ECON201-HW8

Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by K+L represents

tax revenue

Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by I+J+K represents

consumer surplus before the tax

The Laffer curve relates

the tax rate to tax revenue raised by the tax

Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. Total surplus before the tax is measured

I+J+K+L+M+Y

Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by I+Y represents the

deadweight loss due to the tax

Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The producer surplus after the tax is measured by the area

M

Economists generally agree that the most important tax in the U.S. economy is the

tax on labor

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