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