Ch 8 Econ

An increase in the size of a tax is most likely to increase tax revenue in a market with A. elastic demand and elastic supply. B. elastic demand and inelastic supply. C. inelastic demand and elastic supply. D. inelastic demand and inelastic 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 A. tax is placed on the sellers of the product. B. tax is placed on the buyers of the product. C. supply of the product is more elastic than the demand for the product. D. demand for the product is more elastic than the supply of the product.

Suppose the tax on gasoline is raised from $0.50 per gallon to $2.50 per gallon. As a result, A. tax revenue necessarily increases. B. the deadweight loss of the tax necessarily increases. C. the demand curve for gasoline necessarily becomes steeper. D. All of the above are correct.

To fully understand how taxes affect economic well-being, we must compare the A. benefit to buyers with the loss to sellers. B. price paid by buyers to the price received by sellers. C. profits earned by firms to the losses incurred by consumers. D. decrease in total surplus to the increase in revenue raised by the government.

The Laffer curve relates A. the tax rate to tax revenue raised by the tax. B. the tax rate to the deadweight loss of the tax. C. the price elasticity of supply to the deadweight loss of the tax. D. government welfare payments to the birth rate.

The benefit to buyers of participating in a market is measured by A. the price elasticity of demand. B. consumer surplus. C. the maximum amount that buyers are willing to pay for the good. D. the equilibrium price.

Suppose a tax of $4 per unit is imposed on a good, and the tax causes the equilibrium quantity of the good to decrease from 2,000 units to 1,700 units. The tax decreases consumer surplus by $3,000 and decreases producer surplus by $4,400. The deadweight loss of the tax is A. $200. B. $400. C. $600. D. $1,200.

When a tax is imposed on the buyers of a good, the demand curve shifts A. downward by the amount of the tax. B. upward by the amount of the tax. C. downward by less than the amount of the tax. D. upward by more than the amount of the tax.

Total surplus with a tax is equal to A. consumer surplus plus producer surplus. B. consumer surplus minus producer surplus. C. consumer surplus plus producer surplus minus tax revenue. D. consumer surplus plus producer surplus plus tax revenue.

When a tax is imposed on a good, the A. supply curve for the good always shifts. B. demand curve for the good always shifts. C. amount of the good that buyers are willing to buy at each price always remains unchanged. D. equilibrium quantity of the good always decreases.