The Costs of Taxation

What happen in sale tax revenue if there is a decrease in sale?

• Decrease

• Increase

• Remains the same

A direct tax can be shifted to another

• True

• False

Government revenue obtained from from fees for issue of license and permit is

• Non-tax revenue

• Indirect tax

• Tax revenue

• Direct tax

The source of government revenue comes from....

• Direct tax

• Non-tax revenue

• Indirect tax

• All the above

A tax on a good has a deadweight loss if

• the reduction in producer surplus is greater than the reduction in consumer surplus.

• the reduction in consumer and producer surplus is greater than the tax revenue.

• the reduction in consumer surplus is greater than the reduction in producer surplus.

• the tax revenue is greater than the reduction in consumer and producer surplus.

Donna runs an inn and charges $300 a night for a room, which equals her cost. Sam, Harry, and Bill are three potential customers willing to pay $500, $325, and $250, respectively. When the government levies a tax on innkeepers of $50 per night of occupancy, Donna raises her price to $350. The deadweight loss of the tax is

• $150

• $100

• $25

• $50

Sophie pays Sky $50 to mow her lawn every week. When the government levies a mowing tax of $10 on Sky, he raises his price to $60. Sophie continues to hire him at a higher price. What is the change in producer surplus, change in consumer surplus, and deadweight loss?

• . $0, −$10, $0

• $0, $0, $10

• +$10, −$10, $0

• +$10, −$10, $10

If a policymaker wants to raise revenue by taxing goods while minimizing the deadweight losses, he should look for goods with __​______ elasticities of demand and ________ elasticities of supply.​

​ (a)  

• small, small

• small, large

• large, large

• large, small

In the economy of Agricola, tenant farmers rent the land they use from landowners. If the supply of land is perfectly inelastic, then a tax on land would have ________ deadweight losses, and the burden of the tax would fall entirely on the ________ .

​ (a)  

• no, landowners

• sizable, farmers

• no, farmers

• sizable, landowners

Suppose the demand for grape jelly is perfectly elastic (because strawberry jelly is a good substitute), while the supply is unit elastic. A tax on grape jelly would have deadweight losses, and the burden of the tax would fall entirely on the of grape jelly.

(a)  

• sizable, producers

• no, consumers

• sizable, consumers