ECON 2302 - Chapter 8

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

tax revenue

Suppose a tax of $1 per unit is imposed on a good. The more elastic the supply of the good, other things equal, the

larger is the deadweight loss of the tax.

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

consumer surplus after the tax.

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

consumer surplus before the tax.

A tax affects

buyers, sellers, and the government.

If the tax on a good is increased from $1 per unit to $4 per unit, the deadweight loss from the tax increases by a factor of

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Taxes cause deadweight losses because they a) lead to losses in surplus for consumers and for producers that, when taken together, exceed tax revenue collected by the government. b) distort incentives to both buyers and sellers. c) prevent buyers and sellers from realizing some of the gains from trade. d) All of the above are correct.

d) All of the above are correct.

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 area measured by M represents

producer surplus after the tax.

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

total surplus after the tax.