econ hw 5 – Flashcard
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If a tax shifts the demand curve upward (or to the right), we can infer that the tax was levied on
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We cannot infer anything because the shift described is not consistent with a tax.
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Suppose Rebecca needs a dog sitter so that she can travel to her sister's wedding. Rebecca values dog sitting for the weekend at $200. Susan is willing to dog sit for Rebecca so long as she receives at least $175. Rebecca and Susan agree on a price of $185. Suppose the government imposes a tax of $30 on dog sitting. The tax has made Rebecca and Susan worse off by a total of
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$25
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The amount of deadweight loss from a tax depends upon the
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All of the above are correct.
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Suppose that a university charges students a $100 "tax" to register for business classes. The next year the university raises the "tax" to $150. The deadweight loss from the "tax" triples.
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FALSE
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When a good is taxed, the deadweight loss is larger the more elastic are demand and supply.
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TRUE
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The loss in total surplus resulting from a tax is called
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A DEADWEIGHT LOSS
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Suppose the government imposes a tax of P' - P'''. The area measured by J+K+L+M represents
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total surplus after the tax.
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The Social Security tax is a labor tax.
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t
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The view held by Arthur Laffer and Ronald Reagan that cuts in tax rates would encourage people to increase the quantity of labor they supplied became known as
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supply-side economics
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The price that buyers effectively pay after the tax is imposed is
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p3
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Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. The tax revenue is
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(P2-P8) x Q2.
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If there is only one unit of the good and if the buyers bid against each other for the right to purchase it, then the consumer surplus will be
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$10 or slightly less.
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If the government allowed a free market for transplant organs such as kidneys to exist, critics argue that such a market would
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benefit rich people but not poor people.
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Which area represents consumer surplus at a price of P2?
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AFG
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All else equal, an increase in demand will cause an increase in producer surplus.
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true
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Area A represents
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the increase in producer surplus to those producers already in the market when the price increases from P1 to P2.
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The area below the price and above the supply curve measures the producer surplus in a market.
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true
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If the price were P3, consumer surplus would be represented by the area
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A
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If the supply curve is S, the demand curve is D, and the equilibrium price is $100, what is the producer surplus?
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$2,500
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Suppose a tax of $4 per unit is imposed on a good, and the tax causes the equilibrium quantity of the good to decrease from 2,000 units to 1,700 units. The tax decreases consumer surplus by $3,000 and decreases producer surplus by $4,400. The deadweight loss of the tax is
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600
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Without a tax, producer surplus in this market is
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$2,400.
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If the supply curve is S and the demand curve shifts from D to D', what is the change in producer surplus?
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Producer surplus increases by $3,125
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The Laffer curve relates
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the tax rate to tax revenue raised by the tax.
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If the market price is $1,000, the producer surplus in the market is
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300
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The more elastic are supply and demand in a market, the greater are the distortions caused by a tax on that market, and the more likely it is that a tax cut in that market will raise tax revenue.
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True
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What is the consumer surplus if the price is $100?
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2500
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Suppose televisions are a normal good and buyers of televisions experience a decrease in income. As a result, consumer surplus in the television market
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may increase, decrease, or remain unchanged.
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When the government imposes taxes on buyers and sellers of a good, society loses some of the benefits of market efficiency.
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TRUE
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Economists disagree on whether labor taxes cause small or large deadweight losses. This disagreement arises primarily because economists hold different views about
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the elasticity of labor supply.
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At Nick's Bakery, the cost to make a cheese danish is $1.50 per danish. As a result of selling ten danishes, Nick experiences a producer surplus in the amount of $20. Nick must be selling his danishes for
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$3.50 each
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If Karla hires Roland to mow her lawn, Roland's producer surplus is
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$5
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Externalities are
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side effects passed on to a party other than the buyers and sellers in the market
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You have two essentially identical extra tickets to the Midwest Regional Sweet 16 game in the men's NCAA basketball tournament. The table shows the willingness to pay of the four potential buyers in the market for a ticket to the game. You hold an auction to sell the two tickets. Michael and Earvin each offer to pay $360 for a ticket, and you sell them the two tickets. What is the total consumer surplus in the market?
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$180
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If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer surplus relevant to that purchase is
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zero
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Connie can clean windows in large office buildings at a cost of $1 per window. The market price for window-cleaning services is $3 per window. If Connie cleans 100 windows, her producer surplus is $100.
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FALSE
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Donald produces nails at a cost of $350 per ton. If he sells the nails for $500 per ton, his producer surplus is
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$150
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When the price rises from P1 to P2, which area represents the increase in producer surplus due to new producers entering the market?
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B
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If the market price of an orange is $0.65, then consumer surplus amounts to
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$3.60.
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Economists dismiss the idea that lower tax rates can lead to higher tax revenue, because there is a consensus that the relevant elasticities of demand and supply are very low.
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FALSE
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Deadweight loss measures the loss
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in a market to buyers and sellers that is not offset by an increase in government revenue.
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Which of the following statements is correct?
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C. Total surplus before the tax is imposed is $500
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The per-unit burden of the tax on buyers is
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3
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At equilibrium, total surplus is represented by the area
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A+B+C+D+H+F.
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Supply-side economics is a term associated with the views of
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Ronald Reagan and Arthur Laffer.
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Total surplus in a market is consumer surplus minus producer surplus.
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FALSE
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The amount of deadweight loss that results from a tax of a given size is determined by
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the price elasticities of demand and supply.
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Alex is willing to pay $10, and Bella is willing to pay $8, for 1 pound of ribeye steak. When the price of ribeye steak increases from $9 to $11,
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Alex experiences a decrease in consumer surplus, but Bella does not.
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Which of the following quantities decrease in response to a tax on a good?
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A. the equilibrium quantity in the market for the good, producer surplus, and the well-being of buyers of the good
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The price that buyers effectively pay after the tax is imposed is
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P3
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If the market price is $105,
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Sam's consumer surplus is $30 and total consumer surplus is $90.
