Micro quiz (questions)

Taxes are the price we pay for civilized society

Oliver Wendell Holmes

Supplyside economics is a term associated with

Ronald Reagan and Laffer

When a country is on the downward-sloping side of the Laffer curve

a cut in the tax rate will increase tax revenue and decrease deadweight loss

Which of the statements is correct?

a decrease in the size of tax always decreases the deadweight loss of the tax

Marginal buyer

buyer who would be the first to leave market if price were any higher

Decrease in total surplus that results from a market distortion

deadweight loss

As size of tax rises,

deadweight loss rises, and tax revenue first rises, then falls

More elastic supply,

larger deadweight loss from tax

Total surplus

measures efficiency

Higher country's tax rates...

more likely that country will be on the negatively sloped part of the Laffer curve

Willingness to pay

price a buyer will pay for a good

Ronald Reagan believed

reducing income tax rates would raise economic wellbeing and perhaps even tax revenue

Laffer curve

relates the tax rate to tax revenue raised by the tax

Laffer graph

represents the amount of tax revenue as a function of the size of the tax

Benefit that the government receives is measured by

tax revenue

Consumer surplus is measured using

the demand curve for a product

Welfare economics

the study of how the allocation of resources affects economic well being

Which of the following scenarios is consistent with the Laffer curve?

the tax rate is 1 percent, and tax revenue is very low

Consumer surplus is equal to

the value to buyers - amount paid by buyers