Exam 8: Applications: the Costs of Taxation

Scenario 8-2 Roland mows Karla's lawn for $25. Roland's opportunity cost of mowing Karla's lawn is $20, and Karla's willingness to pay Roland to mow her lawn is $28. -Refer to Scenario 8-2. If Karla hires Roland to mow her lawn, Roland's producer surplus is

Which of the following statements is correct regarding a tax on a good and the resulting deadweight loss?

When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic.

If the labor supply curve is nearly vertical, a tax on labor

A $2 tax per gallon of paint placed on the buyers of paint will shift the demand curve

For the purpose of analyzing the gains and losses from a tax on a good, we use tax revenue as a direct measure of the

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?

When a tax is levied on a good,

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2. The amount of deadweight loss as a result of the tax is

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. Without a tax, the equilibrium price and quantity are

The supply curve for whiskey is the typical upward-sloping straight line, and the demand curve for whiskey is the typical downward-sloping straight line. When whiskey is taxed, the area on the relevant supply-and-demand graph that represents

In terms of gains from trade, why is it true that taxes cause deadweight losses?

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The imposition of the tax causes the price paid by buyers to

Economists use the government's tax revenue to measure the public benefit from a tax.

Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much tax revenue is collected after the tax is imposed?

Using demand and supply diagrams, show the difference in deadweight loss between (a) a market with inelastic demand and supply and (b) a market with elastic demand and supply.

The loss in total surplus resulting from a tax is called

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. Total surplus with the tax in place is

Suppose a tax is imposed on baseball bats. In which of the following cases will the tax cause the equilibrium quantity of baseball bats to shrink by the smallest amount?

A tax