Deck 8: Essay

Question 1

Figure 8-25
Refer to Figure 8-25.How much is total surplus at the market equilibrium?

Answer 1

Total surplus is $500 at the equilibrium.

Question 2

Figure 8-25
Refer to Figure 8-25.Suppose the government increases the size of the tax on this good from $4 per unit to $6 per unit.Will the tax revenue collected from the tax increase,decrease,or stay the same?

Answer 2

Total tax revenue will stay the same at $240.

Question 3

Scenario 8-3
Suppose the market demand and market supply curves are given by the equations:
Refer to Scenario 8-3.What are the equilibrium price and equilibrium quantity in this market?

Answer 3

The equilibrium price is $50 and the equilibrium quantity is 150 units.

Question 4

Figure 8-25
Refer to Figure 8-25.Suppose the government places a $4 tax per unit on this good.How much tax revenue is collected after the tax is imposed?

Question 5

Figure 8-25
Refer to Figure 8-25.Suppose the government places a $4 tax per unit on this good.What price will sellers receive for the good after the tax is imposed?

Question 6

Figure 8-25
Refer to Figure 8-25.How much is consumer surplus at the market equilibrium?

Question 7

Figure 8-25
Refer to Figure 8-25.How much is producer surplus at the market equilibrium?

Question 8

Figure 8-25
Refer to Figure 8-25.Suppose the government places a $4 tax per unit on this good.How much is the deadweight loss from this tax?

Question 9

Scenario 8-3
Suppose the market demand and market supply curves are given by the equations:
Refer to Scenario 8-3.Suppose that a tax of T is placed on buyers so that the demand curve becomes:
What quantity will be bought and sold after the tax is imposed?

Question 10

Figure 8-25
Refer to Figure 8-25.What are the equilibrium price and equilibrium quantity in this market?

Question 11

Figure 8-25
Refer to Figure 8-25.Suppose the government places a $4 tax per unit on this good.How much is producer surplus after the tax is imposed?

Question 12

A tax is imposed on a certain good.The tax produces revenue of $5,000 for the government.The tax reduces consumer surplus by $3,000 and it reduces producer surplus by $4,000.What is the amount of the deadweight loss of the tax?

Question 13

Scenario 8-3
Suppose the market demand and market supply curves are given by the equations:
Refer to Scenario 8-3.Suppose that a tax of T is placed on buyers so that the demand curve becomes:
What will be the deadweight loss from this tax?

Question 14

In terms of gains from trade,why is it true that taxes cause deadweight losses?

Question 15

Scenario 8-3
Suppose the market demand and market supply curves are given by the equations:
Refer to Scenario 8-3.Suppose that a tax of T is placed on buyers so that the demand curve becomes:
How much tax revenue will be collected after this tax is imposed?

Question 16

Figure 8-25
Refer to Figure 8-25.Suppose the government places a $4 tax per unit on this good.How much is total surplus after the tax is imposed?

Question 17

Figure 8-25
Refer to Figure 8-25.Suppose the government places a $4 tax per unit on this good.How many units of this good will be bought and sold after the tax is imposed?

Question 18

Figure 8-25
Refer to Figure 8-25.Suppose the government places a $4 tax per unit on this good.What price will consumers pay for the good after the tax is imposed?

Question 19

Figure 8-25
Refer to Figure 8-25.Suppose the government places a $4 tax per unit on this good.How much is consumer surplus after the tax is imposed?

Question 20

Scenario 8-3
Suppose the market demand and market supply curves are given by the equations:
Refer to Scenario 8-3.Suppose that a tax of T is placed on buyers so that the demand curve becomes:
What price will sellers receive and what price will buyers pay after the tax is imposed?

Question 21

Figure 8-26
Refer to Figure 8-26.How much is total surplus at the market equilibrium?

Question 22

Figure 8-26
Refer to Figure 8-26.Suppose the government places a $3 tax per unit on this good.How many units of this good will be bought and sold after the tax is imposed?

Question 23

Scenario 8-3
Suppose the market demand and market supply curves are given by the equations:
Refer to Scenario 8-3.Suppose that a tax of T is placed on buyers so that the demand curve becomes:
If T = 40,how many units will be bought and sold after the tax is imposed?

Question 24

Figure 8-26
Refer to Figure 8-26.Suppose the government places a $3 tax per unit on this good.How much tax revenue is collected after the tax is imposed?

Question 25

Figure 8-26
Refer to Figure 8-26.Suppose the government places a $3 tax per unit on this good.What price will sellers receive for the good after the tax is imposed?

Question 26

Figure 8-26
Refer to Figure 8-26.How much is consumer surplus at the market equilibrium?

Question 27

Figure 8-27
Refer to Figure 8-27.Suppose that Market A is characterized by Demand 1 and Supply 1,and Market B is characterized by Demand 2 and Supply 1.If an identical tax is imposed on each market,the tax will create a larger deadweight loss in which market? Explain.

Question 28

Scenario 8-3
Suppose the market demand and market supply curves are given by the equations:
Refer to Scenario 8-3.Suppose that a tax of T is placed on buyers so that the demand curve becomes:
If T = 40,how much is the burden of the tax on the buyers and on the sellers?

Question 29

Figure 8-26
Refer to Figure 8-26.Suppose the government places a $3 tax per unit on this good.How much is producer surplus after the tax is imposed?

Question 30

Figure 8-26
Refer to Figure 8-26.Suppose the government places a $3 tax per unit on this good.How much is the deadweight loss from this tax?

Question 31

Figure 8-26
Refer to Figure 8-26.What are the equilibrium price and equilibrium quantity in this market?

Question 32

Figure 8-28
Refer to Figure 8-28.Suppose that Market A is characterized by Demand 1 and Supply 1,and Market B is characterized by Demand 1 and Supply 2.If an identical tax is imposed on each market,the tax will create a larger deadweight loss in which market? Explain.

Question 33

Figure 8-26
Refer to Figure 8-26.Suppose the government places a $3 tax per unit on this good.How much is total surplus after the tax is imposed?

Question 34

Figure 8-26
Refer to Figure 8-26.Suppose the government places a $3 tax per unit on this good.How much is consumer surplus after the tax is imposed?

Question 35

Figure 8-26
Refer to Figure 8-26.Suppose the government increases the size of the tax on this good from $3 per unit to $6 per unit.Will the tax revenue collected from the tax increase,decrease,or stay the same?

Question 36

Figure 8-26
Refer to Figure 8-26.How much is producer surplus at the market equilibrium?

Question 37

Scenario 8-3
Suppose the market demand and market supply curves are given by the equations:
Refer to Scenario 8-3.Suppose that a tax of T is placed on buyers so that the demand curve becomes:
If T = 40,what price will buyers pay and what price will sellers receive?

Question 38

Scenario 8-3
Suppose the market demand and market supply curves are given by the equations:
Refer to Scenario 8-3.Suppose that a tax of T is placed on buyers so that the demand curve becomes:
If T = 40,how much tax revenue will be collected from this tax?

Question 39

Scenario 8-3
Suppose the market demand and market supply curves are given by the equations:
Refer to Scenario 8-3.Suppose that a tax of T is placed on buyers so that the demand curve becomes:
If T = 40,how much will be the deadweight loss from this tax?

Question 40

Figure 8-26
Refer to Figure 8-26.Suppose the government places a $3 tax per unit on this good.What price will consumers pay for the good after the tax is imposed?

Question 41

Provide several examples of important taxes on labor in the United States.For a typical worker,what is the marginal tax rate on labor income once all the labor taxes are summed?

Question 42

Suppose the demand curve and the supply curve in a market are both linear.To begin,there was a $5 tax per unit,and the $5 tax resulted in a deadweight loss of $1,500.Now,the tax per unit is higher,with the higher tax resulting in a deadweight loss of $6,000.What is the amount of the new tax per unit?

Question 43

Use the following graph shown to fill in the table that follows.
WITHOUT TAX
WITH TAX
CHANGE
Consumer surplus
Producer surplus
Tax revenue
Total surplus

Question 44

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

Question 45

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 - 2(P + 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?

Question 46

Suppose the demand curve and the supply curve in a market are both linear,and suppose the price elasticity of supply is 0.5.Will the deadweight loss from a $3 tax per unit be larger if the price elasticity of demand is 0.3 or if the price elasticity of demand is 0.7?

Question 47

Is the United States' labor supply more inelastic or more elastic? Briefly summarize the competing theories.

Question 48

Suppose that the market for product X is characterized by a typical,downward-sloping,linear demand curve and a typical,upward-sloping,linear supply curve.If a $2 tax per unit results in a deadweight loss of $200,how large would be the deadweight loss from a $4 tax per unit?

Question 49

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.

Question 50

Suppose that the market for product X is characterized by a typical,downward-sloping,linear demand curve and a typical,upward-sloping,linear supply curve.If a $2 tax per unit results in a deadweight loss of $200,how large would be the deadweight loss from a $6 tax per unit?

Question 51

Suppose the demand curve and the supply curve in a market are both linear.If a $2 tax per unit results in a deadweight loss of $200,how large would be the deadweight loss from a $3 tax per unit?

Question 52

Describe the Laffer curve.

Question 53

Figure 8-29
Refer to Figure 8-29.As the size of the tax increases from $3 to $6 to $9,what happens to tax revenues?

Question 54

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?

Question 55

The demand for energy drinks is more elastic than the demand for milk.Would a tax on energy drinks or a tax on milk have a larger deadweight loss? Explain.

Question 56

Suppose that the market for product X is characterized by a typical,downward-sloping,linear demand curve and a typical,upward-sloping,linear supply curve.Suppose the price elasticity of supply is 0.7.Will the deadweight loss from a $3 tax per unit be smaller if the absolute value of the price elasticity of demand is 0.6 or if the absolute value of the price elasticity of demand is 1.5?

Question 57

Figure 8-29
Refer to Figure 8-29.If you were a policymaker choosing between a $3,$6,or $9 tax,which would you choose and why?

Question 58

Figure 8-29
Refer to Figure 8-29.As the size of the tax increases from $3 to $6 to $9,what happens to the deadweight loss from the tax?