53) If the government eliminates a tax on a good with a perfectly elastic supply, who benefits most?

A) buyers

B) sellers

C) buyers if the demand is also perfectly elastic, otherwise sellers

D) buyers if the demand is unit elastic, otherwise sellers

E) Buyers and sellers benefit equally.

54) If the elasticity of demand for a product equals 3 and the supply is perfectly elastic, then if a tax is imposed on this product,

A) the buyer pays all the tax.

B) the seller pays all the tax.

C) the buyer pays 3/4 of the tax.

D) the seller pays 3/4 of the tax.

E) the buyer pays 4/3 of the tax.

55) The loss to society resulting from a tax includes the

A) deadweight loss.

B) consumer surplus paid to the government in the form of tax revenue.

C) producer surplus paid to the government in the form of tax revenue.

D) deadweight loss plus the consumer surplus and producer surplus paid to the government as tax revenue.

E) deadweight loss minus the tax revenue collected by the government.

56) The inefficiency of a sales tax on a good is ultimately the result of the

A) low tax revenue earned by the government relative to the cost of collection.

B) wedge between what buyers pay for the good and what sellers receive for the good.

C) buyers being unable to avoid paying the tax.

D) sellers being unable to avoid paying the tax.

E) increase in the consumer surplus that is more than offset by the decrease in the producer surplus.

57) A tax

A) places a wedge between the price paid by the buyers and the price received by the sellers.

B) reduces consumer surplus and producer surplus.

C) decreases government spending.

D) Both answers A and B are correct.

E) None of the above answers is correct.

58) When a tax is imposed on a good, at the after-tax equilibrium the marginal benefit of the last unit produced ________ the marginal cost.

A) equals

B) is greater than

C) is less than

D) can be calculated but is not comparable to

E) The premise of the question is incorrect because after a tax is imposed, it becomes impossible to determine the marginal benefit and the marginal cost.

59) When a tax is imposed on a good or a service, the marginal benefit of the last unit bought ________ the marginal cost of the last unit.

A) is equal to

B) is greater than

C) is less than

D) None of the above answers is correct because there is no consistent relationship between the marginal benefit of the last unit and its marginal cost.

E) is not able to be compared to

60) If neither the demand nor supply of a good is perfectly elastic or inelastic, a tax on the good ________ consumer surplus and ________ producer surplus.

A) decreases; decreases

B) increases; increases

C) decreases; increases

D) increases; decreases

E) decreases; does not change

61) When a product is taxed,

A) part of the initial consumer surplus goes to the government as revenue.

B) part of the initial consumer surplus becomes a deadweight loss.

C) the producer surplus never changes because consumers pay taxes, not producers.

D) Both answers A and B are correct.

E) Both answers B and C are correct.

62) The size of the deadweight loss, or excess burden, of a tax depends on the

A) amount of producer surplus but not the amount of consumer surplus because it is the producers who send the tax revenues to the government.

B) strength of demand.

C) strength of supply.

D) elasticities of demand and supply.

E) number of demanders and the number of suppliers.

53) If the government eliminates a tax on a good with a perfectly elastic supply, who benefits most?

A) buyers

B) sellers

C) buyers if the demand is also perfectly elastic, otherwise sellers

D) buyers if the demand is unit elastic, otherwise sellers

E) Buyers and sellers benefit equally.

54) If the elasticity of demand for a product equals 3 and the supply is perfectly elastic, then if a tax is imposed on this product,

A) the buyer pays all the tax.

B) the seller pays all the tax.

C) the buyer pays 3/4 of the tax.

D) the seller pays 3/4 of the tax.

E) the buyer pays 4/3 of the tax.

55) The loss to society resulting from a tax includes the

A) deadweight loss.

B) consumer surplus paid to the government in the form of tax revenue.

C) producer surplus paid to the government in the form of tax revenue.

D) deadweight loss plus the consumer surplus and producer surplus paid to the government as tax revenue.

E) deadweight loss minus the tax revenue collected by the government.

56) The inefficiency of a sales tax on a good is ultimately the result of the

A) low tax revenue earned by the government relative to the cost of collection.

B) wedge between what buyers pay for the good and what sellers receive for the good.

C) buyers being unable to avoid paying the tax.

D) sellers being unable to avoid paying the tax.

E) increase in the consumer surplus that is more than offset by the decrease in the producer surplus.

57) A tax

A) places a wedge between the price paid by the buyers and the price received by the sellers.

B) reduces consumer surplus and producer surplus.

C) decreases government spending.

D) Both answers A and B are correct.

E) None of the above answers is correct.

58) When a tax is imposed on a good, at the after-tax equilibrium the marginal benefit of the last unit produced ________ the marginal cost.

A) equals

B) is greater than

C) is less than

D) can be calculated but is not comparable to

E) The premise of the question is incorrect because after a tax is imposed, it becomes impossible to determine the marginal benefit and the marginal cost.

59) When a tax is imposed on a good or a service, the marginal benefit of the last unit bought ________ the marginal cost of the last unit.

A) is equal to

B) is greater than

C) is less than

D) None of the above answers is correct because there is no consistent relationship between the marginal benefit of the last unit and its marginal cost.

E) is not able to be compared to

60) If neither the demand nor supply of a good is perfectly elastic or inelastic, a tax on the good ________ consumer surplus and ________ producer surplus.

A) decreases; decreases

B) increases; increases

C) decreases; increases

D) increases; decreases

E) decreases; does not change

61) When a product is taxed,

A) part of the initial consumer surplus goes to the government as revenue.

B) part of the initial consumer surplus becomes a deadweight loss.

C) the producer surplus never changes because consumers pay taxes, not producers.

D) Both answers A and B are correct.

E) Both answers B and C are correct.

62) The size of the deadweight loss, or excess burden, of a tax depends on the

A) amount of producer surplus but not the amount of consumer surplus because it is the producers who send the tax revenues to the government.

B) strength of demand.

C) strength of supply.

D) elasticities of demand and supply.

E) number of demanders and the number of suppliers.

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