Question 1

Taxing goods with very inelastic supply generates less deadweight loss than taxing goods with very elastic supply because

Accepted Answer

Taxing goods with very inelastic supply results in a smaller change in producer behavior because producers cannot easily change the quantity they supply in response to the tax. This leads to less distortion in the market and, consequently, a smaller deadweight loss compared to taxing goods with very elastic supply, where producers can more easily adjust their behavior, leading to greater market distortions and a larger deadweight loss.

Question 2

An annual subscription for ECONO! magazine costs $26.If Lauren would be willing to pay up to $32,Boris would be willing to pay up to $29,Yonnie would be willing to pay up to $27,and Edette would pay no more than $23,what is the consumer surplus for this group of economics enthusiasts? Explain how the number was obtained.

Accepted Answer

The answer of An annual subscription for ECONO! magazine costs...

Question 3

If a tax is imposed on a good with a perfectly elastic supply,the burden of the tax will be borne

Accepted Answer

When supply is perfectly elastic, producers can sell all they want at a certain price. If a tax is imposed, they will not accept a lower price, so the entire tax burden falls on consumers, as they will have to pay the tax in addition to the market price.

Question 4

A good with a ________ supply generates no deadweight loss when taxed.

Accepted Answer

A good with a perfectly inelastic supply means that the quantity supplied does not change regardless of changes in price, thus there is no deadweight loss when taxed.

Question 5

Use a figure with intersecting supply and demand curves to explain how a change in producer's direct costs (such as manufacturing and transport expenses)affects social welfare.

Accepted Answer

The answer of Use a figure with intersecting supply and...

Question 6

A good is selling at equilibrium price P_E and equilibrium quantity Q_E.Explain why the social welfare ( = total surplus)would not be increased by raising the quantity supplied and consumed,above Q_E.

Accepted Answer

The answer of A good is selling at equilibrium price...

Question 7

At very low tax rates________ is much larger than________.

Accepted Answer

At very low tax rates, tax revenue is much larger than deadweight loss because the economic activities are not significantly deterred by the tax, leading to relatively small efficiency losses compared to the revenue generated.

Question 8

Producers will lose no producer surplus due to a tax if supply in their market is perfectly elastic because

Accepted Answer

When supply is perfectly elastic, producers can easily adjust their production in response to changes in market conditions, including taxes. This means they can avoid losing producer surplus by altering their behavior, such as increasing efficiency or reducing costs, to offset the impact of the tax.

Question 9

Use a figure with intersecting supply and demand curves to explain why social welfare is maximized when the market price is the equilibrium price.

Accepted Answer

The answer of Use a figure with intersecting supply and...

Question 10

How successful would a $1 excise tax on each Little Caesar's pizza be in generating revenue if Little Caesar's is the only pizza chain that is taxed?

Accepted Answer

Since there are other pizza chains available, the demand for Little Caesar's pizza is relatively elastic, which means that consumers can easily switch to other pizza options if the price goes up due to the excise tax. As a result, the tax revenue generated will be small as compared to if the demand were inelastic.

Question 11

The benefit to society from the imposition of a tax is the

Accepted Answer

The benefit to society from the imposition of a tax is the tax revenue collected, which can be used to fund public goods and services, social programs, or reduce the budget deficit. While taxes can result in lost consumer and producer surplus and a deadweight loss, the tax revenue can still provide a net benefit to society. Overall, option C is the best choice as it directly addresses the question of societal benefit.

Question 12

As a tax rate grows larger and larger,eventually

Accepted Answer

As tax rates increase, the resulting deadweight loss (the loss of economic activity due to the tax) can eventually become larger than the tax revenue collected. This occurs because as tax rates increase, individuals and businesses may decrease their economic activity or seek out ways to avoid the tax, resulting in less overall economic output and less revenue for the government.

Question 13

Use a figure with intersecting supply and demand curves to explain how a change in consumer incomes affects social welfare.

Accepted Answer

The answer of Use a figure with intersecting supply and...

Question 14

"For any good,the consumer surplus should be roughly zero,because although there are some consumers who consider the good a bargain at the market price,there are others who consider the price too high and the good not worth the price." Explain why this statement is incorrect.

Accepted Answer

The answer of "For any good,the consumer surplus should be...

Question 15

The luxury tax of 1990 produced far less tax revenue than projected because

Accepted Answer

The demand for luxury goods is highly elastic, meaning consumers are sensitive to price changes. When the luxury tax was imposed, it likely led to a significant decrease in the quantity of luxury goods purchased, thus generating less revenue than expected.

Question 16

Explain the concept of a producer's willingness to sell and the two factors that go into it.

Accepted Answer

The answer of Explain the concept of a producer's willingness...

Question 17

In a small town,the market price for a day's worth of yard work is $85.If Artie would be willing to do the work for as little as $75,Belinda would do it for as little as $78,Corazon would do so for as little as $81,and Darius would only do yard work for $88,what is the producer surplus for this group of workers on a given day when everyone who wants to work does so? Explain how the number was obtained.

Accepted Answer

The answer of In a small town,the market price for...

Question 18

Draw a set of supply and demand curves and explain,with reference to the graph,why the producer surplus could be "described as the total producer gain."

Accepted Answer

The answer of Draw a set of supply and demand...

Question 19

Draw a set of supply and demand curves and explain,with reference to the graph,why the consumer surplus could be described as the "total consumer gain."

Accepted Answer

The answer of Draw a set of supply and demand...

Question 20

Taxing goods with very elastic supply generates more deadweight loss than taxing goods with very inelastic supply because

Accepted Answer

Taxing goods with very elastic supply leads to a greater change in producer behavior because producers are more responsive to changes in price. When supply is elastic, even a small tax can lead to a significant reduction in the quantity supplied, creating a larger deadweight loss compared to goods with inelastic supply, where producers are less responsive to price changes.

Quiz 5: Market Outcomes and Tax Incidence

Taxing goods with very inelastic supply generates less deadweight loss than taxing goods with very elastic supply because

If a tax is imposed on a good with a perfectly elastic supply,the burden of the tax will be borne

A good with a ________ supply generates no deadweight loss when taxed.

Use a figure with intersecting supply and demand curves to explain how a change in producer's direct costs (such as manufacturing and transport expenses)affects social welfare.

A good is selling at equilibrium price P_E and equilibrium quantity Q_E.Explain why the social welfare ( = total surplus)would not be increased by raising the quantity supplied and consumed,above Q_E.

At very low tax rates is much larger than.

Producers will lose no producer surplus due to a tax if supply in their market is perfectly elastic because

Use a figure with intersecting supply and demand curves to explain why social welfare is maximized when the market price is the equilibrium price.

How successful would a $1 excise tax on each Little Caesar's pizza be in generating revenue if Little Caesar's is the only pizza chain that is taxed?

The benefit to society from the imposition of a tax is the

As a tax rate grows larger and larger,eventually

Use a figure with intersecting supply and demand curves to explain how a change in consumer incomes affects social welfare.

"For any good,the consumer surplus should be roughly zero,because although there are some consumers who consider the good a bargain at the market price,there are others who consider the price too high and the good not worth the price." Explain why this statement is incorrect.

The luxury tax of 1990 produced far less tax revenue than projected because

Explain the concept of a producer's willingness to sell and the two factors that go into it.

Draw a set of supply and demand curves and explain,with reference to the graph,why the producer surplus could be "described as the total producer gain."

Draw a set of supply and demand curves and explain,with reference to the graph,why the consumer surplus could be described as the "total consumer gain."

Taxing goods with very elastic supply generates more deadweight loss than taxing goods with very inelastic supply because

Quiz 5: Market Outcomes and Tax Incidence

Taxing goods with very inelastic supply generates less deadweight loss than taxing goods with very elastic supply because

If a tax is imposed on a good with a perfectly elastic supply,the burden of the tax will be borne

A good with a ________ supply generates no deadweight loss when taxed.

Use a figure with intersecting supply and demand curves to explain how a change in producer's direct costs (such as manufacturing and transport expenses)affects social welfare.

A good is selling at equilibrium price PE and equilibrium quantity QE.Explain why the social welfare ( = total surplus)would not be increased by raising the quantity supplied and consumed,above QE.

At very low tax rates________ is much larger than________.

Producers will lose no producer surplus due to a tax if supply in their market is perfectly elastic because

Use a figure with intersecting supply and demand curves to explain why social welfare is maximized when the market price is the equilibrium price.

How successful would a $1 excise tax on each Little Caesar's pizza be in generating revenue if Little Caesar's is the only pizza chain that is taxed?

The benefit to society from the imposition of a tax is the

As a tax rate grows larger and larger,eventually

Use a figure with intersecting supply and demand curves to explain how a change in consumer incomes affects social welfare.

"For any good,the consumer surplus should be roughly zero,because although there are some consumers who consider the good a bargain at the market price,there are others who consider the price too high and the good not worth the price." Explain why this statement is incorrect.

The luxury tax of 1990 produced far less tax revenue than projected because

Explain the concept of a producer's willingness to sell and the two factors that go into it.

Draw a set of supply and demand curves and explain,with reference to the graph,why the producer surplus could be "described as the total producer gain."

Draw a set of supply and demand curves and explain,with reference to the graph,why the consumer surplus could be described as the "total consumer gain."

Taxing goods with very elastic supply generates more deadweight loss than taxing goods with very inelastic supply because

A good is selling at equilibrium price P_E and equilibrium quantity Q_E.Explain why the social welfare ( = total surplus)would not be increased by raising the quantity supplied and consumed,above Q_E.

At very low tax rates is much larger than.