Government Intervention: Indirect taxes

Which of the letters in this graph represents the surplus that is lost to sellers who are no longer able to participate in this market?

• U

• W

• T

• S

• R

Which of the following correctly identifies the areas of consumer surplus (CS), producer surplus (PS), tax revenue and deadweight loss (DWL) in this market after the tax?

• CS = R

  
  

  PS = UV

  
  

  DWL = T

  
  

  Tax = S

  ​

• CS = R

  
  

  PS = V

  
  

  DWL = TW

  
  

  Tax = SU

  ​

• CS = RST

  
  

  PS = UWV

  
  

  DWL = TW

  
  

  Tax = 0

  ​

• CS = R

  
  

  PS = V

  
  

  DWL = 0

  
  

  Tax = SU

  ​

• CS = RST

  
  

  PS = UWV

  
  

  DWL = 0

  
  

  Tax = 0

  ​

This graph illustrates a good where a tax has been imposed on the buyers of that good.

What is the consumer's tax burden and what is the producer's tax burden?

• Consumer's tax burden is $0; producer's tax burden is $12

• Consumer's tax burden is $6; producer's tax burden is $6

• Consumer's tax burden is $8; producer's tax burden is $4

• Consumer's tax burden is $4; producer's tax burden is $8

• Consumer's tax burden is $12; producer's tax burden is $0

Assume a market has a downward sloping demand curve and an upward sloping supply curve.

Which of the following statements about the impact of a per unit tax on this market is NOT true?

Choose 1 answer:

• Deadweight loss is the surplus that is lost from buyers and sellers that are no longer able to participate in the market

• When a per unit tax is imposed on a market, the price that buyers pay will always increase by the amount of the tax

• The more the quantity sold in the market decreases, the larger the deadweight loss will be

• Unless both supply and demand are perfectly inelastic, a tax results in deadweight loss.

• The tax burden is the consumer and producer surplus that becomes government revenue

Which of the following would calculate the producers' tax burden?

• 3 × ($13−$11)

• .5 ​(3) × ($16−$13)

• .5 ($13−$7) × (5−3)

• .5 (5) × ($16−$11)

• 3 × ($11−$7)

This graph shows a market where a tax has been imposed on the buyers of a good.

What letters represent the tax burden of sellers?

• None, since the buyers of a good were taxed

• C

• B

• D

• E

The graph shown represents a market in which a per unit tax has been imposed.

What is the dollar amount of the tax, and who has the tax been imposed on?

• $2.50 on buyers

• $5 tax on sellers

• $2.50 on sellers

• $5 tax on buyers

• $2.50 on both buyers and sellers