ECO1305 Exam 2 HW 5 Questions
Suppose a tax of $5 per unit is imposed on a good, and the tax cause the equilibrium quantity of the good to decrease from 200 units to 100 units. The tax decreases consumer surplus by $450 and decreases producer surplus by $300. The deadweight loss from the tax is...
$250
The decrease in total surplus that results from a market distortion, such as a tax, is called a...
Deadweight loss
Erin would be willing to pay as much as $100 per week to have her house cleaned. Ernesto's opportunity cost of cleaning Erin's house is $70 per week. Assume Erin is required to pay a tax of $40 if she hires Ernesto to clean her house for a week. Which of the following is correct?
Erin will now clean her own house
A tax on buyers shifts the demand curve to the right (T/F)
False
A tax on sellers increases supply (T/F)
False
If the government imposes a $3 tax in a market, the buyers and sellers will share an equal burden of the tax (T/F)
False
When a tax is imposed on a good, the resulting decrease in consumer surplus is always larger than the resulting decrease in producer surplus (T/F)
False
When a tax is placed on the sellers of a product, generally, buyers pay...
More, and sellers receive less than they did before the tax
If a tax levied on the sellers of a product, then the demand curve will...
Not shift
Which of the following statements regarding a Laffer curve is the most plausible?
Reducing a high tax rate is more likely to increase tax revenue than is reducing a low tax rate
A tax levied on the sellers of a good shifts the...
Supply curve upward by the size of the tax
The government's benefit from a tax can be measured by...
Tax revenue
Suppose Yolanda needs a dog sitter so that she can travel to the sister's wedding. Yolanda values dog sitting for the weekend at $200. Rebecca is willing to dog sit for Yolanda so long as she receives at least $175. Yolanda and Rebecca agree on a price of $185. Suppose the government imposes a tax of $30 on dog sitting. What is the deadweight loss of the tax.
The lost benefit to Yolanda and Rebecca because after the tax, Rebecca will not dog sit for Yolanda
What generally happens to the total surplus in a market when the government imposes a tax?
Total surplus decreases
Because taxes distort incentives, they cause markets to allocate resources inefficiently (T/F)
True
Taxes create deadweight loss (T/F)
True
Which of the following quantities decrease in response to a tax on a good?
the equilibrium quantity in the market for the good, producer surplus, and the well-being of buyers of the good
