Question :
31.Assumethesupplycurveforcigarsisatypical,upward-slopingstraightline,andthedemandcurveforcigarsisatypical,downward-slopingstraightline.Supposetheequilibriumquantityinthemarketforcigarsis1,000permonthwhenthereisnotax.T : 1262569
31.Assumethesupplycurveforcigarsisatypical,upward-slopingstraightline,andthedemandcurveforcigarsisatypical,downward-slopingstraightline.Supposetheequilibriumquantityinthemarketforcigarsis1,000permonthwhenthereisnotax.Thenataxof$0.50percigarisimposed.Theeffectivepricepaidbybuyersincreasesfrom
a.Thedemandforcigarsislesselasticthanthesupplyofcigars.
b.Thetaxcausesadecreaseinconsumersurplusof$390andadecreaseinproducersurplusof$97.50.
c.Thedeadweightlossofthetaxis$12.50.
d.Alloftheabovearecorrect.
32.Supposethatpolicymakersareconsideringplacingataxoneitheroftwomarkets.InMarketA,thetaxwillhaveasignificanteffectonthepriceconsumerspay,butitwillnotaffectequilibriumquantityverymuch.InMarketB,thesametaxwillhaveonlyasmalleffectonthepriceconsumerspay,butitwillhavealargeeffectontheequilibriumquantity.Otherfactorsareheldconstant.Inwhichmarketwillthetaxhavealargerdeadweightloss?
a.MarketA
b.MarketB
c.Thedeadweightlosswillbethesameinbothmarkets.
d.Thereisnotenoughinformationtoanswerthequestion.
33.Consideragoodtowhichaper-unittaxapplies.Thegreaterthepriceelasticitiesofdemandandsupplyforthegood,the
a.smallerthedeadweightlossfromthetax.
b.greaterthedeadweightlossfromthetax.
c.moreefficientisthetax.
d.moreequitableisthedistributionofthetaxburdenbetweenbuyersandsellers.
34.Consideragoodtowhichaper-unittaxapplies.Thesizeofthedeadweightthatresultsfromthetaxissmaller,the
a.largeristhepriceelasticityofdemand.
b.smalleristhepriceelasticityofsupply.
c.largeristheamountofthetax.
d.Alloftheabovearecorrect.
35.Consideragoodtowhichaper-unittaxapplies.Thesizeofthedeadweightthatresultsfromthetaxissmaller,the
a.lesselasticisthedemandforthegood.
b.lesselasticisthesupplyofthegood.
c.smalleristheamountofthetax.
d.Alloftheabovearecorrect.
36.Supposethegovernmentplacesaper-unittaxonagood.Thesmallerthepriceelasticitiesofdemandandsupplyforthegood,the
a.smallerthedeadweightlossfromthetax.
b.greaterthedeadweightlossfromthetax.
c.lessefficientisthetax.
d.moreequitableisthedistributionofthetaxburdenbetweenbuyersandsellers.
37.Suppose thepriceofmilkis$2.39pergallon,andtheequilibriumquantityofmilkis100 thousandgallonsperdaywithnotaxonmilk.Startingfromthisinitialsituation,whichofthefollowingscenarioswouldresultinthesmallestdeadweightloss?
a.The priceelasticityofdemandformilkis 0.3,thepriceelasticityofsupplyformilk is0.7,andthemilktaxamountsto$0.40pergallon.
b.The priceelasticityofdemandformilkis 0.2,thepriceelasticityofsupplyformilk is0.5,andthemilktaxamountsto$0.30pergallon.
c.The priceelasticityofdemandformilkis 0.2,thepriceelasticityofsupplyformilk is0.7,andthemilktaxamountsto$0.30pergallon.
d.The priceelasticityofdemandformilkis 0.1,thepriceelasticityofsupplyformilk is0.5,andthemilktaxamountsto$0.20pergallon.
38.Assume the priceof gasolineis $2.00 pergallon, andthe equilibrium quantityof gasolineis 10 milliongallons perdaywithnotaxongasoline.Startingfromthisinitialsituation,whichofthefollowingscenarioswouldresultinthelargestdeadweightloss?
a.Thepriceelasticityofdemandforgasolineis0.1;thepriceelasticityofsupplyforgasolineis0.6;andthegasolinetaxamountsto$0.20pergallon.
b.Thepriceelasticityofdemandforgasolineis0.1;thepriceelasticityofsupplyforgasolineis0.4;andthegasolinetaxamountsto$0.20pergallon.
c.Thepriceelasticityofdemandforgasolineis0.2;thepriceelasticityofsupplyforgasolineis0.6;andthegasolinetaxamountsto$0.30pergallon.
d.Thereisinsufficientinformationtomakethisdetermination.
39.Assume the priceof gasolineis $2.40 pergallon, andthe equilibrium quantityof gasolineis 12 milliongallons perdaywithnotaxongasoline.Startingfromthisinitialsituation,whichofthefollowingscenarioswouldresultinthelargestdeadweightloss?
a.A10percentincreaseinthepriceofgasolinereducesthequantityofgasolinedemandedby2percentanditincreasesthequantityofgasolinesuppliedby5percent;andthetaxongasolineamountsto$0.40pergallon.
b.A10percentincreaseinthepriceofgasolinereducesthequantityofgasolinedemandedby2percentanditincreasesthequantityofgasolinesuppliedby7percent;andthetaxongasolineamountsto$0.40pergallon.
c.A10percentincreaseinthepriceofgasolinereducesthequantityofgasolinedemandedby1percentanditincreasesthequantityofgasolinesuppliedby8percent;andthetaxongasolineamountsto$0.35pergallon.
d.Thereisinsufficientinformationtomakethisdetermination.
40.Otherthingsequal,thedeadweightlossofatax
a.decreasesasthesizeofthetaxincreases.
b.increasesasthesizeofthetaxincreases,buttheincreaseinthedeadweightlossislessrapidthantheincreaseinthesizeofthetax.
c.increasesasthesizeofthetaxincreases,andtheincreaseinthedeadweightlossismorerapidthantheincreaseinthesizeofthetax.
d.increasesasthepriceelasticitiesofdemandand/orsupplyincrease,butthedeadweightlossdoesnotchangeasthesizeofthetaxincreases.