is the area
A + B + C + D + E + F
If there is no tax placed on the product in this market, consumer surplus is the area
A + B + E
Which of the following would likely cause the greatest deadweight loss?
A tax on cruise line tickets
If a tax is placed on the product in this market, tax revenue paid by the buyers is the area
B
Deadweight loss is greatest when
Both supply and demand are relatively elastic
If a tax is placed on the product in this market, tax revenue paid by the sellers is the area
C
If there is no tax placed on the product in this market, producer surplus is the area
C + D + F
A tax on gasoline is likely to
Cause a greater deadweight loss in the long run when compared to the short run
When a tax distorts incentives to buyers and sellers so that fewer goods are produced and sold, the tax has
Caused a deadweight loss
The reduction of a tax
Could increase tax revenue if the tax had been extremely high
If a tax is placed on the product in this market, producer surplus is the area
D
If a tax is placed on the product in this market, deadweight loss is the area
E + F
When a tax on a good starts small and is gradually increased, tax revenue will
First rise and then fall
If a tax on a good is doubled, the deadweight loss from the tax
Increases by a factor of four
The graph that shows the relationship between the size of a tax and the tax revenue collected by the government is known as a
Laffer curve
Suppose the supply of diamonds is relatively inelastic. A tax on diamonds would generate a
Small deadweight loss and the burden of the tax would fall on the seller of diamonds
Which of the following is true with regard to the burden of the tax in Exhibit?
The sellers pay a larger portion of the tax because supply is more inelastic than demand
Taxes on labor income tend to encourage
Workers to work fewer hours Second earners to stay home The elderly to retire early The unscrupulous to enter the underground economy