Question 1

The cost to society created by distortions in the market as a result of a tax is also known as

Accepted Answer

Deadweight loss refers to the cost to society created by distortions in the market as a result of a tax. Social distortion is a less commonly used term and could refer to a variety of distortions in society. Fiscal externality and fiduciary imbalance may be related to government finances, but they do not specifically refer to the costs of tax distortions. Budget deficit refers to the amount by which government spending exceeds revenue in a given period, and is not directly related to the costs of tax distortions.

Question 2

Compared to producers, consumers will lose the lesser amount of surplus from a tax if

Accepted Answer

When demand is more elastic than supply, consumers are more sensitive to changes in price and therefore will adjust their consumption more in response to a tax. This means that producers will be forced to bear more of the tax burden, resulting in less loss of surplus for consumers.

Question 3

In the long run, both supply and demand tend to become more elastic. This suggests that, in the long run, the

Accepted Answer

As both supply and demand become more elastic in the long run, the responsiveness of consumers and producers to changes in price increases. Therefore, a tax will cause a greater distortion in the market and create a larger deadweight loss in the long run compared to the short run.

Question 4

The net cost to society from the imposition of a tax is also known as

Accepted Answer

Deadweight loss is the net loss of economic welfare resulting from a tax. It is the difference between the total loss to society caused by the tax and the total net revenue received by the government from the tax. Choices A, B, C, and E do not accurately describe the net cost to society from the imposition of a tax.

Question 5

Compared to producers, consumers will lose the greater amount of surplus from a tax if

Accepted Answer

When demand is less elastic than supply, consumers are less responsive to price changes and are more likely to bear a larger burden of the tax, leading to a greater loss in consumer surplus.

Question 6

A tax on milk would likely cause a decrease in the price of

Accepted Answer

The answer of A tax on milk would likely cause...

Question 7

Gasoline and ethanol are substitute fuels. If the government increases taxes on gasoline, this will cause a(n) _______in deadweight loss in the market for gasoline and a(n)_______ .

Accepted Answer

If the government increases taxes on gasoline, the demand for gasoline will decrease as it becomes more expensive. This will cause a decrease in deadweight loss in the market for gasoline. However, as gasoline and ethanol are substitute fuels, an increase in the price of gasoline will lead to an increase in demand for ethanol, causing an increase in the price of ethanol. Therefore, the correct answer is C, an increase in deadweight loss in the market for gasoline and an increase in the price of ethanol.

Question 8

A tax creates no deadweight loss only when either supply or demand is

Accepted Answer

A perfectly inelastic demand or supply curve means that the quantity demanded or supplied does not change at all in response to a change in price. Therefore, a tax can be imposed without causing a deadweight loss if either the demand or supply is perfectly inelastic, because the price does not change and consumers and producers do not change their behavior.

Question 9

The revenue generated from a tax equals the

Accepted Answer

This is because the revenue generated from a tax is equal to the tax per unit multiplied by the quantity sold after the tax is imposed. This can be represented by the formula R=TQ, where R is revenue, T is the tax per unit, and Q is the quantity sold after the tax is imposed.

Question 10

The deadweight loss from a tax is likely to be greater with a good that has

Accepted Answer

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

Question 11

If the government wants to raise taxes while generating the least amount of deadweight loss, it should raise taxes on a good with a

Accepted Answer

When the demand for a good is perfectly inelastic, consumers will continue to purchase the same quantity of the good regardless of a price increase. Therefore, there will be minimal deadweight loss as a result of the tax increase.

Question 12

The per-unit dollar amount of a tax times the quantity sold after the tax is imposed equals

Accepted Answer

The per-unit dollar amount of a tax times the quantity sold after the tax is imposed gives us the total tax revenue collected by the government.

Question 13

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 is

Accepted Answer

The deadweight loss from the tax is the loss in consumer and producer surplus that is not offset by tax revenue, which is $125 million (total loss) - $100 million (tax revenue) = $25 million.

Question 14

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 is

Accepted Answer

The loss in consumer and producer surplus plus the deadweight loss represents the total efficiency loss caused by the tax, which is $295 million. The tax revenue, then, must be the difference between the total efficiency loss and just the loss in consumer and producer surplus, which is $295 million - $250 million = $45 million.

Question 15

The deadweight loss from a tax is likely to be less with a good that has

Accepted Answer

The deadweight loss from a tax is likely to be less with a good that has few substitutes because consumers and producers have fewer alternatives to avoid the tax, leading to smaller changes in quantity bought and sold, and thus a smaller deadweight loss.

Question 16

Peanut butter and jelly are complements. If a tax is imposed on peanut butter, how will that affect the market for jelly?

Accepted Answer

Since peanut butter and jelly are complements, an increase in the price of peanut butter will lead to a decrease in the demand for peanut butter. As people buy less peanut butter, they will also buy less jelly to accompany it, leading to a decrease in the demand for jelly along with a decrease in price.

Question 17

Deadweight loss is defined as

Accepted Answer

Deadweight loss is the loss of economic efficiency that occurs when the equilibrium for a good or service is not achieved or is not achievable. In other words, it is the cost to society created by distortions in the market, such as taxes and subsidies, which result in a reduction in the quantity bought and sold, and an increase in the price paid by the consumer.

Question 18

In the long run, both supply and demand tend to become more elastic. This suggests that, in the long run, the

Accepted Answer

As both supply and demand become more elastic in the long run, it means that producers and consumers are more responsive to changes in price. This makes it harder for the government to collect revenue from taxes as consumers are more likely to switch to substitutes and producers are more likely to decrease production or find alternatives. Therefore, tax revenue will be lower than it is in the short run.

Question 19

The deadweight loss from a tax is equal to one half of

Accepted Answer

The deadweight loss from a tax is equal to the loss of welfare resulting from the tax, which is the reduction in consumer and producer surplus. This reduction is caused by a decrease in the quantity sold, which is directly proportional to the amount of the tax. Therefore, the deadweight loss is equal to the amount of the tax multiplied by the decrease in quantity sold.

Question 20

Butter and margarine are substitute goods. A tax on butter will have what effect on the market for margarine?

Accepted Answer

Since butter and margarine are substitutes, consumers are likely to switch from butter to margarine if the price of butter increases. This increase in demand for margarine will cause its price to rise. Therefore, a tax on butter will have a positive effect on the market for margarine, increasing its demand and price.

Quiz 4: Market Outcomes and Tax Incidence

The cost to society created by distortions in the market as a result of a tax is also known as

Compared to producers, consumers will lose the lesser amount of surplus from a tax if

In the long run, both supply and demand tend to become more elastic. This suggests that, in the long run, the

The net cost to society from the imposition of a tax is also known as

Compared to producers, consumers will lose the greater amount of surplus from a tax if

A tax on milk would likely cause a decrease in the price of

Gasoline and ethanol are substitute fuels. If the government increases taxes on gasoline, this will cause a(n) _in deadweight loss in the market for gasoline and a(n) _ .

A tax creates no deadweight loss only when either supply or demand is

The revenue generated from a tax equals the

The deadweight loss from a tax is likely to be greater with a good that has

If the government wants to raise taxes while generating the least amount of deadweight loss, it should raise taxes on a good with a

The per-unit dollar amount of a tax times the quantity sold after the tax is imposed equals

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 is

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 is

The deadweight loss from a tax is likely to be less with a good that has

Peanut butter and jelly are complements. If a tax is imposed on peanut butter, how will that affect the market for jelly?

Deadweight loss is defined as

In the long run, both supply and demand tend to become more elastic. This suggests that, in the long run, the

The deadweight loss from a tax is equal to one half of

Butter and margarine are substitute goods. A tax on butter will have what effect on the market for margarine?

Quiz 4: Market Outcomes and Tax Incidence

The cost to society created by distortions in the market as a result of a tax is also known as

Compared to producers, consumers will lose the lesser amount of surplus from a tax if

In the long run, both supply and demand tend to become more elastic. This suggests that, in the long run, the

The net cost to society from the imposition of a tax is also known as

Compared to producers, consumers will lose the greater amount of surplus from a tax if

A tax on milk would likely cause a decrease in the price of

Gasoline and ethanol are substitute fuels. If the government increases taxes on gasoline, this will cause a(n) _______in deadweight loss in the market for gasoline and a(n) _______ .

A tax creates no deadweight loss only when either supply or demand is

The revenue generated from a tax equals the

The deadweight loss from a tax is likely to be greater with a good that has

If the government wants to raise taxes while generating the least amount of deadweight loss, it should raise taxes on a good with a

The per-unit dollar amount of a tax times the quantity sold after the tax is imposed equals

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 is

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 is

The deadweight loss from a tax is likely to be less with a good that has

Peanut butter and jelly are complements. If a tax is imposed on peanut butter, how will that affect the market for jelly?

Deadweight loss is defined as

In the long run, both supply and demand tend to become more elastic. This suggests that, in the long run, the

The deadweight loss from a tax is equal to one half of

Butter and margarine are substitute goods. A tax on butter will have what effect on the market for margarine?

Gasoline and ethanol are substitute fuels. If the government increases taxes on gasoline, this will cause a(n) _in deadweight loss in the market for gasoline and a(n) _ .