Taxes & Subsidies (Vocabulary)

Economists use the definition: "A compulsory contribution to State Revenue" for which of the words below?

• Subsidy

• Tax

• Extortion

• Supply

If there is a "Per-unit Tax" in the gum market, this most likely means that...

• People who buy gum have to pay a higher income tax rate than average

• A certain price (say $0.05) is added to the market price every time a pack of gum is sold

• Producers are not allowed to charge more than a certain price for gum

• A certain amount of extra money (say $0.05) is paid to producers by the government every time that a pack of gum is sold.

If the government placed a per-unit tax on refrigerators, how would this effect the equilibrium price & quantity of refrigerators?

• Price (paid by consumers) would increase, Quantity Demanded would decrease

• Price (paid by consumers) would decrease, Quantity Demanded would increase

• Price (paid by consumers) would increase, Quantity Demanded would increase

• Price (paid by consumers) would decrease, Quantity Demanded would decrease

Taxes increase Consumer Surplus

• True

• False

Taxes increase Producer Surplus

• True

• False

Taxes create Deadweight Loss

• True

• False

Which 2 of the ideas list below account for why a government might create a per-unit tax?

• To raise revenue for Government Projects, like Public Goods

• To address positive externalities in the market

• To address negative externalities in the market

• To create Deadweight Loss

Economists use the definition: "A sum of money granted by the government to assist an industry" for which of the words below?

• Subsidy

• Tax

• Extortion

• Supply

If there is a "Per-unit Subsidy" in the soybean market, this most likely means that...

• Farmers who cultivate soybeans have to pay a lower income tax rate than average

• A certain price (say $1.65) is added to the market price every time a bushel of soybeans is sold

• Producers are not allowed to charge more than a certain price for soybeans

• A certain amount of extra money (say $1.65) is paid to producers by the government every time that a bushel of soybeans is sold.

Subsidies increase Consumer Surplus

• True

• False