Question 1

Figure: The Market for Hamburgers
   (Figure: The Market for Hamburgers) Look at the figure The Market for Hamburgers.If the market is originally in equilibrium and the government imposes an excise tax of $0.80 per hamburger, producer surplus will be reduced by: 
A.$175.
B.$240.
C.$105.
D.$90.

Accepted Answer

The answer of Figure: The Market for Hamburgers
  ...

Question 2

An analysis of the effect of excise taxes on markets allows us to conclude that:
A.when the price elasticity of supply is equal to zero, an excise tax falls entirely on the consumers.
B.when the price elasticity of demand is lower than the price elasticity of supply, an excise tax falls mainly on the producers.
C.whether the tax is levied on consumers or producers, the post-tax quantity sold will be the same.
D.when the price elasticity of demand is higher than the price elasticity of supply, an excise tax falls mainly on the consumers.

Accepted Answer

The answer of An analysis of the effect of excise...

Question 3

Given any upward-sloping supply curve for a good, the more elastic the demand curve, the
________ equilibrium output will fall and the will be the deadweight loss when the
government imposes an excise tax.
A.more; smaller
B.more; larger
C.less; smaller
D.less; larger

Accepted Answer

When demand is more elastic, the equilibrium output will fall more because consumers are more sensitive to price changes. This will result in a larger deadweight loss when the government imposes an excise tax because the more elastic demand means that the tax burden cannot be fully passed on to consumers in the form of higher prices, leading to a larger reduction in consumer surplus.

Question 4

Suppose the demand for good X is perfectly inelastic and a tax is levied on the producers of each unit.Which of the following is a result of this tax?
A.Consumers pay the entire tax, and deadweight loss will occur because the equilibrium quantity of good X falls.
B.Consumers pay the entire tax, and there is no deadweight loss because the equilibrium quantity of good X remains constant.
C.Consumers and producers share the burden of the tax, and there is no deadweight loss because the equilibrium quantity of good X remains constant.
D.Producers pay the entire tax, and deadweight loss will occur because the equilibrium quantity of good X falls.

Accepted Answer

The answer of Suppose the demand for good X is...

Question 5

To minimize deadweight loss, markets where demand is relatively and supply is
relatively should be taxed.
A.elastic; inelastic
B.elastic; elastic
C.inelastic; elastic
D.inelastic; inelastic

Accepted Answer

To minimize deadweight loss, it's best to tax markets where both demand and supply are relatively inelastic. In such markets, the quantity traded is less sensitive to price changes, resulting in a smaller reduction in trade volume and thus a smaller deadweight loss when a tax is imposed.

Question 6

If the purpose of a tax is to decrease the amount of a harmful activity, such as underage drinking, the government should impose it on harmful activities whose supply is and
the demand is _.
A.elastic; elastic
B.inelastic; inelastic
C.elastic; inelastic
D.inelastic; elastic

Accepted Answer

The answer of If the purpose of a tax is...

Question 7

If demand is inelastic, then deadweight loss will:
A.be minimized if supply is also inelastic.
B.be maximized if supply is also inelastic.
C.decrease if demand becomes more elastic.
D.increase if supply becomes more inelastic.

Accepted Answer

When demand is inelastic, deadweight loss is minimized if supply is also inelastic because both curves are steeper, leading to smaller areas of deadweight loss when taxes or other distortions are introduced.

Question 8

The 1990 "yacht tax" caused a large deadweight loss, because demand for luxury yachts made in the United States is:
A.very elastic.
B.very inelastic.
C.perfectly inelastic, since "rich" people will pay whatever is necessary.
D.perfectly elastic.

Accepted Answer

The answer of The 1990 "yacht tax" caused a large...

Question 9

If you want to reduce the inefficiency costs of taxation, you should devise taxes to fall on goods for which the supply is ________ and the demand is _.
A.elastic; elastic
B.inelastic; inelastic
C.elastic; inelastic
D.inelastic; elastic

Accepted Answer

Taxes on goods with inelastic supply and demand create less distortion in the market, leading to lower inefficiency costs, because consumers and producers are less responsive to price changes, thus minimizing the deadweight loss associated with taxation.

Question 10

The deadweight loss from an excise tax is largest if demand:

Accepted Answer

Deadweight loss is largest when both demand and supply are elastic because the quantity traded decreases significantly, leading to a larger loss in total welfare.

Question 11

If the government imposes an excise tax in a market in which the supply curve is perfectly inelastic, the burden of the tax will fall completely on the and the deadweight loss
will equal _.
A.consumers; zero
B.producers; zero
C.consumers; the government's tax revenue
D.producers; the government's tax revenue

Accepted Answer

The answer of If the government imposes an excise tax...

Question 12

Figure: The Market for Hamburgers
(Figure: The Market for Hamburgers) Look at the figure The Market for Hamburgers.If the market is originally in equilibrium and the government imposes an excise tax of $0.80 per unit of the good sold, the deadweight loss associated with the tax will be:
A.$40.
B.$240.
C.$105.
D.$90.

Accepted Answer

The answer of Figure: The Market for Hamburgers
(Figure: The Market...

Question 13

Which of the following statements about the effects of an excise tax is incorrect?
A.The lower the elasticity of supply relative to the elasticity of demand, the lower the burden of the tax borne by suppliers.
B.An excise tax causes a deadweight loss because consumer and producer surpluses are reduced by more than the revenue the government collects.
C.An excise tax drives a wedge between the price paid by consumers and the price received by producers.
D.An excise tax is inefficient because it distorts incentives at the margin for both consumers and producers.

Accepted Answer

The answer of Which of the following statements about the...

Question 14

Given any downward-sloping demand curve for a good, the more price-elastic the supply curve, the ________ equilibrium output will fall and the will be the deadweight loss
when the government imposes an excise tax.
A.more; smaller
B.more; larger
C.less; smaller
D.less; larger

Accepted Answer

When supply is more price-elastic, the equilibrium output will decrease more in response to the tax, which will increase the deadweight loss. Therefore, the deadweight loss will be larger.

Question 15

Figure: The Market for Hamburgers
   (Figure: The Market for Hamburgers) Look at the figure The Market for Hamburgers.If the market is originally in equilibrium and the government imposes an excise tax of $0.80 per unit of the good sold, consumer surplus will be reduced by: 
A.$175.
B.$240.
C.$105.
D.$90.

Accepted Answer

The answer of Figure: The Market for Hamburgers
  ...

Question 16

Figure: The Market for Hamburgers
  (Figure: The Market for Hamburgers) Look at the figure The Market for Hamburgers.If the market is originally in equilibrium and the government imposes an excise tax of $0.80 per unit of the good sold, the government's revenue from the tax will be: 
A.$175.
B.$240.
C.$105.
D.$90.

Accepted Answer

The answer of Figure: The Market for Hamburgers
  (Figure:...

Question 17

If the government wants to minimize the deadweight loss from taxes, it should impose taxes on goods for which:
A.the price elasticity of demand is high.
B.the price elasticity of demand is low.
C.the price elasticity of supply is high.
D.the demand is high.

Accepted Answer

The answer of If the government wants to minimize the...

Question 18

If the government imposes an excise tax in a market in which the demand curve is perfectly inelastic, the burden of the tax will fall completely on the , and the deadweight loss
will equal _.
A.consumers; zero
B.producers; zero
C.consumers; the government's tax revenue
D.producers; the government's tax revenue

Accepted Answer

The answer of If the government imposes an excise tax...

Question 19

Given any downward-sloping demand curve for a good, the more inelastic the supply curve, the ________ equilibrium output will fall and the will be the deadweight loss when
the government imposes an excise tax.
A.more; smaller
B.more; larger
C.less; smaller
D.less; larger

Accepted Answer

When the supply curve is more inelastic, it means that suppliers are less responsive to price changes. Therefore, the equilibrium output will fall less because suppliers cannot easily adjust their quantity supplied. Additionally, the deadweight loss will be smaller because the tax causes less distortion in the market when supply is inelastic.

Question 20

Given any upward-sloping supply curve for a good, the more inelastic the demand curve, the
________ equilibrium output will fall and the will be the deadweight loss when the
government imposes an excise tax.
A.more; smaller
B.more; larger
C.less; smaller
D.less; larger

Accepted Answer

When demand is inelastic, a change in price leads to a relatively smaller change in quantity demanded. Therefore, with an excise tax, the equilibrium output falls less because consumers are less sensitive to the price increase. Additionally, the deadweight loss is smaller because the market is closer to the efficient level of trade than it would be if demand were more elastic.

Quiz 7: Taxes

Figure: The Market for Hamburgers (Figure: The Market for Hamburgers) Look at the figure The Market for Hamburgers.If the market is originally in equilibrium and the government imposes an excise tax of $0.80 per hamburger, producer surplus will be reduced by: A.$175. B.$240. C.$105. D.$90.

Given any upward-sloping supply curve for a good, the more elastic the demand curve, the ________ equilibrium output will fall and the will be the deadweight loss when the government imposes an excise tax. A.more; smaller B.more; larger C.less; smaller D.less; larger

To minimize deadweight loss, markets where demand is relatively and supply is relatively should be taxed. A.elastic; inelastic B.elastic; elastic C.inelastic; elastic D.inelastic; inelastic

If the purpose of a tax is to decrease the amount of a harmful activity, such as underage drinking, the government should impose it on harmful activities whose supply is and the demand is _. A.elastic; elastic B.inelastic; inelastic C.elastic; inelastic D.inelastic; elastic

If demand is inelastic, then deadweight loss will: A.be minimized if supply is also inelastic. B.be maximized if supply is also inelastic. C.decrease if demand becomes more elastic. D.increase if supply becomes more inelastic.

The 1990 "yacht tax" caused a large deadweight loss, because demand for luxury yachts made in the United States is: A.very elastic. B.very inelastic. C.perfectly inelastic, since "rich" people will pay whatever is necessary. D.perfectly elastic.

If you want to reduce the inefficiency costs of taxation, you should devise taxes to fall on goods for which the supply is ________ and the demand is _. A.elastic; elastic B.inelastic; inelastic C.elastic; inelastic D.inelastic; elastic

The deadweight loss from an excise tax is largest if demand:

Given any downward-sloping demand curve for a good, the more price-elastic the supply curve, the ________ equilibrium output will fall and the will be the deadweight loss when the government imposes an excise tax. A.more; smaller B.more; larger C.less; smaller D.less; larger

If the government wants to minimize the deadweight loss from taxes, it should impose taxes on goods for which: A.the price elasticity of demand is high. B.the price elasticity of demand is low. C.the price elasticity of supply is high. D.the demand is high.

Given any downward-sloping demand curve for a good, the more inelastic the supply curve, the ________ equilibrium output will fall and the will be the deadweight loss when the government imposes an excise tax. A.more; smaller B.more; larger C.less; smaller D.less; larger

Given any upward-sloping supply curve for a good, the more inelastic the demand curve, the ________ equilibrium output will fall and the will be the deadweight loss when the government imposes an excise tax. A.more; smaller B.more; larger C.less; smaller D.less; larger