Application: The Costs of Taxation

According to Chapter 8, what is the primary effect of a tax on a good on the price buyers pay and the price sellers receive?

What is the term for the fall in total surplus that results when a tax distorts a market outcome?

In the example where Joe values cleaning Jane's house at $120 and Joe's opportunity cost is $80, what happens if the government imposes a $50 tax on cleaning services?

What determines the size of the deadweight loss from a tax?

A tax on which of the following goods would likely cause the largest deadweight loss?

According to the Case Study 'The Deadweight Loss Debate,' what is the primary reason economists disagree about the size of the deadweight loss from labor taxes?

If the government triples the size of a tax on a good, what happens to the deadweight loss?

What does the Laffer curve illustrate?

In Figure 3 'How a Tax Affects Welfare,' if the price buyers pay is PB, the price sellers receive is PS, and the quantity sold is Q2, what area represents the total tax revenue for the government?

The supply-side economics argument championed by Ronald Reagan was based on the idea that:

Why do taxes cause deadweight losses?

If the supply of a good is perfectly inelastic, what is the deadweight loss of a tax on that good?

In the welfare analysis diagram in Figure 3, which areas represent the loss of consumer surplus due to the tax?

In the welfare analysis diagram in Figure 3, which areas represent the deadweight loss of the tax?

When a small tax is imposed on a good, tax revenue is small. If the tax is doubled, what happens to the tax revenue and deadweight loss?

Which group of people is most likely to have a more elastic supply of labor, according to the 'Deadweight Loss Debate' case study?

Based on the example in Figure 3, what is the loss in producer surplus when the tax is implemented?

Why might an economist argue that a tax on food has a small deadweight loss but is still not a good tax?

If a market has an equilibrium price of $10 and quantity of 100 units, and a $2 tax per unit is imposed, causing the new equilibrium quantity to be 90 units, what is the deadweight loss?

Based on the 2010 ECB paper mentioned in the 'New Research on Taxation' news box, what would happen to tax revenues in the U.S. if labor taxes were raised?

If a tax on a good with a relatively inelastic supply and a relatively elastic demand is imposed, who bears most of the tax burden?

Consider a market where the pre-tax equilibrium is 100 units at a price of $10. A tax of $3 per unit is imposed. The new quantity is 80. The price buyers pay is $12. What is the price sellers receive?

Using the numbers from the previous question (Tax=$3, Q moves from 100 to 80, PB=$12, PS=$9), what is the government's tax revenue?

Using the numbers from the previous questions (Tax=$3, Q moves from 100 to 80, PB=$12, PS=$9), what is the deadweight loss?

Who are the two main groups whose welfare is analyzed when determining the effects of a tax, besides the government?

If a tax is imposed on a market where both supply and demand are very elastic, the deadweight loss will be:

What does Ronald Reagan's story about making movies during World War II, as related in the case study, illustrate?

If a tax on a good is increased from $1 to $3 per unit, the deadweight loss will increase by a factor of:

According to the analysis in Chapter 8, why does a tax on a good shrink the size of the market?

If the government wants to raise a certain amount of revenue with the smallest possible deadweight loss, it should tax goods with:

In Figure 4, 'The Deadweight Loss,' what do the lost gains from trade represent?

If the marginal tax rate on labor is 40 percent, what does this mean?

Suppose a tax of $1 per unit creates a deadweight loss of $50. If the tax is increased to $2 per unit, what will be the new deadweight loss, assuming a linear supply and demand curve?

As the size of a tax on a good increases from zero to a very large amount, tax revenue will:

According to the analysis in Chapter 8, the total loss of welfare to buyers and sellers from a tax is:

In the welfare analysis of a tax, how is the public benefit from the tax measured?

If a government imposed a 10,000 percent tax on hollow-tipped bullets, as proposed by Senator Moynihan, what would be the likely outcome for tax revenue?

A tax on insulin is likely to cause a smaller deadweight loss than a tax of the same size on a cruise vacation because:

Suppose that for every one dollar increase in a tax, the deadweight loss increases by two dollars. This relationship suggests that:

The key insight for understanding how a tax affects welfare is that a tax:

If tax revenue is $300 and the deadweight loss from the tax is $100, what is the total decrease in consumer and producer surplus?

An economist who believes that the labor supply is very inelastic would argue that a tax on labor has a:

What is the relationship between the deadweight loss and tax revenue as a tax on a good continuously increases from zero?

If the price paid by buyers is $8, the price received by sellers is $6, and the quantity sold is 50 units, what is the per-unit tax?

What is the ultimate source of the deadweight loss from a tax?

The analysis in Chapter 8 indicates that the cost of taxes to buyers and sellers is composed of what two components?

Suppose a tax is levied on a good. The price paid by buyers increases by $0.60, and the price received by sellers decreases by $0.40. What is the size of the tax?

If a political candidate argues for a large tax cut by claiming it will increase tax revenue, they are implicitly assuming that the economy is currently on which part of the Laffer curve?

Based on the welfare analysis in Figure 3, total surplus after the tax is imposed is represented by which areas?

If a tax causes no deadweight loss, what must be true about either the supply or the demand for the good?