Econ 202 Ch 8 Q&A – Flashcards
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Taxes on labor encourage which of the following?
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workers to work overtime
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A tax levied on the buyers of a good shifts the
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demand curve downward (or to the left)
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For a good that is taxed, the area of the relevant supply-and-demand graph that represents government's tax revenue is
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smaller than the area that represents the loss of consumer surplus and producer surplus caused by the tax
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If the labor supply curve is very elastic, a tax on labor
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has a large deadweight loss
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If the labor supply curve is nearly vertical, a tax on labor
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has little impact on the amount of work that workers are willing to do
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If the tax on a good is doubled, the deadweight loss of the tax
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quadruples
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The Laffer curve illustrates that
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tax revenue first rises, then falls as a tax increases
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The higher a country's tax rates, the more likely that country will be
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on the negatively sloped part of the Laffer curve
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Other things equal, the deadweight loss of a tax
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increase as the size of the tax increase, and the increase in the deadweight loss is more rapid than the increase in the size of the tax
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The Social Security tax is a tax on
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labor
