Q&A Hero

Q: In the long run, both supply and demand tend to become more elastic. This suggests that, in the long run, the a. revenue generated from the tax will increase. b. deadweight loss from a tax will be less than it is in the short run. c. deadweight loss from a tax will be zero. d. deadweight loss from a tax will be greater than it is in the short run. e. government will likely reduce tax rates.

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Q: Assume that a $0.10/pound tax on apples raises $100 million in revenue but causes a $125 million loss of consumer and producer surplus. From this information, we know that the deadweight loss from the tax isa. $225 million. b. $100 million. c. $125 million.d. $25 million.e. $1.25 million.

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Q: The deadweight loss from a tax is likely to be greater with a good that hasa. few complements. b. many substitutes. c. few substitutes.d. an inelastic demand.e. an inelastic supply.

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Q: A tax creates no deadweight loss only when either supply or demand isa. somewhat elastic. b. perfectly elastic. c. perfectly inelastic.d. increasing.e. decreasing.

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Q: The deadweight loss from a tax is likely to be less with a good that hasa. few complements. b. many substitutes. c. few substitutes.d. an elastic demand.e. an elastic supply.

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Q: The net cost to society from the imposition of a tax is also known asa. tax revenue. b. consumer surplus. c. producer surplus.d. deadweight loss.e. social welfare.

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Q: If the government wants to raise taxes while generating the least amount of deadweight loss, it should raise taxes on a good with aa. very elastic demand. b. very elastic supply. c. somewhat elastic supply.d. somewhat elastic demand.e. perfectly inelastic demand.

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Q: The cost to society created by distortions in the market as a result of a tax is also known asa. social distortion. b. fiscal externality. c. deadweight loss.d. fiduciary imbalance.e. budget deficit.

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Q: Deadweight loss is defined as a. the cost to society created by distortions in the market. b. how much revenue a tax generates. c. who pays a tax out of pocket. d. the dollar cost of a tax per unit of sale. e. the benefit from additional government spending.

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Q: Assume that a $0.25/gallon tax on milk causes a loss of $250 million in consumer and producer surplus and creates a deadweight loss of $45 million. From this information, we know that the tax revenue from the tax isa. $250 million. b. $45 million. c. $205 million.d. $295 million.e. $75 million.

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Q: The per-unit dollar amount of a tax times the quantity sold after the tax is imposed equalsa. consumer surplus. b. deadweight loss. c. the tax revenue.d. producer surplus.e. social welfare.

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Q: The revenue generated from a tax equals the a. amount of the good sold times the original price of the good. b. amount of the tax times the quantity sold after the tax is imposed. c. total social welfare lost as a result of the tax. d. deadweight loss from the tax. e. total consumer and producer surplus before the tax.

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Q: For any type of tax the government imposes a. supply plus demand equals market price. b. tax revenue plus deadweight loss equals total lost social welfare. c. tax revenue plus market price equals deadweight loss. d. deadweight loss plus economic distortion equals tax revenue. e. total lost social welfare plus tax revenue equals deadweight loss.

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Q: When a tax is imposed, consumer surplus and producer surplus are reallocated to a. social welfare. b. tax revenue and deadweight loss. c. tax revenue. d. deadweight loss. e. government spending on public services.

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Q: When a tax is imposed on some good, the lost consumer surplus and producer surplus both typically end up as a. additional revenues for firms. b. lower prices for consumers. c. more units of output bought and sold. d. increased social welfare. e. tax revenue and deadweight loss.

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Q: Taxes almost always cause producer prices to decrease. How much they decrease depends on a. the elasticities of supply and demand. b. the amount of the tax. c. who is legally obligated to pay the tax. d. who pays the tax out of pocket. e. how often the government collects the tax.

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Q: Taxes will almost always cause consumer prices to increase. How much they increase depends on a. how often the government collects the tax. b. the amount of the tax. c. who pays the tax out of pocket. d. who is legally obligated to pay the tax. e. the elasticities of supply and demand.

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Q: Excise taxes are popular sources of revenue for governments because a. they have very high levels of deadweight loss. b. they are easy to understand. c. consumers are rarely aware that they are paying them. d. they are very stable sources of revenue. e. they require very little paperwork.

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Q: When a tax is imposed on some good, what usually happens to consumer and producer surplus? a. They both increase. b. They both fall to zero. c. They both decrease. d. Consumer surplus increases and producer surplus decreases. e. Consumer surplus decreases and producer surplus increases.

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Q: The incidence of a tax is unrelated to a. how responsive producers are to the tax. b. how responsive consumers are to the tax. c. the elasticity of supply. d. the elasticity of demand. e. who pays the tax out of pocket.

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Q: When a tax is imposed on some good, what happens to the amount of the good bought and sold? a. It increases. b. It decreases. c. It decreases, but only if the tax is imposed on producers. d. It decreases, but only if the tax is imposed on consumers. e. It increases, but only if the tax is imposed on consumers.

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Q: The incidence of a tax reflects a. who pays the tax out of pocket. b. how much tax revenue the tax generates. c. who bears the burden of the tax. d. how the tax revenue from the tax is spent. e. government efficiency in providing goods and services.

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Q: A tax on milk would likely cause a decrease in thea. price consumers pay for milk. b. price of products made from milk. c. amount of milk sold.d. revenues from the milk tax.e. deadweight loss from the milk tax.

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Q: A tax on milk would likely cause an increase in thea. price consumers pay for milk. b. price producers receive for milk. c. amount of milk sold.d. revenues earned from selling milk.e. profits earned by selling milk.

Q: 1. 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.

Q: A tax on producers would cause the ________ curve(s) to shift to the ________.a. demand; left b. supply and demand; left c. supply; leftd. supply; righte. supply and demand; right

Q: The luxury tax of 1990 produced far less tax revenue than projected becausea. the government made the mistake of announcing the tax.b. the tax was too low.c. the supply of luxury goods is highly inelastic.d. there are very few consumers of luxury goods.e. the demand for luxury goods is highly elastic.

Q: If a tax causes the supply curve to shift, we know that the tax is paid out of pocket by a. consumers. b. producers. c. the government. d. both producers and consumers. e. consumer, producers, and the government.

Q: A tax on consumers of a good would shift the ________ curve down and cause the price paid by consumers to ________. a. supply; increase b. demand; decrease, then return to its original level c. supply; decrease d. demand; increase e. supply; increase, then return to its original level

Q: A tax that is applied to one specific good or service is a(n) ________ tax.a. sales b. general local option sales c. propertyd. excisee. wealth

Q: Excise taxes are taxes that are a. applied to all goods and activities. b. usually applied to inferior goods. c. usually applied to income and capital gains. d. never applied to goods or activities. e. applied to a particular good or activity.

Q: A tax on apples would cause the price paid by consumers to ________ and the price received by producers to ________.a. increase; increase b. increase; decrease c. decrease; increase, then decreased. decrease; decreasee. increase, then decrease; increase

Q: After a tax is imposed, the price paid by consumers ________ and the price received by producers ________.a. increases; increases b. increases; decreases c. decreases; increasesd. decreases; decreasese. is unaffected; is unaffected

Q: When a tax is imposed on some good, what tends to happen to consumer prices and producer prices? a. Consumer prices decrease and producer prices increase. b. Consumer prices increase and producer prices decrease. c. Consumer prices increase and producer prices increase. d. Consumer prices decrease and producer prices decrease. e. Consumer prices and producer prices converge at the same point.

Q: The difference between the price consumers pay and the price sellers receive after a tax is imposed is equal to thea. loss of social welfare from the tax.b. dollar amount of the tax. c. deadweight loss from the tax.d. revenue from the tax.e. lost profit from the tax.

Q: It is said that taxes drive a wedge between prices. This statement is true because taxes cause a. both consumer and producer prices to increase. b. the consumer price to increase but leave producer prices unchanged. c. both consumer and producer prices to decrease. d. the consumer price to decrease and the producer price to increase. e. the consumer price to increase and the producer price to decrease.

Q: In most cases, taxes reduce economic efficiency because a. they lower prices for consumers and cause firms to suffer. b. they increase firms profits at the expense of consumers. c. taxes are perceived as unfair by some taxpayers. d. the government often spends tax revenues on programs that some voters dont like. e. they reduce consumer surplus and producer surplus.

Q: A tax on apples would cause apple growers to suffer because a. consumer surplus would decrease. b. the government would collect revenue from the tax. c. consumers would pay higher prices. d. producer surplus would increase. e. revenues and profits from growing apples would decrease.

Q: A tax on consumers would cause the ________ curve(s) to shift to the ________.a. demand; right b. supply; left c. supply and demand; leftd. supply and demand; righte. demand; left

Q: Use the following information to answer the following questions.The following graph depicts a market where a tax has been imposed. Pe was the equilibrium price before the tax was imposed, and Qe was the equilibrium quantity. After the tax, PC is the price that consumers pay, and PS is the price that producers receive. QT units are sold after the tax is imposed. NOTE: The areas B and C are rectangles that are divided by the supply curve ST. Include both sections of those rectangles when choosing your answers.Which areas represent the deadweight loss created as a result of the tax?a. A + B + C + E + F + G b. A + C c. A + B + C + Ed. F + Ge. B + C + F + G

Q: A tax on apples would cause consumers to suffer because a. consumer surplus would increase. b. the price of apples would increase and fewer apples would be purchased. c. revenues for apple growers would decrease. d. the government would collect revenue from the tax. e. producer surplus would decrease.

Q: When a good is divided up, it is important that everyone get an equal share. This statement emphasizesa. maximum surplus. b. efficiency. c. aggregation.d. equity.e. total welfare.

Q: When a good is divided up, it is important that none of the good go to waste. This statement emphasizesa. fairness. b. zero surplus. c. efficiency.d. equity.e. equal welfare.

Q: Which of the following statements is concerned with equity rather than efficiency? a. Imposing a tax on a good reduces the incentive to buy that good. b. The burden of a new sales tax typically increases prices. c. Deadweight loss is the lost social welfare from a tax. d. Tax rates on middle-class households are too high and should be reduced. e. Taxes cause producers and consumers to lose surplus.

Q: Questions about the equity of a tax are concerned mostly witha. efficiency. b. tax revenue. c. fairness.d. deadweight loss.e. elasticity.

Q: Which of the following statements is concerned with efficiency rather than equity? a. Sales taxes on food are regressive and should be eliminated. b. Income taxes should be raised on low-income families so that everyone pays. c. The United States should implement a wealth tax on upper-income households. d. Excise taxes tend to raise prices for consumers. e. The overall tax system in the United States should be much more progressive.

Q: Another name for social welfare isa. total surplus. b. combined equity. c. collective good.d. common benefit.e. net per-capita gain.

Q: The price-quantity combination found where the supply and demand curves intersect is a unique combination that is efficient because a. producers can sell as much as they want. b. total surplus is maximized. c. tax revenue is sufficient to pay for government services. d. consumers can buy as much as they want. e. new products are being introduced.

Q: A market has reached an efficient outcome when a. producers are able to produce and sell as much as they like. b. total surplus is minimized. c. producer surplus is greater than consumer surplus. d. consumers are able to purchase as much as they like. e. total surplus is maximized.

Q: Consider the market for socks. The current price of a pair of plain white socks is $5.00. Two consumers, Jeff and Samir, are willing to pay $7.25 and $8.00, respectively, for a pair of plain white socks. Two sock manufacturers are willing to sell plain white socks for as little as $4.00 and $4.15 per pair. What is the total producer and consumer surplus (i.e., social welfare) in this market?a. $7.10 b. $5.25 c. $1.85d. $23.40e. $4.50

Q: Consumer surplus plus producer surplus equalsa. deadweight loss. b. economic profit. c. social welfare.d. tax revenue.e. market distortions.

Q: Social welfare is measured as the sum of a. tax revenue and deadweight loss. b. deadweight loss and consumer surplus. c. producer surplus and tax revenue. d. consumer surplus and tax revenue. e. consumer surplus and producer surplus.

Q: Social welfare (i.e., the sum of producer and consumer surplus) is maximized when a. the government taxes most goods and services. b. very few consumers and producers exist within a market. c. the market reaches its equilibrium price and quantity. d. supply and demand are perfectly inelastic. e. the government imposes price controls.

Q: Producer surplus is depicted by the area a. above market price and below the supply curve. b. between the supply curve and the demand curve. c. below market price and above the supply curve. d. above market price and below the demand curve. e. above the demand curve and below the supply curve.

Q: When looking at a graph, the area above the supply curve and below market price is defined asa. consumer surplus. b. producer surplus. c. producer benefit.d. business profit.e. tax revenue.

Q: When looking at a supply and demand graph, you would find producer surplus a. above the demand curve and below the supply curve. b. below the demand curve and above market price. c. to the right of equilibrium quantity and above market price. d. above the demand curve and above the supply curve. e. below market price and above the supply curve.