Econ Test 2

the Laffer curve relates

the tax rate to tax revenue raised by the tax

at the equilibrium price, total surplus is $480

$1,120

the amount of deadweight loss as a result of the tax is

$105

the vertical distance between points A and B represents a tax in the market

$12

the efficient price is

$16, and the efficient quantity is 80

the amount of tax revenue received by the government is equal to

$490

the price that sellers effectively receive after the tax is imposed is

$5

when a tax is levied on a good

(all of the above are correct) government collects revenues which might justify the loss in total welfare, there is a decrease in the quantity of the good bought and sold in the market, a wedge is placed between the price, buyers pay and the price sellers effectively receive

the amount of deadweight loss from a tax depends upon the

(all of the above are correct) price elasticity of demand, price elasticity of supply, amount of the tax per unit

at equilibrium, consumer surplus is represented by the area

A+B+C

if the economy is at point B on the curve, then an increase in the tax rate will

Increase the deadweight loss of tax and decrease tax revenue

the equilibrium price is

P2

suppose the government has imposed a price ceiling on cellular phones. Which of the following events could transform the price ceiling from one that is binding to one that is not binding?

a technological advance makes cellular phone production less expensive

which of the following statements is true for markets in which the demand curve slopes downward and the supply curve slopes upward?

as the size of the tax increases, tax revenue rises initially, but it eventually begins to fall; deadweight loss continually rises

Get Smart University is contemplating an increase in tuition to enhance revenue. If GSU feels that raising tuition would enhance revenue, it is

assuming that the demand for university education is inelastic

A price ceiling is binding when it is set

below the equilibrium price, causing a shortage

the price elasticities of supply and demand affect

both the size of the deadweight loss from a tax and the tax incidence

when a tax is placed on the sellers of energy drink the

burden of the tax will be shared by the buyers and the sellers but the division of the burden is not always equal

which of the following statements is correct concerning the burden of a tax imposed on take-out food?

buyers and sellers share the burden of the tax

all else equal what happens to consumer surplus if the price of a good increases?

consumer surplus decreases

a decrease in the size of tax is most likely to increase tax revenue in a market with

elastic demand and elastic supply

deadweight loss measures the loss

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

in which market will the majority of the tax burden fall on buyers?

market (b)

a result of welfare economics is that the equilibrium price of a product is considered to be the best price because it

maximizes the combined welfare of buyers and sellers

if the size of a tax increases, tax revenue

may increase, decrease, or remain the same

in the housing market supply and demand are

more elastic in the long run than in the short run and so rent control leads to a larger shortage of apartments in the long run than in the short run

a government-imposed price of $16 in this market could be an example of a

non-binding price ceiling and binding price floor

a tax imposed on the buyers of a good will raise the

price paid by buyers and lower the equilibrium quanity

buyers of a product will bear the larger part of the tax burden and sellers will bear a smaller part of the tax burden, when the

supply of the product is more elastic than the demand for the product

suppose the tax on liquor is increased so that the tax goes from being a "medium" tax to being a "large" tax. As a result, is it likely that

tax revenue decreases, and the deadweight loss increases

the Laffer curve illustrates that

tax revenue first rises, then falls as a tax increases

welfare economics is the study of how

the allocation of resources affects economic well-being

consumer surplus is

the amount a buyer is wiling to pay for a good minus the amount the buyer actually pays for it

which of the following statements is correct regarding tax on a good and the r resulting deadweight loss?

the greater are the price elasticities of supply and demand, the greater is the deadweight loss

which of the following will cause a decrease in consumer surplus?

the imposition of a binding price floor in the market

if 40 units of the good are being bought and sold, the

the marginal value to buyers is greater that the marginal cost to sellers

total surplus is equal to

value to buyers - cost to sellers

Panel (a) and Panel (b) each illustrate a $4 tax placed on a market in comparison to panel (a) and Panel (b) illustrates which of the following statements?

when demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic

which of the following statements is not correct

when the price is $6, there is a surplus of 8 units

the marginal seller is the seller who

would leave the market first if the price were any lower