Quiz 8: Application: The Costs of Taxation

Total surplus is always equal to the sum of consumer surplus and producer surplus.

Total surplus in a market does not change when the government imposes a tax on that market because the loss of consumer surplus and producer surplus is equal to the gain of government revenue.

When a tax is imposed on buyers,consumer surplus and producer surplus both decrease.

When a tax is imposed on buyers,consumer surplus decreases but producer surplus increases.

When a tax is imposed on sellers,producer surplus decreases but consumer surplus increases.

When a tax is imposed on sellers,consumer surplus and producer surplus both decrease.

Taxes affect market participants by increasing the price paid by the buyer and received by the seller.

Taxes affect market participants by increasing the price paid by the buyer and decreasing the price received by the seller.

A tax raises the price received by sellers and lowers the price paid by buyers.

Normally,both buyers and sellers of a good become worse off when the good is taxed.

When a good is taxed,the tax revenue collected by the government equals the decrease in the welfare of buyers and sellers caused by the tax.

A tax places a wedge between the price buyers pay and the price sellers receive.

A tax on a good causes the size of the market to increase.

A tax on a good causes the size of the market to shrink.

When a tax is imposed,the loss of consumer surplus and producer surplus as a result of the tax exceeds the tax revenue collected by the government.

Economists use the government's tax revenue to measure the public benefit from a tax.

Because taxes distort incentives,they cause markets to allocate resources inefficiently.

Taxes cause deadweight losses because they prevent buyers and sellers from realizing some of the gains from trade.

As the price elasticities of supply and demand increase,the deadweight loss from a tax increases.

The greater the elasticity of demand,the smaller the deadweight loss of a tax.

The more inelastic are demand and supply,the greater is the deadweight loss of a tax.

The elasticities of the supply and demand curves in the market for cigarettes affect how much a tax distorts that market.

If a tax did not induce buyers or sellers to change their behavior,it would not cause a deadweight loss.

The most important tax in the U.S.economy is the tax on corporations' profits.

The Social Security tax,and to a large extent,the federal income tax,are labor taxes.

Taxes on labor tend to increase the number of hours that people choose to work.

Taxes on labor tend to encourage the elderly to retire early.

Taxes on labor tend to encourage second earners to stay at home rather than work in the labor force.

Economists disagree on whether labor taxes have a small or large deadweight loss.

The demand for bread is less elastic than the demand for donuts;hence,a tax on bread will create a larger deadweight loss than will the same tax on donuts,other things equal.

The larger the deadweight loss from taxation,the larger the cost of government programs.

A tax on insulin is likely to cause a very large deadweight loss to society.

The deadweight loss of a tax rises even more rapidly than the size of the tax.

As the size of a tax increases,the government's tax revenue rises,then falls.

Tax revenues increase in direct proportion to increases in the size of the tax.

If the size of a tax doubles,the deadweight loss doubles.

If the size of a tax triples,the deadweight loss increases by a factor of six.

A tax on unimproved land falls entirely on landowners because the supply of land is perfectly inelastic.

Because the supply of land is perfectly elastic,the deadweight loss of a tax on land is very large.

Economist Arthur Laffer made the argument that tax rates in the United States were so high that reducing the rates would increase tax revenue.

The Laffer curve is the curve showing how tax revenue varies as the size of the tax varies.

The result of the large tax cuts in the first Reagan Administration demonstrated very convincingly that Arthur Laffer was correct when he asserted that cuts in tax rates would increase tax revenue.

The idea that tax cuts would increase the quantity of labor supplied,thus increasing tax revenue,became know as supply-side economics.

The Laffer curve illustrates how taxes in markets with greater elasticities of demand compare to taxes in markets with smaller elasticities of supply.

The more elastic are supply and demand in a market,the greater are the distortions caused by a tax on that market,and the more likely it is that a tax cut in that market will raise tax revenue.

When the government imposes taxes on buyers and sellers of a good,society loses some of the benefits of market efficiency.

John has been in the habit of mowing Willa's lawn each week for $20.John's opportunity cost is $15,and Willa would be willing to pay $25 to have her lawn mowed.What is the maximum tax the government can impose on lawn mowing without discouraging John and Willa from continuing their mutually beneficial arrangement?

Use the following graph shown to fill in the table that follows.

Suppose that instead of a supply-demand diagram,you are given the following information: Q_s = 100 + 3P Q_d = 400 - 2P From this information compute equilibrium price and quantity.Now suppose that a tax is placed on buyers so that Q_d = 400 - (2P + T). If T = 15,solve for the new equilibrium price and quantity.(Note: P is the price received by sellers and P + T is the price paid by buyers. )Compare these answers for equilibrium price and quantity with your first answers.What does this show you?

Using demand and supply diagrams,show the difference in deadweight loss between (a)a market with inelastic demand and supply and (b)a market with elastic demand and supply.

Illustrate on three demand-and-supply graphs how the size of a tax (small,medium and large)can alter total revenue and deadweight loss.

In 1776,the American Revolution was sparked by anger over A) the extravagant lifestyle of British royalty. B) the crimes of British soldiers stationed in the American colonies. C) British taxes imposed on the American colonies. D) the failure of the British to protect American colonists from attack by hostile Native Americans.

Anger over British taxes played a significant role in bringing about the A) election of John Adams as the second American president. B) American Revolution. C) War of 1812. D) "no new taxes" clause in the U.S.Constitution.

Who once said that taxes are the price we pay for a civilized society? A) Aristotle B) George Washington C) Oliver Wendell Holmes,Jr. D) Ronald Reagan

Who once said that taxes are the price we pay for a civilized society? A) Milton Friedman B) Theodore Roosevelt C) Arthur Laffer D) Oliver Wendell Holmes,Jr.

To fully understand how taxes affect economic well-being,we must A) assume that economic well-being is not affected if all tax revenue is spent on goods and services for the people who are being taxed. B) compare the taxes raised in the United States with those raised in other countries,especially France. C) compare the reduced welfare of buyers and sellers to the amount of revenue the government raises. D) take into account the fact that almost all taxes reduce the welfare of buyers,increase the welfare of sellers,and raise revenue for the government.

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.

To fully understand how taxes affect economic well-being,we must compare the A) consumer surplus to the producer surplus. B) price paid by buyers to the price received by sellers. C) reduced welfare of buyers and sellers to the revenue raised by the government. D) consumer surplus to the deadweight loss.

When a tax is levied on a good,the buyers and sellers of the good share the burden, A) provided the tax is levied on the sellers. B) provided the tax is levied on the buyers. C) provided a portion of the tax is levied on the buyers,with the remaining portion levied on the sellers. D) regardless of how the tax is levied.

A tax on a good A) raises the price that buyers effectively pay and raises the price that sellers effectively receive. B) raises the price that buyers effectively pay and lowers the price that sellers effectively receive. C) lowers the price that buyers effectively pay and raises the price that sellers effectively receive. D) lowers the price that buyers effectively pay and lowers the price that sellers effectively receive.

When a tax is placed on a product,the price paid by buyers A) rises,and the price received by sellers rises. B) rises,and the price received by sellers falls. C) falls,and the price received by sellers rises. D) falls,and the price received by sellers falls.

A tax affects A) buyers only. B) sellers only. C) buyers and sellers only. D) buyers,sellers,and the government.

The government's benefit from a tax can be measured by A) consumer surplus. B) producer surplus. C) tax revenue. D) All of the above are correct.

What happens to the total surplus in a market when the government imposes a tax? A) Total surplus increases by the amount of the tax. B) Total surplus increases but by less than the amount of the tax. C) Total surplus decreases. D) Total surplus is unaffected by the tax.

When a good is taxed, A) both buyers and sellers of the good are made worse off. B) only buyers are made worse off,because they ultimately bear the burden of the tax. C) only sellers are made worse off,because they ultimately bear the burden of the tax. D) neither buyers nor sellers are made worse off,since tax revenue is used to provide goods and services that would otherwise not be provided in a market economy.

To measure the gains and losses from a tax on a good,economists use the tools of A) macroeconomics. B) welfare economics. C) international-trade theory. D) circular-flow analysis.

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.

A tax levied on the sellers of a good shifts the A) supply curve upward (or to the left). B) supply curve downward (or to the right). C) demand curve upward (or to the right). D) demand curve downward (or to the left).

A tax levied on the buyers of a good shifts the A) supply curve upward (or to the left). B) supply curve downward (or to the right). C) demand curve downward (or to the left). D) demand curve upward (or to the right).

If a tax shifts the supply curve upward (or to the left),we can infer that the tax was levied on A) buyers of the good. B) sellers of the good. C) both buyers and sellers of the good. D) We cannot infer anything because the shift described is not consistent with a tax.

If a tax shifts the supply curve downward (or to the right),we can infer that the tax was levied on A) buyers of the good. B) sellers of the good. C) both buyers and sellers of the good. D) We cannot infer anything because the shift described is not consistent with a tax.

If a tax shifts the demand curve downward (or to the left),we can infer that the tax was levied on A) buyers of the good. B) sellers of the good. C) both buyers and sellers of the good. D) We cannot infer anything because the shift described is not consistent with a tax.

If a tax shifts the demand curve upward (or to the right),we can infer that the tax was levied on A) buyers of the good. B) sellers of the good. C) both buyers and sellers of the good. D) We cannot infer anything because the shift described is not consistent with a tax.

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.

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

A tax placed on buyers of tires shifts the A) demand curve for tires downward,decreasing the price received by sellers of tires and causing the quantity of tires to increase. B) demand curve for tires downward,decreasing the price received by sellers of tires and causing the quantity of tires to decrease. C) supply curve for tires upward,decreasing the effective price paid by buyers of tires and causing the quantity of tires to increase. D) supply curve for tires upward,increasing the effective price paid by buyers of tires and causing the quantity of tires to decrease.

Suppose a tax is imposed on the buyers of fast-food French fries.The burden of the tax will A) fall entirely on the buyers of fast-food French fries. B) fall entirely on the sellers of fast-food French fries. C) be shared equally by the buyers and sellers of fast-food French fries. D) be shared by the buyers and sellers of fast-food French fries but not necessarily equally.

It does not matter whether a tax is levied on the buyers or the sellers of a good because A) sellers always bear the full burden of the tax. B) buyers always bear the full burden of the tax. C) buyers and sellers will share the burden of the tax. D) None of the above is correct;the incidence of the tax does depend on whether the buyers or the sellers are required to pay the tax.

When alcohol is taxed and sellers of alcohol are required to pay the tax to the government, A) the quantity of alcohol bought and sold in the market is reduced. B) the price paid by buyers of alcohol decreases. C) the demand for alcohol decreases. D) there is a movement downward and to the right along the demand curve for alcohol.

One result of a tax,regardless of whether the tax is placed on the buyers or the sellers,is that the A) size of the market is unchanged. B) price the seller effectively receives is higher. C) supply curve for the good shifts upward by the amount of the tax. D) tax reduces the welfare of both buyers and sellers.

When a tax is placed on the buyers of a product,a result is that buyers effectively pay A) less than before the tax,and sellers effectively receive less than before the tax. B) less than before the tax,and sellers effectively receive more than before the tax. C) more than before the tax,and sellers effectively receive less than before the tax. D) more than before the tax,and sellers effectively receive more than before the tax.

When a tax is levied on a good, A) neither buyers nor sellers are made worse off. B) only sellers are made worse off. C) only buyers are made worse off. D) both buyers and sellers are made worse off.

When a tax is levied on the buyers of a good,the A) supply curve shifts upward by the amount of the tax. B) quantity supplied increases for all conceivable prices of the good. C) buyers of the good will send tax payments to the government. D) demand curve shifts to the right by the horizontal distance of the tax.

When a tax is levied on the sellers of a good,the A) supply curve shifts upward by the amount of the tax. B) quantity demanded decreases for all conceivable prices of the good. C) quantity supplied increases for all conceivable prices of the good. D) None of the above is correct.

A $2.00 tax per gallon of paint placed on the sellers of paint will shift the supply curve A) downward by exactly $2.00. B) downward by less than $2.00. C) upward by exactly $2.00. D) upward by less than $2.00.

When a tax on a good is enacted, A) buyers and sellers share the burden of the tax regardless of whether the tax is levied on buyers or on sellers. B) buyers always bear the full burden of the tax. C) sellers always bear the full burden of the tax. D) sellers bear the full burden of the tax if the tax is levied on them;buyers bear the full burden of the tax if the tax is levied on them.

A tax placed on a good A) causes the effective price to sellers to increase. B) affects the welfare of buyers of the good but not the welfare of sellers. C) causes the equilibrium quantity of the good to decrease. D) creates a burden that is usually borne entirely by the sellers of the good.

When a tax is levied on buyers of a good, A) government collects too little revenue to justify the tax if the equilibrium quantity of the good decreases as a result of the tax. B) there is an increase in the quantity of the good supplied. C) a wedge is placed between the price buyers pay and the price sellers effectively receive. D) the effective price to buyers decreases because the demand curve shifts leftward.

When a tax is levied on a good, A) government collects revenues which might justify the loss in total welfare. B) there is a decrease in the quantity of the good bought and sold in the market. C) a wedge is placed between the price buyers pay and the price sellers effectively receive. D) All of the above are correct.

When a tax is levied on a good, A) government revenues exceed the loss in total welfare. B) there is a decrease in the quantity of the good bought and sold in the market. C) the price that sellers receive exceeds the price that buyers pay. D) All of the above are correct.

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.

The benefit to buyers of participating in a market is measured by A) consumer surplus. B) producer surplus. C) total surplus. D) deadweight loss.

The benefit that government receives from a tax is measured by A) the change in the equilibrium quantity of the good. B) the change in the equilibrium price of the good. C) tax revenue. D) total surplus.

The benefit that government receives from a tax is measured by A) deadweight loss. B) consumer surplus. C) tax incidence. D) tax revenue.

If T represents the size of the tax on a good and Q represents the quantity of the good that is sold,total tax revenue received by government can be expressed as A) T/Q. B) T+Q. C) TxQ. D) (TxQ)/Q.

When a tax is levied on buyers,the A) supply curves shifts upward by the amount of the tax. B) tax creates a wedge between the price buyers effectively pay and the price sellers receive. C) tax has no effect on the well-being of sellers. D) All of the above are correct.

For the purpose of analyzing the gains and losses from a tax on a good,we use tax revenue as a direct measure of the A) government's benefit from the tax. B) government's loss from the tax. C) deadweight loss of the tax. D) overall net gain to society of the tax.

The decrease in total surplus that results from a market distortion,such as a tax,is called a A) wedge loss. B) revenue loss. C) deadweight loss. D) consumer surplus loss.

A tax on a good A) gives buyers an incentive to buy more of the good than they otherwise would buy. B) gives sellers an incentive to produce less of the good than they otherwise would produce. C) creates a benefit to the government,the size of which exceeds the loss in surplus to buyers and sellers. D) All of the above are correct.

When the price of a good is measured in dollars,then the size of the deadweight loss that results from taxing that good is measured in A) units of the good that is being taxed. B) units of a related good that is not being taxed. C) dollars. D) percentage change.

The benefit to sellers of participating in a market is measured by the A) amount of taxes collected on sales of the good. B) producer surplus. C) amount sellers receive for their product. D) sellers' willingness to sell.

When the government places a tax on a product,the cost of the tax to buyers and sellers A) is less than the revenue raised from the tax by the government. B) is equal to the revenue raised from the tax by the government. C) exceeds the revenue raised from the tax by the government. D) Without additional information,such as the elasticity of demand for this product,it is impossible to compare the cost of a tax to buyers and sellers with tax revenue.

Relative to a situation in which gasoline is not taxed,the imposition of a tax on gasoline causes the quantity of gasoline demanded to A) decrease and the quantity of gasoline supplied to decrease. B) decrease and the quantity of gasoline supplied to increase. C) increase and the quantity of gasoline supplied to decrease. D) increase and the quantity of gasoline supplied to increase.

Which of the following quantities decrease in response to a tax on a good? A) the equilibrium quantity in the market for the good,the effective price of the good paid by buyers,and consumer surplus B) the equilibrium quantity in the market for the good,producer surplus,and the well-being of buyers of the good C) the effective price received by sellers of the good,the wedge between the effective price paid by buyers and the effective price received by sellers,and consumer surplus D) None of the above is necessarily correct unless we know whether the tax is levied on buyers or on sellers.

For a good that is taxed,the area on the relevant supply-and-demand graph that represents government's tax revenue is a A) triangle. B) rectangle. C) trapezoid. D) None of the above is correct;government's tax revenue is the area between the supply and demand curves,above the horizontal axis,and below the effective price to buyers.

For a good that is taxed,the area on the relevant supply-and-demand graph that represents government's tax revenue is A) smaller than the area that represents the loss of consumer surplus and producer surplus caused by the tax. B) bounded by the supply curve,the demand curve,the effective price paid by buyers,and the effective price received by sellers. C) a right triangle. D) a triangle,but not necessarily a right triangle.

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.

Taxes cause deadweight losses because they A) lead to losses in surplus for consumers and for producers that,when taken together,exceed tax revenue collected by the government. B) distort incentives to both buyers and sellers. C) prevent buyers and sellers from realizing some of the gains from trade. D) All of the above are correct.

Taxes cause deadweight losses because taxes A) reduce the sum of producer and consumer surpluses by more than the amount of tax revenue. B) prevent buyers and sellers from realizing some of the gains from trade. C) cause marginal buyers and marginal sellers to leave the market,causing the quantity sold to fall. D) All of the above are correct.

Deadweight loss measures the loss A) in a market to buyers and sellers that is not offset by an increase in government revenue. B) in revenue to the government when buyers choose to buy less of the product because of the tax. C) of equality in a market due to government intervention. D) of total revenue to business firms due to the price wedge caused by the tax.

The loss in total surplus resulting from a tax is called A) a deficit. B) economic loss. C) deadweight loss. D) inefficiency.

Deadweight loss is the A) decline in total surplus that results from a tax. B) decline in government revenue when taxes are reduced in a market. C) decline in consumer surplus when a tax is placed on buyers. D) loss of profits to business firms when a tax is imposed.

A deadweight loss is a consequence of a tax on a good because the tax A) induces the government to increase its expenditures. B) induces buyers to consume less,and sellers to produce less. C) increases the equilibrium price in the market. D) imposes a loss on buyers that is greater than the loss to sellers.

For good A,the supply curve is the typical upward-sloping straight line,and the demand curve is the typical downward-sloping straight line.When good A is taxed,the area on the relevant supply-and-demand graph that represents the deadweight loss is A) larger than the area that represents consumer surplus in the absence of the tax. B) larger than the area that represents government's tax revenue. C) a triangle. D) All of the above are correct.

For good B,the supply curve is the typical upward-sloping straight line,and the demand curve is the typical downward-sloping straight line.When good B is taxed,the area on the relevant supply-and-demand graph that represents A) government's tax revenue is a rectangle. B) the deadweight loss of the tax is a triangle. C) the loss of consumer surplus caused by the tax is neither a rectangle nor a triangle. D) All of the above are correct.

For good X,the supply curve is the typical upward-sloping straight line,and the demand curve is the typical downward-sloping straight line.A tax of $10 per unit is imposed on good X.The tax reduces the equilibrium quantity in the market by 200 units.The deadweight loss from the tax is A) $2,000. B) $1,000. C) $500. D) $250.

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.As a result,the government is able to raise $750 per month in tax revenue.We can conclude that the equilibrium quantity of widgets has fallen by A) 25 per month. B) 50 per month. C) 75 per month. D) 100 per month.

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.As a result,the government is able to raise $750 per month in tax revenue.We can conclude that the post tax quantity of widgets is A) 50 per month. B) 75 per month. C) 100 per month. D) 150 per month.

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 A) $250. B) $125. C) $75. D) $50.

Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.Total surplus before the tax is measured by the area A) I+Y. B) J+K+L+M. C) L+M+Y. D) I+J+K+L+M+Y.

Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The area measured by I+J+K+L+M+Y represents A) total surplus before the tax. B) total surplus after the tax. C) consumer surplus before the tax. D) deadweight loss from the tax.

Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.Total surplus after the tax is measured by the area A) I+Y. B) J+K+L+M. C) I+Y+B. D) I+J+K+L+M+Y.

Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The area measured by J+K+L+M represents A) total surplus after the tax. B) total surplus before the tax. C) deadweight loss from the tax. D) tax revenue.

Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The area measured by K+L represents A) tax revenue. B) consumer surplus before the tax. C) producer surplus after the tax. D) total surplus before the tax.

Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The tax revenue is measured by the area A) K+L. B) I+Y. C) J+K+L+M. D) I+J+K+L+M+Y.

Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The area measured by L+M+Y represents A) consumer surplus after the tax. B) consumer surplus before the tax. C) producer surplus after the tax. D) producer surplus before the tax.

Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The producer surplus before the tax is measured by the area A) I+J+K. B) I+Y. C) L+M+Y. D) M.

Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The area measured by M represents A) consumer surplus after the tax. B) consumer surplus before the tax. C) producer surplus after the tax. D) producer surplus before the tax.

Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The producer surplus after the tax is measured by the area A) M. B) L+M+N+Y+B. C) L+M+Y. D) J.

Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The area measured by J+K+I represents A) consumer surplus after the tax. B) consumer surplus before the tax. C) producer surplus after the tax. D) producer surplus before the tax.

Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The consumer surplus before the tax is measured by the area A) M. B) L+M+Y. C) J. D) J+K+I.

Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The area measured by J represents A) consumer surplus after the tax. B) consumer surplus before the tax. C) producer surplus after the tax. D) producer surplus before the tax.

Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The consumer surplus after the tax is measured by the area A) J+K+I. B) J. C) M. D) L+M+Y.

Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The area measured by I+Y represents the A) deadweight loss due to the tax. B) loss in consumer surplus due to the tax. C) loss in producer surplus due to the tax. D) total surplus before the tax.

Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The deadweight loss due to the tax is measured by the area A) J+K+L+M. B) J+K+L+M+N. C) I+Y. D) I+Y+B.

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2.The imposition of the tax causes the quantity sold to A) increase by 1 unit. B) decrease by 1 unit. C) increase by 2 units. D) decrease by 2 units.

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2.The imposition of the tax causes the price paid by buyers to A) decrease by $2. B) increase by $3. C) decrease by $4. D) increase by $5.

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2.The imposition of the tax causes the price received by sellers to A) decrease by $2. B) increase by $3. C) decrease by $4. D) increase by $5.

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2.The amount of the tax on each unit of the good is A) $1. B) $4. C) $5. D) $9.

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2.The per-unit burden of the tax on buyers is A) $2. B) $3. C) $4. D) $5.

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2.The per-unit burden of the tax on sellers is A) $2. B) $3. C) $4. D) $5.

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2.The amount of tax revenue received by the government is A) $2.50. B) $4. C) $5. D) $9.

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2.The amount of deadweight loss as a result of the tax is A) $2.50. B) $5. C) $7.50. D) $10.

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2.The loss of consumer surplus as a result of the tax is A) $1.50. B) $3. C) $4.50. D) $6.

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2.The loss of producer surplus as a result of the tax is A) $1. B) $2. C) $3. D) $4.

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2.Consumer surplus without the tax is A) $6,and consumer surplus with the tax is $1.50. B) $6,and consumer surplus with the tax is $4.50. C) $10,and consumer surplus with the tax is $1.50. D) $10,and consumer surplus with the tax is $4.50.

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2.Producer surplus without the tax is A) $4,and producer surplus with the tax is $1. B) $4,and producer surplus with the tax is $3. C) $10,and producer surplus with the tax is $1. D) $10,and producer surplus with the tax is $3.

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2.Total surplus without the tax is A) $10,and total surplus with the tax is $2.50. B) $10,and total surplus with the tax is $7.50. C) $20,and total surplus with the tax is $2.50. D) $20,and total surplus with the tax is $7.50.

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2.The loss of consumer surplus associated with some buyers dropping out of the market as a result of the tax is A) $0. B) $1.50. C) $3. D) $4.50.

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2.The loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is A) $0. B) $1.50. C) $3. D) $4.50.

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2.The loss of producer surplus associated with some sellers dropping out of the market as a result of the tax is A) $0. B) $1. C) $2. D) $3.

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2.The loss of producer surplus for those sellers of the good who continue to sell it after the tax is imposed is A) $0. B) $1. C) $2. D) $3.

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3.The equilibrium price before the tax is imposed is A) P1. B) P2. C) P3. D) P4.

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3.The price that buyers effectively pay after the tax is imposed is A) P1. B) P2. C) P3. D) P4.

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3.The price that sellers effectively receive after the tax is imposed is A) P1. B) P2. C) P3. D) P4.

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3.The per unit burden of the tax on buyers is A) P3 - P1. B) P3 - P2. C) P2 - P1. D) P4 - P3.

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3.The per-unit burden of the tax on sellers is A) P3 - P1. B) P3 - P2. C) P2 - P1. D) P4 - P3.

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3.The amount of the tax on each unit of the good is A) P3 - P1. B) P3 - P2. C) P2 - P1. D) P4 - P3.

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3.The amount of tax revenue received by the government is equal to the area A) P3ACP1. B) ABC. C) P2DAP3. D) P1CDP2.

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3.The amount of deadweight loss associated with the tax is equal to A) P3ACP1. B) ABC. C) P2ADP3. D) P1DCP2.

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3.The loss in consumer surplus caused by the tax is measured by the area A) P1P3AC. B) P3ABP2. C) P1P3ABC. D) ABC.

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3.The loss in producer surplus caused by the tax is measured by the area A) ABC. B) P1P3ABC. C) P1P2BC. D) P1C0.

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3.Which of the following equations is valid for the tax revenue that the tax provides to the government? A) Tax revenue = (P2 - P1)xQ1 B) Tax revenue = (P3 - P1)xQ1 C) Tax revenue = (P3 - P2)xQ1 D) Tax revenue = (P3 - P1)x(Q2 - Q1)

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3.Which of the following equations is valid for the deadweight loss of the tax? A) Deadweight loss = (1/2)(P2 - P1)(Q2 + Q1) B) Deadweight loss = (1/2)(P3 - P1)(Q2 + Q1) C) Deadweight loss = (1/2)(P3 - P2)(Q2 - Q1) D) Deadweight loss = (1/2)(P3 - P1)(Q2 - Q1)

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4.The equilibrium price before the tax is imposed is A) $24,and the equilibrium quantity is 70. B) $16,and the equilibrium quantity is 100. C) $10,and the equilibrium quantity is 70. D) $8,and the equilibrium quantity is 100.

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4.The price that buyers effectively pay after the tax is imposed is A) $24. B) $16. C) $14. D) $10.

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4.The price that sellers effectively receive after the tax is imposed is A) $24. B) $16. C) $14. D) $10.

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4.The per-unit burden of the tax on buyers is A) $14. B) $10. C) $8. D) $6.

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4.The per-unit burden of the tax on sellers is A) $14. B) $10. C) $8. D) $6.

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4.The amount of the tax on each unit of the good is A) $14. B) $10. C) $8. D) $6.

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4.The amount of tax revenue received by the government is equal to A) $210. B) $420. C) $980. D) $1,600.

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4.The amount of deadweight loss as a result of the tax is A) $210. B) $420. C) $980. D) $1,600.

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4.The tax results in a loss of consumer surplus that amounts to A) $120. B) $240. C) $560. D) $680.

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4.The tax results in a loss of producer surplus that amounts to A) $90. B) $180. C) $420. D) $510.

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The equilibrium price before the tax is imposed is A) P1. B) P2. C) P3. D) P4.

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The price that buyers effectively pay after the tax is imposed is A) P1. B) P2. C) P3. D) P4.

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The price that sellers effectively receive after the tax is imposed is A) P1. B) P2. C) P3. D) P4.

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The tax is levied on A) buyers only. B) sellers only. C) both buyers and sellers. D) This is impossible to determine from the figure.

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.Consumer surplus before the tax was levied is represented by area A) A. B) A+B+C. C) D+H+F. D) F.

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.Producer surplus before the tax was levied is represented by area A) A. B) A+B+C. C) D+H+F. D) F.

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.After the tax is levied,consumer surplus is represented by area A) A. B) A+B+C. C) D+H+F. D) F.

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.After the tax is levied,producer surplus is represented by area A) A. B) A+B+C. C) D+H+F. D) F.

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The tax causes a reduction in consumer surplus that is represented by area A) A. B) B+C. C) C+H. D) F.

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The tax causes a reduction in producer surplus that is represented by area A) A. B) C+H. C) D+H. D) F.

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The benefit to the government is measured by A) tax revenue and is represented by area A+B. B) tax revenue and is represented by area B+D. C) the net gain in total surplus and is represented by area B+D. D) the net gain in total surplus and is represented by area C+H.

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The total surplus with the tax is represented by area A) C+H. B) A+B+C. C) D+H+F. D) A+B+D+F.

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The loss in total welfare that results from the tax is represented by area A) A+B+D+F. B) A+B+C. C) D+H+F. D) C+H.

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.Without a tax,the equilibrium price and quantity are A) $16 and 300. B) $10 and 600. C) $10 and 300. D) $6 and 300.

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.Without a tax,consumer surplus in this market is A) $1,500. B) $2,400. C) $3,000. D) $3,600.

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.Without a tax,producer surplus in this market is A) $1,500. B) $2,400. C) $3,000. D) $3,600.

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.Without a tax,total surplus in this market is A) $3,000. B) $4,800. C) $6,000. D) $7,200.

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.When the tax is imposed in this market,the price buyers effectively pay is A) $4. B) $6. C) $10. D) $16.

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.When the tax is imposed in this market,buyers effectively pay what amount of the $10 tax? A) $0 B) $4 C) $6 D) $10

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.When the tax is imposed in this market,sellers effectively pay what amount of the $10 tax? A) $0 B) $4 C) $6 D) $10

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.When the tax is imposed in this market,the price sellers effectively receive is A) $4. B) $6. C) $10. D) $16.

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.When the tax is imposed in this market,consumer surplus is A) $600. B) $900. C) $1,500. D) $3,000.

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.When the tax is imposed in this market,producer surplus is A) $450. B) $600. C) $900. D) $1,500.

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.When the tax is placed on this good,the quantity sold A) is 600,and buyers effectively pay $10. B) is 300,and buyers effectively pay $10. C) is 600,and buyers effectively pay $16. D) is 300,and buyers effectively pay $16.

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.When the government imposes the tax in this market,tax revenue is A) $600. B) $900. C) $1,500. D) $3,000.

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.The amount of the tax on each unit of the good is A) $6. B) $8. C) $10. D) $12.

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.Total surplus with the tax in place is A) $1,500. B) $3,600. C) $4,500. D) $6,000.

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.What happens to consumer surplus when the tax is imposed in this market? A) Consumer surplus falls by $3,600. B) Consumer surplus falls by $2,700. C) Consumer surplus falls by $1,800. D) Consumer surplus falls by $900.

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.What happens to producer surplus when the tax is imposed in this market? A) Producer surplus falls by $600. B) Producer surplus falls by $900. C) Producer surplus falls by $1,800. D) Producer surplus falls by $2,100.

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.What happens to total surplus in this market when the tax is imposed? A) Total surplus increases by $1,500. B) Total surplus increases by $3,000. C) Total surplus decreases by $1,500. D) Total surplus decreases by $,3000.

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.The tax results in a deadweight loss that amounts to A) $600. B) $900. C) $1,500. D) $1,800.

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7.Before the tax is imposed,the equilibrium price is A) $16,and the equilibrium quantity is 15. B) $12,and the equilibrium quantity is 15. C) $12,and the equilibrium quantity is 25. D) $8,and the equilibrium quantity is 15.

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7.As a result of the tax,buyers effectively pay A) $16 for each unit of the good,and sellers effectively receive $12 for each unit of the good. B) $16 for each unit of the good,and sellers effectively receive $8 for each unit of the good. C) $12 for each unit of the good,and sellers effectively receive $8 for each unit of the good. D) $14 for each unit of the good,and sellers effectively receive $10 for each unit of the good.

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7.Suppose a 20th unit of the good were sold by a seller to a buyer.Which of the following statements is correct? A) For the 20th unit,the difference between the buyer's value and the seller's cost is less than the tax per unit. B) For the 20th unit,the difference between the buyer's value and the seller's cost is greater than the tax per unit. C) For the 20th unit,the difference between the buyer's value and the seller's cost is equal to the tax per unit. D) It makes sense for the buyer to buy and for the seller to sell the 20th unit,with or without the tax in place.

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7.Which of the following statements summarizes the incidence of the tax? A) For each unit of the good that is sold,buyers bear one-half of the tax burden,and sellers bear one-half of the tax burden. B) For each unit of the good that is sold,buyers bear one-third of the tax burden,and sellers bear two-thirds of the tax burden. C) For each unit of the good that is sold,buyers bear one-fourth of the tax burden,and sellers bear three-fourths of the tax burden. D) For each unit of the good that is sold,buyers bear three-fourths of the tax burden,and sellers bear one-fourth of the tax burden.

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7.Which of the following statements is correct? A) Total surplus before the tax is imposed is $250. B) After the tax is imposed,consumer surplus is 45 percent of its pre-tax value. C) After the tax is imposed,producer surplus is 45 percent of its pre-tax value. D) All of the above are correct.

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7.Which of the following statements is correct? A) Total surplus before the tax is imposed is $45. B) After the tax is imposed,consumer surplus is 25 percent of its pre-tax value. C) After the tax is imposed,producer surplus is 36 percent of its pre-tax value. D) All of the above are correct.

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7.As a result of the tax, A) consumer surplus decreases from $150 to $60. B) producer surplus decreases from $125 to $45. C) the market experiences a deadweight loss of $45. D) All of the above are correct.

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7.As a result of the tax,consumer surplus decreases by A) $65,producer surplus decreases by $85,tax revenue is $120,and deadweight loss is $30. B) $75,producer surplus decreases by $75,tax revenue is $120,and deadweight loss is $30. C) $80,producer surplus decreases by $80,tax revenue is $120,and deadweight loss is $40. D) $120,producer surplus decreases by $120,tax revenue is $200,and deadweight loss is $40.

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7.Which of the following statements is correct? A) The loss of producer surplus that is associated with some sellers dropping out of the market as a result of the tax is $30. B) The loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is $60. C) The loss of consumer surplus caused by this tax exceeds the loss of producer surplus caused by this tax. D) This tax produces $200 in tax revenue for the government.

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7.The deadweight loss associated with this tax amounts to A) $60,and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses. B) $60,and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers. C) $40,and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses. D) $40,and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers.

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8.The tax causes consumer surplus to decrease by the area A) A. B) B+C. C) A+B+C. D) A+B+C+D+F.

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8.After the tax goes into effect,consumer surplus is the area A) A. B) B+C. C) A+B+C. D) A+B+D+J+K.

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8.The tax causes producer surplus to decrease by the area A) D+F. B) D+F+G. C) D+F+J. D) D+F+G+H.

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8.After the tax goes into effect,producer surplus is the area A) D+F+G+H+J. B) D+F+G+H. C) D+F+J. D) J.

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8.The government collects tax revenue that is the area A) L. B) B+D. C) C+F. D) F+G+L.

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8.The decrease in consumer and producer surpluses that is not offset by tax revenue is the area A) C. B) F. C) G. D) C+F.

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8.The deadweight loss of the tax is the area A) B+D. B) C+F. C) A+C+F+J. D) B+C+D+F.

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8.One effect of the tax is to A) reduce consumer surplus from $60 to $24. B) reduce producer surplus from $32 to $8. C) create a deadweight loss of $24. D) All of the above are correct.

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8.One effect of the tax is to A) reduce consumer surplus by $36. B) reduce producer surplus by $24. C) create a deadweight loss of $20. D) All of the above are correct.

Scenario 8-1 Claudia would be willing to pay as much as $100 per week to have her house cleaned.John's opportunity cost of cleaning Claudia's house is $70 per week. -Refer to Scenario 8-1.If Claudia pays John $80 to clean her house,Claudia's consumer surplus is A) $80. B) $30. C) $20. D) $10.

Scenario 8-1 Claudia would be willing to pay as much as $100 per week to have her house cleaned.John's opportunity cost of cleaning Claudia's house is $70 per week. -Refer to Scenario 8-1.If John cleans Claudia's house for $80,John's producer surplus is A) $80. B) $30. C) $20. D) $10.

Scenario 8-1 Claudia would be willing to pay as much as $100 per week to have her house cleaned.John's opportunity cost of cleaning Claudia's house is $70 per week. -Refer to Scenario 8-1.Assume Claudia is required to pay a tax of $40 when she hires someone to clean her house for a week.Which of the following is correct? A) Claudia will now clean her own house. B) John will continue to clean Claudia's house,but his producer surplus will decline. C) Total economic welfare (consumer surplus plus producer surplus plus tax revenue)will increase. D) Claudia will continue to hire John to clean her house,but her consumer surplus will decline.

Scenario 8-1 Claudia would be willing to pay as much as $100 per week to have her house cleaned.John's opportunity cost of cleaning Claudia's house is $70 per week. -Refer to Scenario 8-1.Assume Claudia is required to pay a tax of $15 when she hires someone to clean her house.Which of the following is true? A) Claudia will continue to hire John to clean her house,but her consumer surplus will decline. B) John will continue to clean Claudia's house,but his producer surplus will decline. C) Total economic welfare (consumer surplus plus producer surplus plus tax revenue)will decrease. D) All of the above are correct.

Scenario 8-2 Tom mows Stephanie's lawn for $25.Tom's opportunity cost of mowing Stephanie's lawn is $20,and Stephanie's willingness to pay Tom to mow her lawn is $28. -Refer to Scenario 8-2.If Stephanie hires Tom to mow her lawn,Stephanie's consumer surplus is A) $3. B) $5. C) $8. D) $25.

Scenario 8-2 Tom mows Stephanie's lawn for $25.Tom's opportunity cost of mowing Stephanie's lawn is $20,and Stephanie's willingness to pay Tom to mow her lawn is $28. -Refer to Scenario 8-2.If Stephanie hires Tom to mow her lawn,Tom's producer surplus is A) $2. B) $3. C) $5. D) $25.

Scenario 8-2 Tom mows Stephanie's lawn for $25.Tom's opportunity cost of mowing Stephanie's lawn is $20,and Stephanie's willingness to pay Tom to mow her lawn is $28. -Refer to Scenario 8-2.Assume that Tom is required to pay a tax of $3 each time he mows a lawn.Which of the following results is most likely? A) Stephanie now will decide to mow her own lawn,and Tom will decide it is no longer in his interest to mow Stephanie's lawn. B) Stephanie is willing to pay Tom to mow her lawn,but Tom will decline her offer. C) Tom is willing to mow Stephanie's lawn,but Stephanie will decide to mow her own lawn. D) Tom and Stephanie still can engage in a mutually-agreeable trade.

Scenario 8-2 Tom mows Stephanie's lawn for $25.Tom's opportunity cost of mowing Stephanie's lawn is $20,and Stephanie's willingness to pay Tom to mow her lawn is $28. -Refer to Scenario 8-2.Assume Tom is required to pay a tax of $10 each time he mows a lawn.Which of the following results is most likely? A) Stephanie now will decide to mow her own lawn,and Tom will decide it is no longer in his interest to mow Stephanie's lawn. B) Stephanie still is willing to pay Tom to mow her lawn,but Tom will decline her offer. C) Tom still is willing to mow Stephanie's lawn,but Stephanie will decide to mow her own lawn. D) Tom and Stephanie still can engage in a mutually-agreeable trade.

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 $800 and decreases producer surplus by $700.The deadweight loss from the tax is A) $500. B) $1,000. C) $1,500. D) $2,000.

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.

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 A) 2,000 to 1,500. B) 2,400 to 2,000. C) 2,600 to 2,000. D) 3,000 to 2,400.

Suppose a tax of $5 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 $10,000 and decreases producer surplus by $15,000.The deadweight loss of the tax is $2,500.The tax decreased the equilibrium quantity of the good from A) 6,500 to 5,500. B) 5,500 to 4,500. C) 5,000 to 3,000. D) 6,000 to 4,000.

A tax of $0.25 is imposed on each bag of potato chips that is sold.The tax decreases producer surplus by $600 per day,generates tax revenue of $1,220 per day,and decreases the equilibrium quantity of potato chips by 120 bags per day.The tax A) decreases consumer surplus by $645 per day. B) decreases the equilibrium quantity from 6,000 bags per day to 5,880 bags per day. C) decreases total surplus from $3,000 to $1,800 per day. D) creates a deadweight loss of $15 per day.

David walks Carolyn's dog once a day for $50 per week.Carolyn values this service at $60 per week,while the opportunity cost of David's time is $30 per week.The government places a tax of $35 per week on dog walkers.Before the tax,what is the total surplus? A) $60 B) $50 C) $30 D) $25

David walks Carolyn's dog once a day for $50 per week.Carolyn values this service at $60 per week,while the opportunity cost of David's time is $30 per week.The government places a tax of $35 per week on dog walkers.After the tax,what is the loss in total surplus? A) $50 B) $30 C) $25 D) $0

David walks Carolyn's dog once a day for $50 per week.Carolyn values this service at $60 per week,while the opportunity cost of David's time is $30 per week.The government places a tax of $35 per week on dog walkers.After the tax,what is the total surplus? A) $50 B) $30 C) $25 D) $0

Diana is a personal trainer whose client Charles pays $80 per hour-long session.Charles values this service at $100 per hour,while the opportunity cost of Diana's time is $75 per hour.The government places a tax of $10 per hour on personal trainers.Before the tax,what is the total surplus? A) $25 B) $20 C) $5 D) $0

Diana is a personal trainer whose client Charles pays $80 per hour-long session.Charles values this service at $100 per hour,while the opportunity cost of Diana's time is $75 per hour.The government places a tax of $10 per hour on personal trainers.After the tax,what is likely to happen in the market for personal training? A) Diana and Charles will agree to a new price somewhere between $85 and $100. B) Diana and Charles will agree to a new price somewhere between $70 and $110. C) Diana will no longer offer personal training services to Charles because she must charge more than $100 in order to cover her opportunity costs and pay the tax. D) The price will remain at $80,and Diana will pay the $10 tax.

The price elasticities of supply and demand affect A) both the size of the deadweight loss from a tax and the tax incidence. B) the size of the deadweight loss from a tax but not the tax incidence. C) the tax incidence but not the size of the deadweight loss from a tax. D) neither the size of the deadweight loss from a tax nor the tax incidence.

The size of the deadweight loss generated from a tax is affected by the A) elasticities of both supply and demand. B) elasticity of demand only. C) elasticity of supply only. D) total revenue collected by the government.

The size of a tax and the deadweight loss that results from the tax are A) positively related. B) negatively related. C) independent of each other. D) equal to each other.

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.

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 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.

When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic, A) buyers of the good will bear most of the burden of the tax. B) sellers of the good will bear most of the burden of the tax. C) buyers and sellers will each bear 50 percent of the burden of the tax. D) both equilibrium price and quantity will increase.

When a tax is imposed on a good for which both demand and supply are very elastic, A) sellers effectively pay the majority of the tax. B) buyers effectively pay the majority of the tax. C) the tax burden is equally divided between buyers and sellers. D) None of the above is correct;further information would be required to determine how the burden of the tax is distributed between buyers and sellers.

Which of the following statements is correct regarding the imposition of a tax on gasoline? A) The incidence of the tax depends upon whether the buyers or the sellers are required to remit tax payments to the government. B) The incidence of the tax depends upon the price elasticities of demand and supply. C) The amount of tax revenue raised by the tax depends upon whether the buyers or the sellers are required to remit tax payments to the government. D) The amount of tax revenue raised by the tax does not depend upon the amount of the tax per unit.

When a good is taxed,the burden of the tax A) falls more heavily on the side of the market that is more elastic. B) falls more heavily on the side of the market that is more inelastic. C) falls more heavily on the side of the market that is closer to unit elastic. D) is distributed independently of relative elasticities of supply and demand.

The deadweight loss from a $1 tax will be smallest in a market with A) inelastic supply and elastic demand. B) inelastic supply and inelastic demand. C) elastic supply and elastic demand. D) elastic supply and inelastic demand.

The deadweight loss from a $2 tax will be smallest 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.

The deadweight loss from a $3 tax will be largest in a market with A) inelastic supply and elastic demand. B) inelastic supply and inelastic demand. C) elastic supply and elastic demand. D) elastic supply and inelastic demand.

Suppose a tax of $1 per unit is imposed on a good.The more elastic the supply of the good,other things equal,the A) smaller is the response of quantity supplied to the tax. B) larger is the tax burden on sellers relative to the tax burden on buyers. C) larger is the deadweight loss of the tax. D) All of the above are correct.

Suppose a tax of $1 per unit is imposed on a good.The more elastic the demand for the good,other things equal, A) the larger is the decrease in quantity demanded as a result of the tax. B) the smaller is the tax burden on buyers relative to the tax burden on sellers. C) the larger is the deadweight loss of the tax. D) All of the above are correct.

Table 8-1 -Refer to Table 8-1.Suppose the government is considering levying a tax in one or more of the markets described in the table.Which of the markets will allow the government to minimize the deadweight loss(es)from the tax? A) market A only B) markets A and C only C) markets B and D only D) market C only

Table 8-1 -Refer to Table 8-1.Suppose the government is considering levying a tax in one or more of the markets described in the table.Which of the markets will maximize the deadweight loss(es)from the tax? A) market B only B) markets A and C only C) markets B and D only D) market D only

Figure 8-9 -Refer to Figure 8-9.Which of the following combinations will minimize the deadweight loss from a tax? A) supply 1 and demand 1 B) supply 2 and demand 2 C) supply 1 and demand 2 D) supply 2 and demand 1

Figure 8-9 -Refer to Figure 8-9.Which of the following combinations will maximize the deadweight loss from a tax? A) supply 1 and demand 1 B) supply 2 and demand 2 C) supply 1 and demand 2 D) supply 2 and demand 1

Figure 8-9 -Refer to Figure 8-9.Which of the following statements is correct? A) Supply 1 is more elastic than supply 2. B) Demand 2 is more elastic than demand 1. C) Demand 1 is more elastic than supply 1. D) All of the above are correct.

Figure 8-9 -Refer to Figure 8-9.Which of the following statements is not correct? A) Supply 2 is more elastic than supply 1. B) Demand 2 is more elastic than demand 1. C) Supply 1 is more inelastic than supply 2. D) Demand 2 is more inelastic than supply 2.

Suppose that the government imposes a tax on dairy products.The deadweight loss from this tax will likely be greater in the A) first year after it is imposed than in the fifth year after it is imposed because demand and supply will be more elastic in the first year than in the fifth year. B) first year after it is imposed than in the fifth year after it is imposed because demand and supply will be less elastic in the first year than in the fifth year. C) fifth year after it is imposed than in the first year after it is imposed because demand and supply will be more elastic in the first year than in the fifth year. D) fifth year after it is imposed than in the first year after it is imposed because demand and supply will be less elastic in the first year than in the fifth year.

The demand for milk is more elastic than the demand for water.Suppose the government levies an equivalent tax on milk and water.The deadweight loss would be larger in the market for A) milk than water because the quantity of milk would fall by more than the quantity of water. B) milk than water because the quantity of water would fall by more than the quantity of milk. C) water than milk because the quantity of milk would fall by more than the quantity of water. D) water than milk because the quantity of water would fall by more than the quantity of milk.

The deadweight loss from a tax A) does not vary in amount when the price elasticity of demand changes. B) does not vary in amount when the amount of the tax per unit changes. C) is larger,the larger is the amount of the tax per unit. D) is smaller,the larger is the amount of the tax per unit.

Which of the following statements is correct regarding a tax on a good and the resulting deadweight loss? A) The greater are the price elasticities of supply and demand,the greater is the deadweight loss. B) The greater is the price elasticity of supply and the smaller is the price elasticity of demand,the greater is the deadweight loss. C) The smaller are the decreases in quantity demanded and quantity supplied,the greater the deadweight loss. D) The smaller is the wedge between the effective price to sellers and the effective price to buyers,the greater is the deadweight loss.

The amount of deadweight loss that results from a tax of a given size is determined by A) whether the tax is levied on buyers or sellers. B) the number of buyers in the market relative to the number of sellers. C) the price elasticities of demand and supply. D) the ratio of the tax per unit to the effective price received by sellers.

The amount of deadweight loss from a tax depends upon the A) price elasticity of demand. B) price elasticity of supply. C) amount of the tax per unit. D) All of the above are correct.

Assume the supply curve for cigars is a typical,upward-sloping straight line,and the demand curve for cigars is a typical,downward-sloping straight line.Suppose the equilibrium quantity in the market for cigars is 1,000 per month when there is no tax.Then a tax of $0.50 per cigar is imposed.The effective price paid by buyers increases from $1.50 to $1.90 and the effective price received by sellers falls from $1.50 to $1.40.The government's tax revenue amounts to $475 per month.Which of the following statements is correct? A) After the tax is imposed,the equilibrium quantity of cigars is 900 per month. B) The demand for cigars is more elastic than the supply of cigars. C) The deadweight loss of the tax is $12.50. D) The tax causes a decrease in consumer surplus of $380.

Assume the supply curve for cigars is a typical,upward-sloping straight line,and the demand curve for cigars is a typical,downward-sloping straight line.Suppose the equilibrium quantity in the market for cigars is 1,000 per month when there is no tax.Then a tax of $0.50 per cigar is imposed.The effective price paid by buyers increases from $1.50 to $1.90 and the effective price received by sellers falls from $1.50 to $1.40.The government's tax revenue amounts to $475 per month.Which of the following statements is correct? A) The demand for cigars is less elastic than the supply of cigars. B) The tax causes a decrease in consumer surplus of $390 and a decrease in producer surplus of $97.50. C) The deadweight loss of the tax is $12.50. D) All of the above are correct.

Suppose that policymakers are considering placing a tax on either of two markets.In Market A,the tax will have a significant effect on the price consumers pay,but it will not affect equilibrium quantity very much.In Market B,the same tax will have only a small effect on the price consumers pay,but it will have a large effect on the equilibrium quantity.Other factors are held constant.In which market will the tax have a larger deadweight loss? A) Market A B) Market B C) The deadweight loss will be the same in both markets. D) There is not enough information to answer the question.

Consider a good to which a per-unit tax applies.The greater the price elasticities of demand and supply for the good,the A) smaller the deadweight loss from the tax. B) greater the deadweight loss from the tax. C) more efficient is the tax. D) more equitable is the distribution of the tax burden between buyers and sellers.

Consider a good to which a per-unit tax applies.The size of the deadweight that results from the tax is smaller,the A) larger is the price elasticity of demand. B) smaller is the price elasticity of supply. C) larger is the amount of the tax. D) All of the above are correct.

Consider a good to which a per-unit tax applies.The size of the deadweight that results from the tax is smaller,the A) less elastic is the demand for the good. B) less elastic is the supply of the good. C) smaller is the amount of the tax. D) All of the above are correct.

Assume the price of gasoline is $2.00 per gallon,and the equilibrium quantity of gasoline is 10 million gallons per day with no tax on gasoline.Starting from this initial situation,which of the following scenarios would result in the largest deadweight loss? A) The price elasticity of demand for gasoline is 0.1;the price elasticity of supply for gasoline is 0.6;and the gasoline tax amounts to $0.20 per gallon. B) The price elasticity of demand for gasoline is 0.1;the price elasticity of supply for gasoline is 0.4;and the gasoline tax amounts to $0.20 per gallon. C) The price elasticity of demand for gasoline is 0.2;the price elasticity of supply for gasoline is 0.6;and the gasoline tax amounts to $0.30 per gallon. D) There is insufficient information to make this determination.

Assume the price of gasoline is $2.40 per gallon,and the equilibrium quantity of gasoline is 12 million gallons per day with no tax on gasoline.Starting from this initial situation,which of the following scenarios would result in the largest deadweight loss? A) A 10 percent increase in the price of gasoline reduces the quantity of gasoline demanded by 2 percent and it increases the quantity of gasoline supplied by 5 percent;and the tax on gasoline amounts to $0.40 per gallon. B) A 10 percent increase in the price of gasoline reduces the quantity of gasoline demanded by 2 percent and it increases the quantity of gasoline supplied by 7 percent;and the tax on gasoline amounts to $0.40 per gallon. C) A 10 percent increase in the price of gasoline reduces the quantity of gasoline demanded by 1 percent and it increases the quantity of gasoline supplied by 8 percent;and the tax on gasoline amounts to $0.35 per gallon. D) There is insufficient information to make this determination.

Other things equal,the deadweight loss of a tax A) decreases as the size of the tax increases. B) increases as the size of the tax increases,but the increase in the deadweight loss is less rapid than the increase in the size of the tax. C) increases as the size of the tax increases,and the increase in the deadweight loss is more rapid than the increase in the size of the tax. D) increases as the price elasticities of demand and/or supply increase,but the deadweight loss does not change as the size of the tax increases.

Economists generally agree that the most important tax in the U.S.economy is the A) income tax. B) tax on labor. C) inheritance or death tax. D) tax on corporate profits.

Economists generally agree that the most important tax in the U.S.economy is the A) investment tax. B) sales tax. C) property tax. D) labor tax.

Which of the following is a tax on labor? A) Medicare tax B) Social Security tax C) federal income tax D) All of the above are labor taxes.

Which of the following is a tax on labor? A) Medicare tax B) inheritance tax C) sales tax D) All of the above are labor taxes.

Labor taxes may distort labor markets greatly if A) labor supply is highly inelastic. B) many workers choose to work 40 hours per week regardless of their earnings. C) the number of hours many part-time workers want to work is very sensitive to the wage rate. D) "underground" workers do not respond to changes in the wages of legal jobs because they prefer not to pay taxes.

Economists disagree on whether labor taxes cause small or large deadweight losses.This disagreement arises primarily because economists hold different views about A) the size of labor taxes. B) the importance of labor taxes imposed by the federal government relative to the importance of labor taxes imposed by the various states. C) the elasticity of labor supply. D) the elasticity of labor demand.

Taxes on labor have the effect of encouraging A) workers to work more hours. B) the elderly to postpone retirement. C) second earners within a family to take a job. D) unscrupulous people to take part in the underground economy.

Concerning the labor market and taxes on labor,economists disagree about A) the size of the tax on labor. B) the size of the deadweight loss of the tax on labor. C) whether or not a tax on labor places a wedge between the wage that firms pay and the wage that workers receive. D) All of the above are correct.

The Social Security tax is a tax on A) capital. B) labor. C) consumption expenditures. D) earnings during retirement.

If the labor supply curve is nearly vertical,a tax on labor A) has a large deadweight loss. B) raises a small amount of tax revenue. C) has little impact on the amount of work that workers are willing to do. D) results in a large tax burden on the firms that hire labor.

If the labor supply curve is very elastic,a tax on labor A) has a large deadweight loss. B) raises enough tax revenue to offset the loss in welfare. C) has a relatively small impact on the number of hours that workers choose to work. D) results in a large tax burden on the firms that hire labor.

The marginal tax rate on labor income for many workers in the United States is almost A) 30 percent. B) 40 percent. C) 50 percent. D) 65 percent.

The more freedom young mothers have to work outside the home,the A) more elastic the supply of labor will be. B) less elastic the supply of labor will be. C) more vertical the labor supply curve will be. D) smaller is the decrease in employment that will result from a tax on labor.

The more freedom people are given to choose the date of their retirement,the A) more elastic is the supply of labor. B) less elastic is the supply of labor. C) steeper is the labor supply curve. D) smaller is the decrease in employment that will result from a tax on labor.

Taxes on labor encourage all of the following except A) older workers to take early retirement from the labor force. B) mothers to stay at home rather than work in the labor force. C) workers to work overtime. D) people to be paid "under the table."

Taxes on labor encourage which of the following? A) labor demand to be more inelastic B) mothers to stay at home rather than work in the labor force C) workers to work overtime D) fathers to take on second jobs

As more people become self-employed,which allows them to determine how many hours they work per week,we would expect the deadweight loss from the Social Security tax to A) increase,and the revenue generated from the tax to increase. B) increase,and the revenue generated from the tax to decrease. C) decrease,and the revenue generated from the tax to increase. D) decrease,and the revenue generated from the tax to decrease.

A decrease 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.

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.

If the size of a tax increases,tax revenue A) increases. B) decreases. C) remains the same. D) may increase,decrease,or remain the same.

Suppose the tax on liquor is increased so that the tax goes from being a "medium" tax to being a "large" tax.As a result,it is likely that A) tax revenue increases,and the deadweight loss increases. B) tax revenue increases,and the deadweight loss decreases. C) tax revenue decreases,and the deadweight loss increases. D) tax revenue decreases,and the deadweight loss decreases.

Figure 8-10 The vertical distance between points A and B represents the original tax. -Refer to Figure 8-10.If the government changed the per-unit tax from $5.00 to $2.50,then the price paid by buyers would be $7.50,the price received by sellers would be $5,and the quantity sold in the market would be 1.5 units.Compared to the original tax rate,this lower tax rate would A) increase government revenue and increase the deadweight loss from the tax. B) increase government revenue and decrease the deadweight loss from the tax. C) decrease government revenue and increase the deadweight loss from the tax. D) decrease government revenue and decrease the deadweight loss from the tax.

Figure 8-10 The vertical distance between points A and B represents the original tax. -Refer to Figure 8-10.If the government changed the per-unit tax from $5.00 to $7.50,then the price paid by buyers would be $10.50,the price received by sellers would be $3,and the quantity sold in the market would be 0.5 units.Compared to the original tax rate,this higher tax rate would A) increase government revenue and increase the deadweight loss from the tax. B) increase government revenue and decrease the deadweight loss from the tax. C) decrease government revenue and increase the deadweight loss from the tax. D) decrease government revenue and decrease the deadweight loss from the tax.

Figure 8-10 The vertical distance between points A and B represents the original tax. -Refer to Figure 8-10.The original tax can be represented by the vertical distance AB.Suppose the government is deciding whether to lower the tax to CD or raise it to FG.Which of the following statements is correct? A) Compared to the original tax,the larger tax will decrease both tax revenue and deadweight loss. B) Compared to the original tax,the smaller tax will increase both tax revenue and deadweight loss. C) Compared to the original tax,the larger tax will decrease tax revenue and increase deadweight loss. D) Both a and b are correct.

Figure 8-10 The vertical distance between points A and B represents the original tax. -Refer to Figure 8-10.The original tax can be represented by the vertical distance AB.Suppose the government is deciding whether to lower the tax to CD or raise it to FG.Which of the following statements is not correct? A) Compared to the original tax,the larger tax will increase tax revenue. B) Compared to the original tax,the smaller tax will decrease deadweight loss. C) Compared to the original tax,the smaller tax will decrease tax revenue. D) Compared to the original tax,the larger tax will increase deadweight loss.

As the tax on a good increases from $1 per unit to $2 per unit to $3 per unit and so on,the A) tax revenue increases at first,but it eventually peaks and then decreases. B) deadweight loss increases at first,but it eventually peaks and then decreases. C) tax revenue always increases,and the deadweight loss always increases. D) tax revenue always decreases,and the deadweight loss always increases.

Which of the following ideas is the most plausible? A) Tax revenue is more likely to increase when a low tax rate is increased than when a high tax rate is increased. B) Tax revenue is less likely to increase when a low tax rate is increased than when a high tax rate is increased. C) Tax revenue is likely to increase by the same amount when a low tax rate is increased and when a high tax rate is increased. D) Decreasing a tax rate can never increase tax revenue.

Which of the following statements is true for markets in which the demand curve slopes downward and the supply curve slopes upward? A) As the size of the tax increases,tax revenue continually rises and deadweight loss continually falls. B) As the size of the tax increases,tax revenue and deadweight loss rise initially,but both eventually begin to fall. C) As the size of the tax increases,tax revenue rises initially,but it eventually begins to fall;deadweight loss continually rises. D) As the size of the tax increases,tax revenue rises initially,but it eventually begins to fall;deadweight loss falls initially,but eventually it begins to rise.

In which of the following cases is it most likely that an increase in the size of a tax will decrease tax revenue? A) The price elasticity of demand is small,and the price elasticity of supply is large. B) The price elasticity of demand is large,and the price elasticity of supply is small. C) The price elasticity of demand and the price elasticity of supply are both small. D) The price elasticity of demand and the price elasticity of supply are both large.

Which of the following statements correctly describes the relationship between the size of the deadweight loss and the amount of tax revenue as the size of a tax increases from a small tax to a medium tax and finally to a large tax? A) Both the size of the deadweight loss and tax revenue increase. B) The size of the deadweight loss increases,but the tax revenue decreases. C) The size of the deadweight loss increases,but the tax revenue first increases,then decreases. D) Both the size of the deadweight loss and tax revenue decrease.

Suppose the government increases the size of a tax by 25 percent.The deadweight loss from that tax A) increases by 25 percent. B) increases by more than 25 percent. C) increases but by less than 25 percent. D) decreases by 25 percent.