Question 1

Suppose a tax of $1 per unit is imposed on a good.The more elastic the demand for the good,other things equal,

Accepted Answer

The answer of Suppose a tax of $1 per unit...

Question 2

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

Accepted Answer

The answer of Buyers of a product will bear the...

Question 3

Suppose a tax of $1 per unit is imposed on a good.The more elastic the supply of the good,other things equal,the

Accepted Answer

The answer of Suppose a tax of $1 per unit...

Question 4

Suppose that the government imposes a tax on dairy products.The deadweight loss from this tax will likely be greater in the

Accepted Answer

The answer of Suppose that the government imposes a tax...

Question 5

The demand for potted plants is more elastic than the demand for wallpaper.Suppose the government levies an equivalent tax on potted plants and wallpaper.The deadweight loss would be larger in the market for

Accepted Answer

The answer of The demand for potted plants is more...

Question 6

When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic,

Accepted Answer

When supply is relatively elastic and demand is relatively inelastic, the burden of the tax falls mainly on the buyers of the good as they are not able to reduce their demand much in response to the increase in price caused by the tax, while sellers are able to adjust their supply more easily. Thus, the price paid by buyers will increase by a greater amount than the price received by sellers will decrease, resulting in a decrease in the quantity demanded and an increase in the quantity supplied.

Question 7

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?

Accepted Answer

The answer of Table 8-1
 
-Refer to Table 8-1.Suppose the...

Question 8

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

Accepted Answer

The answer of Sellers of a product will bear the...

Question 9

Which of the following statements is correct regarding the imposition of a tax on gasoline?

Accepted Answer

The incidence of a tax on gasoline refers to who bears the burden of the tax, i.e., whether it is passed on to the buyers or absorbed by the sellers. This depends on the price elasticities of demand and supply, as a more elastic side (i.e., the side that is more responsive to price changes) will bear less of the tax burden. For example, if demand for gasoline is highly elastic, consumers will reduce their purchases significantly in response to the tax, and sellers will have to absorb a greater share of the tax burden. The amount of tax revenue raised by the tax, on the other hand, depends on the amount of the tax per unit, multiplied by the quantity sold. It does not depend on whether the buyers or the sellers are required to remit tax payments to the government.

Question 10

The deadweight loss from a tax of $5 per unit will be smallest in a market with

Accepted Answer

The answer of The deadweight loss from a tax of...

Question 11

Figure 8-12 
-Refer to Figure 8-12.Which of the following statements is not correct?

Accepted Answer

The statement "Demand 2 is more inelastic than supply 2" is not correct. In the graph, both demand curves have the same slope, indicating the same elasticity. Conversely, both supply curves have the same slope, indicating the same elasticity. Therefore, it is not possible to compare the elasticity of demand with the elasticity of supply.

Question 12

Figure 8-12 
-Refer to Figure 8-12.Which of the following statements is correct?

Accepted Answer

The answer of Figure 8-12 
-Refer to Figure 8-12.Which of...

Question 13

Figure 8-12 
-Refer to Figure 8-12.Which of the following combinations will minimize the deadweight loss from a tax?

Accepted Answer

The answer of Figure 8-12 
-Refer to Figure 8-12.Which of...

Question 14

When a tax is imposed on a good for which both demand and supply are very elastic,

Accepted Answer

When both demand and supply are very elastic, it means that both buyers and sellers are very responsive to changes in price. Therefore, if a tax is imposed, both buyers and sellers are likely to adjust their behavior, and it is difficult to predict how the burden of the tax will be distributed between them without further information.

Question 15

The deadweight loss from a $3 tax will be largest in a market with

Accepted Answer

The answer of The deadweight loss from a $3 tax...

Question 16

The deadweight loss from a tax of $8 per unit will be smallest in a market with

Accepted Answer

Deadweight loss is smallest when both demand and supply are inelastic because inelasticity means that there are no good substitutes for the product or the inputs used to produce the product. Therefore, consumers are willing to pay more and producers are willing to produce more even with a tax, which minimizes the distortion to the market.

Question 17

Figure 8-12 
-Refer to Figure 8-12.Which of the following combinations will maximize the deadweight loss from a tax?

Accepted Answer

The answer of Figure 8-12 
-Refer to Figure 8-12.Which of...

Question 18

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?

Accepted Answer

Market B has a high elasticity of demand, meaning that consumers will respond strongly to any increase in price caused by a tax. This will lead to a large deadweight loss, as consumers will reduce their consumption of the good. Market D has a high elasticity of supply, meaning producers will respond strongly to any decrease in price, also leading to a large deadweight loss.

In contrast, markets A and C both have low elasticities of demand and supply, meaning that the tax will not greatly affect the behavior of consumers or producers. This will result in a smaller deadweight loss. Therefore, by taxing markets B and D, the government would minimize the overall deadweight loss incurred by the taxes.

Question 19

The deadweight loss from a tax

Accepted Answer

The deadweight loss from a tax is inversely related to the price elasticity of demand, meaning that the higher the elasticity of demand, the greater the deadweight loss. Therefore, if the tax per unit increases, the deadweight loss will also increase as a result.

Question 20

When a good is taxed,the burden of the tax

Accepted Answer

The burden of the tax falls more heavily on the side of the market that is more inelastic because consumers on that side of the market are less likely to adjust their quantity demanded in response to the price increase caused by the tax. On the other hand, producers on the more elastic side of the market are more likely to decrease their quantity supplied in response to the price decrease caused by the tax, shifting more of the burden onto consumers.

Quiz 8: Application: the Costs of Taxation

Suppose a tax of $1 per unit is imposed on a good.The more elastic the demand for the good,other things equal,

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

Suppose a tax of $1 per unit is imposed on a good.The more elastic the supply of the good,other things equal,the

Suppose that the government imposes a tax on dairy products.The deadweight loss from this tax will likely be greater in the

The demand for potted plants is more elastic than the demand for wallpaper.Suppose the government levies an equivalent tax on potted plants and wallpaper.The deadweight loss would be larger in the market for

When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic,

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?

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

Which of the following statements is correct regarding the imposition of a tax on gasoline?

The deadweight loss from a tax of $5 per unit will be smallest in a market with

Figure 8-12 -Refer to Figure 8-12.Which of the following statements is not correct?

Figure 8-12 -Refer to Figure 8-12.Which of the following statements is correct?

Figure 8-12 -Refer to Figure 8-12.Which of the following combinations will minimize the deadweight loss from a tax?

When a tax is imposed on a good for which both demand and supply are very elastic,

The deadweight loss from a $3 tax will be largest in a market with

The deadweight loss from a tax of $8 per unit will be smallest in a market with

Figure 8-12 -Refer to Figure 8-12.Which of the following combinations will maximize the deadweight loss from a tax?

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?

The deadweight loss from a tax

When a good is taxed,the burden of the tax