Exam 4: Supply and Demand: Applications and Extensions

The state of Florida is considering putting an excise tax on either good X or good Y. An economist discovers the supply of good X is more elastic than the supply of good Y, while the demand elasticities are identical. Which good should Florida tax in order to minimize the deadweight loss of the tax?

A progressive tax

Suppose the market equilibrium price of wheat is $5 per bushel, and the government sets a price floor of $7 per bushel to aid growers. What is the most likely result of this action?

Which of the following generalizations about the benefit of a subsidy is correct?

Use the figure below to answer the following question(s). Figure 4-7 -Refer to Figure 4-7. Which of the following is true for the tax illustrated?

Use the figure below to answer the following question(s). Figure 4-12 -Refer to Figure 4-12. The exhibit illustrates the impact of granting a subsidy on a particular good. Which of the following is true for this subsidy given the information provided in the exhibit?

Use the figure below to answer the following question(s). Figure 4-7 -Refer to Figure 4-7. The supply curve S₁ and the demand curve D indicate initial conditions in the market for gasoline. A $.60-per-gallon excise tax on gasoline is levied, which shifts the supply curve from S₁ to S₂. Imposing the tax causes the equilibrium price of gasoline to increase from

If the government wants to raise tax revenue and shift most of the tax burden to the sellers it would impose a tax on a good with a

Use the figure below to answer the following question(s). Figure 4-10 -Refer to Figure 4-11. On the Laffer curve shown, tax revenue could be increased by

Data from the effects of the substantial tax rate reductions in the 1980s

According to the Laffer curve,

A payment the government makes to either the buyer or seller, usually on a per-unit basis, when a good or service is purchased or sold is called a

Government programs such as Medicare substantially subsidize health care purchases by some consumers in the U.S. economy. Who benefits from these subsidies? How do they affect the price of health care? If you are not a recipient of this program, are you made better or worse off by the subsidy? Explain.

The more elastic the supply of a product, the more likely it is that the

Figure 4-22 -Refer to Figure 4-22. From this tax the government will collect a total of

Figure 4-25 -Refer to Figure 4-25. Producer surplus before the tax was levied is represented by area

The City of Greenville needs to raise revenue. Alderman Black has proposed a $10 tax on red cars in the city, currently numbering 2,000. Mayor White, who wants more than $20,000 in revenue, proposes taxing these cars at $100 each. Councilwoman Bluestone goes even farther, suggesting a $1,000 per red car tax, arguing that her proposal will raise $2 million. If maximizing tax revenue is the only consideration, which proposal should pass? Why?

Figure 4-25 -Refer to Figure 4-25. The equilibrium price before the tax is imposed is

When several hurricanes hit Florida in 2004, a number of local governments imposed price controls that prevented sellers from raising their prices for badly needed products like plywood and generators. In the areas where the controls were imposed, they resulted in

Which of the following statements is true?