Exam 8: Application: the Costs of Taxation

Figure 8-18 -Refer to Figure 8-18. Suppose the government imposes a $1 tax in each of the four markets represented by supply curves S1, S2, S3, and S4. The deadweight will be the largest in the market represented by

Suppose that the market for product X is characterized by a typical, downward-sloping, linear demand curve and a typical, upward-sloping, linear supply curve. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $4 tax per unit?

When a tax is levied on a good, the buyers and sellers of the good share the burden,

Figure 8-13 -Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The amount of tax revenue collected by the government is

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. When the tax is imposed in this market, the price buyers effectively pay is

Figure 8-13 -Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The per-unit burden of the tax on sellers is

The demand for energy drinks is more elastic than the demand for milk. Would a tax on energy drinks or a tax on milk have a larger deadweight loss? Explain.

A tax on a good causes the size of the market to increase.

Other things equal, the deadweight loss of a tax

Figure 8-26 -Refer to Figure 8-26. How much is total surplus at the market equilibrium?

Suppose that the market for large, 64-ounce soft drinks in the town of Pudgyville is characterized by a typical, downward-sloping, linear demand curve and a typical, upward-sloping, linear supply curve. The market is initially in equilibrium with 1,000 soft drinks sold per day. The newly-elected Mayor of Pudgyville wants to tax 64-ounce soft drinks. She is considering either a $0.10 tax or a $0.30 tax. Her chief economic advisor estimates that the number of soft drinks sold after a $0.10 tax will be 900 and after a $0.30 tax will be 500. Which tax is better?

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

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2. The imposition of the tax causes the price paid by buyers to

Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, the

The amount of deadweight loss from a tax depends upon the

Figure 8-29 -Refer to Figure 8-29. As the size of the tax increases from $3 to $6 to $9, what happens to tax revenues?

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. The equilibrium price before the tax is imposed is

In which of the following instances would the deadweight loss of the tax on cartons of cigarettes increase by a factor of 9?

A tax on a good

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. The loss in producer surplus caused by the tax is measured by the area