Economics - Chp. 6, 7, & 8
Which of the following will cause the deadweight loss of taxation to be bigger?
A bigger tax
When a tax is imposed, which of the following will occur?
A deadweight loss will occur in the market
Total Surplus can be calculated as follows:
Value to buyers minus cost to sellers
The producer surplus can be expressed graphically as the area:
above the supply curve and below the price
The consumer surplus can be expressed graphically as the area:
below the demand curve and above the price of the good
Suppose that a regulation is in place that does not allow the price of a good to exceed $5. If this price is below the equilibrium price in the market, this would be an example of a:
binding price ceiling
Suppose that a regulation is in place that does not allow the price of a good to fall below $10. If this price is above the equilibrium price in the market, this would be an example of a:
binding price floor
The loss of total surplus in a market resulting from a tax is called:
deadweight loss
A price increase will cause consumer surplus to ________.
decrease
When a tax is imposed, the quantity traded in a market will ________ and total surplus will ________.
decrease, decrease
If a tax is imposed on a good and the incidence of the tax ends up falling more heavily on the buyers than on the sellers, this will be because:
demand is less elastic than supply for that good
If a tax is imposed on a good and the incidence of the tax ends up falling more heavily on the sellers than on the buyers, this will be because:
demand is more elastic than supply for that good
If a tax is imposed on buyers of a good, the ________ curve of the good will shift ________ by the amount of the tax.
demand, downward
The producer surplus represents the:
difference between the price of the good and the cost to the seller
Consumer surplus is the:
difference between what the consumer is willing to pay and what the consumer has to pay
A given tax will cause a bigger deadweight loss if demand and supply are:
elastic
If a price ceiling is in place and it is binding, the market will:
experience a shortage
If a price floor is in place and it is binding, the market will:
experience a surplus
A price increase will cause producer surplus to ________.
increase
A bigger tax will cause the deadweight loss in the market to:
increase, and it might cause the tax revenue to decrease
Suppose that a regulation is in place that does not allow the price of a good to exceed $5. If this price is above the equilibrium price in the market, this would be an example of a:
not binding price ceiling
If a market is not very competitive and/or if there are externalities, we can expect the market outcome:
not to be efficient, and total surplus will not be maximized`
If a price floor is in place and it is not binding, the market will:
remain in equilibrium, unaffected by the price floor
According to the Laffer curve, if the government wants to increase its revenue from taxes:
sometimes the way to do so will be by lowering the size of the tax
If a tax is imposed on sellers of a good, the ________ curve of the good will shift ________ by the amount of the tax.
supply, upward
Total surplus in a market is usually maximized when:
the market is in equilibrium
When the size of the tax is too big, a further increase in the size of the tax will cause:
the revenue generated by the tax to decrease
Deadweight loss in a taxed market occurs because:
the tax causes the market to trade less than the optimal units, so all the surplus of the units not traded is lost
If the quantity traded in a market is less than the equilibrium quantity:
the value to consumers for additional units is greater than the cost to sellers of producing those units
All of the following occur when a tax is levied on a good, EXCEPT:
total surplus increases