Exam 4: Market Outcomes and Tax Incidence

Use the following information to answer the next questions. The following graph depicts a market where a tax has been imposed. P_e was the equilibrium price before the tax was imposed, and Q_e was the equilibrium quantity. After the tax, P_C is the price that consumers pay, and P_S is the price that producers receive. Q_T units are sold after the tax is imposed. NOTE: The areas B and C are rectangles that are divided by the supply curve S_T. Include both sections of those rectangles when choosing your answers. -A tax on apples would cause apple growers to suffer because

A market has reached an efficient outcome when

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

Explain why the elasticities of supply and demand determine who bears more of the burden of a tax, consumers or producers.

When a good with a perfectly inelastic demand is taxed, the incidence of the tax is borne

Use a figure with intersecting supply and demand curves to explain how a change in producer's direct costs such as manufacturing and transport expenses) affects social welfare.

All else held constant, a decrease in the price of a good would necessarily

The incidence of a tax reflects

Consumers will lose no consumer surplus due to a tax if

If a tax is imposed on a good with a perfectly inelastic demand, the burden of the tax will be borne

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

Consumer surplus is defined as the

Which of the following statements is concerned with efficiency rather than equity?

The revenue generated from a tax equals the

Priscilla is willing to pay $65 for a new pair of shoes. Pandora is willing to pay $50 for the same shoes. The shoes have a price of $45. What is the total consumer surplus for Priscilla and Pandora?

Producers will lose no producer surplus due to a tax if supply in their market is perfectly elastic because

A tax on consumers of a good would shift the_______ curve down and cause the price paid by consumers to_______ .

The incidence of a tax is determined by

Producer surplus is depicted by the area

Another name for social welfare is