ECON 101 - CH 8 Questions

In the market for widgets, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. The equilibrium quantity in the market for widgets is 200 per month when there is no tax. Then a tax of $5 per widget is imposed. The price paid by buyers increases by $2 and the after-tax price received by sellers falls by $3. The government is able to raise $750 per month in revenue from the tax. The deadweight loss from the tax is

$125.

Suppose a tax of $5 per unit is imposed on a good, and the tax causes 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.

With linear demand and supply curves in a market, suppose a tax of $0.20 per unit on a good creates a deadweight loss of $40. If the tax is increased to $0.50 per unit, the deadweight loss from the new tax will be

$250.

Suppose a tax of $3 per unit is imposed on a good. The supply curve is a typical upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. The tax decreases consumer surplus by $3,900 and decreases producer surplus by $3,000. The tax generates tax revenue of $6,000. The tax decreased the equilibrium quantity of the good from

2,600 to 2,000.

Assume that for good X the supply curve for a good is a typical, upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. If the good is taxed, and the tax is tripled, the

All of the above are correct: base of the triangle that represents the deadweight loss triples, height of the triangle that represents the deadweight loss triples, deadweight loss of the tax increases by a factor of nine

In 1776, the American Revolution was sparked by anger over

British taxes imposed on the American colonies.

Who once said that taxes are the price we pay for a civilized society?

Oliver Wendell Holmes, Jr.

Which of the following statements is correct regarding a tax on a good and the resulting deadweight loss?

The greater are the price elasticities of supply and demand, the greater is the deadweight loss.

When a tax on a good is enacted,

buyers and sellers share the burden of the tax regardless of whether the tax is levied on buyers or on sellers.

A tax levied on the buyers of a good shifts the

demand curve downward (or to the left).

Sellers of a product will bear the larger part of the tax burden, and buyers will bear a smaller part of the tax burden, when the

demand for the product is more elastic than the supply of the product.

Consider a good to which a per-unit tax applies. The greater the price elasticities of demand and supply for the good, the

greater the deadweight loss from the tax.

If the labor supply curve is very elastic, a tax on labor

has a large deadweight loss.

If the tax on a good is increased from $0.30 per unit to $0.90 per unit, the deadweight loss from the tax

increases by a factor of 9.

The benefit to sellers of participating in a market is measured by the

producer surplus.

When a tax is imposed on a good for which the demand is relatively elastic and the supply is relatively inelastic,

sellers of the good will bear most of the burden of the tax.

Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, the

smaller is the price elasticity of supply.

Buyers of a product will bear the larger part of the tax burden, and sellers will bear a smaller part of the tax burden, when the

supply of the product is more elastic than the demand for the product.

One result of a tax, regardless of whether the tax is placed on the buyers or the sellers, is that the

tax reduces the welfare of both buyers and sellers.

The benefit that government receives from a tax is measured by

tax revenue.

Suppose Rebecca needs a dog sitter so that she can travel to her sister's wedding. Rebecca values dog sitting for the weekend at $200. Susan is willing to dog sit for Rebecca so long as she receives at least $175. Rebecca and Susan 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 Rebecca and Susan because after the tax, Susan will not dog sit for Rebecca

The amount of deadweight loss that results from a tax of a given size is determined by

the price elasticities of demand and supply.

When a tax is levied on a good,

there is a decrease in the quantity of the good bought and sold in the market.

To measure the gains and losses from a tax on a good, economists use the tools of

welfare economics.