Question 1

If the goal is to reduce cigarette consumption per smoker through taxation, a federal tax is ______ effective than a state tax.

Accepted Answer

A federal tax applies uniformly across all states and therefore has a greater impact in reducing consumption per smoker compared to a state tax, which may vary in amount and implementation across different states.

Question 2

The typical teen-age smoker has a more elastic demand for cigarettes than does a typical older smoker. We expect a given cigarette tax to ______ a teen-age smoker's consumption by______ than an older smoker's consumption.

Accepted Answer

The statement suggests that for teen-age smokers, a change in price (in this case, due to a tax) will have a greater effect on their consumption behavior compared to older smokers. More specifically, their demand for cigarettes is more elastic, meaning that a change in price will result in a more significant change in quantity demanded. Therefore, we expect that a given cigarette tax will reduce a teen-age smoker's consumption by more than an older smoker's consumption. Thus, the best choice is D - reduce; more.

Question 3

Martin's maximum willingness to pay for an electric boat motor is $250. Because of a tax, the price of the motor increases from $230 to $280. The deadweight loss of the tax attributable to Martin is:

Accepted Answer

The answer of Martin's maximum willingness to pay for an...

Question 4

Use the following to answer questions: Figure: Imposition of a Tax 
-(Figure: Imposition of a Tax) Refer to the figure. Consumer surplus before the $4 tax is ________, and consumer surplus after the $4 tax is ________.

Accepted Answer

The answer of Use the following to answer questions: Figure:...

Question 5

If the government wanted to reduce alcohol consumption in the United States, would a state tax or federal tax be most effective?

Accepted Answer

A federal tax would be more effective because suppliers cannot as easily avoid the tax simply by shipping alcohol to other states, therefore reducing the chance of tax evasion. Additionally, a federal tax would have a more uniform impact across all states and potentially reduce overall alcohol consumption in the United States.

Question 6

Use the following to answer questions: Figure: Tax on Consumers of Gadgets 
-If a $2 tax on cigarettes decreases both consumer and producer surplus:

Accepted Answer

When a tax is imposed on cigarettes, the price that consumers pay for cigarettes will increase, and therefore the quantity demanded will decrease. This decrease in quantity demanded will result in a smaller quantity being traded in the market, and it will lead to a deadweight loss, which represents the loss in consumer and producer surplus. As a result, tax revenues will not be able to exactly offset the lost consumer and producer surplus. Thus, tax revenues will be less than the amount of the lost consumer and producer surplus, leading to a decrease in the total surplus in the market.

Question 7

Assume that cigarettes sell for $7 per pack in New Jersey and $3 per pack in South Carolina, and New Jersey taxes cigarettes at $3.00 per pack and South Carolina taxes cigarettes at $0.10 per pack. How might cigarette sellers respond to the after-tax price differential between the two states?

Accepted Answer

Cigarette sellers will try to sell more cigarettes in states with lower taxes, in this case, South Carolina, where the after-tax price is cheaper. Therefore, the supply of cigarettes to South Carolina will increase, while the supply of cigarettes to New Jersey will decrease.

Question 8

If the government imposes a per-cigarette tax on smoking, which of the following is most likely to occur?

Accepted Answer

The answer of If the government imposes a per-cigarette tax...

Question 9

Use the following to answer questions: Figure: Commodity Tax on Suppliers -(Figure: Commodity Tax on Suppliers) Refer to the figure. If a tax shifts the supply curve from S₁ to S₂, tax revenue is:

Accepted Answer

The answer of Use the following to answer questions: Figure:...

Question 10

Use the following to answer questions: Figure: Imposition of a Tax 
-(Figure: Imposition of a Tax) Refer to the figure. After the imposition of a $4 tax, the government collects revenues of:

Accepted Answer

The answer of Use the following to answer questions: Figure:...

Question 11

Who bears the majority of the burden in the case of a state cigarette tax?

Accepted Answer

The majority of the burden in the case of a state cigarette tax falls on the buyers since they will have to pay more for cigarettes due to the tax increase. Sellers may also be affected, but they can simply pass on the tax burden to consumers by charging higher prices. The state government may benefit from the increased tax revenue, but they do not bear the burden of the tax. The neighboring state's government is not directly affected by a state cigarette tax.

Question 12

Use the following to answer questions: Figure: Consumer and Producer Surplus 
-(Figure: Consumer and Producer Surplus) According to the figure, what is the value of the deadweight loss?

Accepted Answer

The best choice is D because it represents the point where the marginal benefit to consumers equals the marginal cost to producers, resulting in the maximum total surplus. At any other quantity, there would be a loss to either consumers or producers, resulting in a deadweight loss. The value of this deadweight loss is $50, as represented by the area between the demand and supply curves at the non-equilibrium quantity. Therefore, the socially optimal choice is to produce and consume a quantity of 4, which maximizes total surplus and minimizes deadweight loss.

Question 13

Use the following to answer questions: Figure: Consumer and Producer Surplus 
-(Figure: Consumer and Producer Surplus) According to the figure, what would happen to the deadweight loss if the tax increased to $2 per basket of apples?

Accepted Answer

As shown in the figure, deadweight loss is represented by the triangle between the supply and demand curves. If the tax increased to $2 per basket of apples, the distance between the supply and demand curves would increase, resulting in a larger triangle and a larger deadweight loss. Therefore, the deadweight loss would increase.

Question 14

Use the following to answer questions: Figure: Tax on Consumers of Gadgets 
-If there is a tax on both medicine and sugar, ceteris paribus, how will the deadweight losses in each market compare?

Accepted Answer

Sugar is a good with a relatively elastic demand, meaning that consumers are more sensitive to changes in price. This makes the deadweight loss from a tax on sugar larger than the deadweight loss from a tax on medicine, which is a necessity for many consumers and has a relatively inelastic demand.

Question 15

Use the following to answer questions: Figure: Commodity Tax on Suppliers -(Figure: Commodity Tax on Suppliers) Refer to the figure. If a tax shifts the supply curve from S₁ to S₂, the value of deadweight loss is:

Accepted Answer

The answer of Use the following to answer questions: Figure:...

Question 16

Use the following to answer questions: Figure: Imposition of a Tax 
-(Figure: Imposition of a Tax) Refer to the figure. With a $4 tax, the deadweight loss is:

Accepted Answer

The deadweight loss is the area of the triangle between the supply and demand curve up to the quantity where they intersect. In this case, the deadweight loss is (1/2)(6-4)(16-12) = $20.

Question 17

Use the following to answer questions: Figure: Tax on Consumers of Gadgets 
-(Figure: Tax on Consumers of Gadgets) Refer to the figure. What is the tax revenue that the government collects from the tax on gadgets?

Accepted Answer

The tax revenue that the government collects from the tax on gadgets is equal to the area of the rectangle labeled "Tax Revenue." We can calculate the area by multiplying the height of the rectangle (which is the amount of the tax per unit, $4) by the width of the rectangle (which is the quantity of gadgets sold, 800 units). Therefore, tax revenue = $4 x 800 = $3,200.

Question 18

Use the following to answer questions: Figure: Consumer and Producer Surplus 
-To be efficient, the revenue from taxation must provide goods that have benefits that ________ the deadweight loss caused by the taxation itself.

Accepted Answer

The goal of efficient taxation is to minimize the deadweight loss while still raising revenue. To achieve this, the revenue generated by the tax must exceed the deadweight loss caused by the tax. Therefore, answer choice B, "exceed," is the best choice.

Question 19

Use the following to answer questions: Figure: Tax on Consumers of Gadgets 
-(Figure: Tax on Consumers of Gadgets) Refer to the figure. What is the amount of the deadweight loss caused by the imposition of the tax on gadgets?

Accepted Answer

The answer of Use the following to answer questions: Figure:...

Question 20

Use the following to answer questions: Figure: Deadweight Loss 
-(Figure: Deadweight Loss) Which of the areas in this figure represents the deadweight loss resulting from a $2 tax?

Accepted Answer

The answer of Use the following to answer questions: Figure:...

Quiz 6: Taxes and Subsidies

If the goal is to reduce cigarette consumption per smoker through taxation, a federal tax is ______ effective than a state tax.

The typical teen-age smoker has a more elastic demand for cigarettes than does a typical older smoker. We expect a given cigarette tax to a teen-age smoker's consumption by than an older smoker's consumption.

Martin's maximum willingness to pay for an electric boat motor is $250. Because of a tax, the price of the motor increases from $230 to $280. The deadweight loss of the tax attributable to Martin is:

Use the following to answer questions: Figure: Imposition of a Tax -(Figure: Imposition of a Tax) Refer to the figure. Consumer surplus before the $4 tax is , and consumer surplus after the $4 tax is .

If the government wanted to reduce alcohol consumption in the United States, would a state tax or federal tax be most effective?

Use the following to answer questions: Figure: Tax on Consumers of Gadgets -If a $2 tax on cigarettes decreases both consumer and producer surplus:

Assume that cigarettes sell for $7 per pack in New Jersey and $3 per pack in South Carolina, and New Jersey taxes cigarettes at $3.00 per pack and South Carolina taxes cigarettes at $0.10 per pack. How might cigarette sellers respond to the after-tax price differential between the two states?

If the government imposes a per-cigarette tax on smoking, which of the following is most likely to occur?

Use the following to answer questions: Figure: Commodity Tax on Suppliers -(Figure: Commodity Tax on Suppliers) Refer to the figure. If a tax shifts the supply curve from S₁ to S₂, tax revenue is:

Use the following to answer questions: Figure: Imposition of a Tax -(Figure: Imposition of a Tax) Refer to the figure. After the imposition of a $4 tax, the government collects revenues of:

Who bears the majority of the burden in the case of a state cigarette tax?

Use the following to answer questions: Figure: Consumer and Producer Surplus -(Figure: Consumer and Producer Surplus) According to the figure, what is the value of the deadweight loss?

Use the following to answer questions: Figure: Consumer and Producer Surplus -(Figure: Consumer and Producer Surplus) According to the figure, what would happen to the deadweight loss if the tax increased to $2 per basket of apples?

Use the following to answer questions: Figure: Tax on Consumers of Gadgets -If there is a tax on both medicine and sugar, ceteris paribus, how will the deadweight losses in each market compare?

Use the following to answer questions: Figure: Commodity Tax on Suppliers -(Figure: Commodity Tax on Suppliers) Refer to the figure. If a tax shifts the supply curve from S₁ to S₂, the value of deadweight loss is:

Use the following to answer questions: Figure: Imposition of a Tax -(Figure: Imposition of a Tax) Refer to the figure. With a $4 tax, the deadweight loss is:

Use the following to answer questions: Figure: Tax on Consumers of Gadgets -(Figure: Tax on Consumers of Gadgets) Refer to the figure. What is the tax revenue that the government collects from the tax on gadgets?

Use the following to answer questions: Figure: Consumer and Producer Surplus -To be efficient, the revenue from taxation must provide goods that have benefits that ________ the deadweight loss caused by the taxation itself.

Use the following to answer questions: Figure: Tax on Consumers of Gadgets -(Figure: Tax on Consumers of Gadgets) Refer to the figure. What is the amount of the deadweight loss caused by the imposition of the tax on gadgets?

Use the following to answer questions: Figure: Deadweight Loss -(Figure: Deadweight Loss) Which of the areas in this figure represents the deadweight loss resulting from a $2 tax?

Quiz 6: Taxes and Subsidies

If the goal is to reduce cigarette consumption per smoker through taxation, a federal tax is ______ effective than a state tax.

The typical teen-age smoker has a more elastic demand for cigarettes than does a typical older smoker. We expect a given cigarette tax to ______ a teen-age smoker's consumption by______ than an older smoker's consumption.

Martin's maximum willingness to pay for an electric boat motor is $250. Because of a tax, the price of the motor increases from $230 to $280. The deadweight loss of the tax attributable to Martin is:

Use the following to answer questions: Figure: Imposition of a Tax -(Figure: Imposition of a Tax) Refer to the figure. Consumer surplus before the $4 tax is ________, and consumer surplus after the $4 tax is ________.

If the government wanted to reduce alcohol consumption in the United States, would a state tax or federal tax be most effective?

Use the following to answer questions: Figure: Tax on Consumers of Gadgets -If a $2 tax on cigarettes decreases both consumer and producer surplus:

Assume that cigarettes sell for $7 per pack in New Jersey and $3 per pack in South Carolina, and New Jersey taxes cigarettes at $3.00 per pack and South Carolina taxes cigarettes at $0.10 per pack. How might cigarette sellers respond to the after-tax price differential between the two states?

If the government imposes a per-cigarette tax on smoking, which of the following is most likely to occur?

Use the following to answer questions: Figure: Commodity Tax on Suppliers -(Figure: Commodity Tax on Suppliers) Refer to the figure. If a tax shifts the supply curve from S1 to S2, tax revenue is:

Use the following to answer questions: Figure: Imposition of a Tax -(Figure: Imposition of a Tax) Refer to the figure. After the imposition of a $4 tax, the government collects revenues of:

Who bears the majority of the burden in the case of a state cigarette tax?

Use the following to answer questions: Figure: Consumer and Producer Surplus -(Figure: Consumer and Producer Surplus) According to the figure, what is the value of the deadweight loss?

Use the following to answer questions: Figure: Consumer and Producer Surplus -(Figure: Consumer and Producer Surplus) According to the figure, what would happen to the deadweight loss if the tax increased to $2 per basket of apples?

Use the following to answer questions: Figure: Tax on Consumers of Gadgets -If there is a tax on both medicine and sugar, ceteris paribus, how will the deadweight losses in each market compare?

Use the following to answer questions: Figure: Commodity Tax on Suppliers -(Figure: Commodity Tax on Suppliers) Refer to the figure. If a tax shifts the supply curve from S1 to S2, the value of deadweight loss is:

Use the following to answer questions: Figure: Imposition of a Tax -(Figure: Imposition of a Tax) Refer to the figure. With a $4 tax, the deadweight loss is:

Use the following to answer questions: Figure: Tax on Consumers of Gadgets -(Figure: Tax on Consumers of Gadgets) Refer to the figure. What is the tax revenue that the government collects from the tax on gadgets?

Use the following to answer questions: Figure: Consumer and Producer Surplus -To be efficient, the revenue from taxation must provide goods that have benefits that ________ the deadweight loss caused by the taxation itself.

Use the following to answer questions: Figure: Tax on Consumers of Gadgets -(Figure: Tax on Consumers of Gadgets) Refer to the figure. What is the amount of the deadweight loss caused by the imposition of the tax on gadgets?

Use the following to answer questions: Figure: Deadweight Loss -(Figure: Deadweight Loss) Which of the areas in this figure represents the deadweight loss resulting from a $2 tax?

The typical teen-age smoker has a more elastic demand for cigarettes than does a typical older smoker. We expect a given cigarette tax to a teen-age smoker's consumption by than an older smoker's consumption.

Use the following to answer questions: Figure: Imposition of a Tax -(Figure: Imposition of a Tax) Refer to the figure. Consumer surplus before the $4 tax is , and consumer surplus after the $4 tax is .

Use the following to answer questions: Figure: Commodity Tax on Suppliers -(Figure: Commodity Tax on Suppliers) Refer to the figure. If a tax shifts the supply curve from S₁ to S₂, tax revenue is:

Use the following to answer questions: Figure: Commodity Tax on Suppliers -(Figure: Commodity Tax on Suppliers) Refer to the figure. If a tax shifts the supply curve from S₁ to S₂, the value of deadweight loss is: