Question 1

When tastes are quasilinear, the sole reason for the deadweight loss from a per-unit tax is that output falls under the tax.

Accepted Answer

A) True 
 B)False

Question 2

The burden of a per-unit tax will fall disproportionately on consumers when the supply curve is relatively more elastic than the demand curve.

Accepted Answer

A) True 
 B)False

Question 3

In most cases, the fact that one of the market curves is perfectly inelastic is not sufficient to conclude that a per-unit tax in that market is efficient.A tax on land rents is an exception.Can you explain why?

Accepted Answer

The answer of In most cases, the fact that one...

Question 4

If demand is linear, tax revenue rises at a constant rate as per unit taxes increase.

Accepted Answer

A) True 
 B)False

Question 5

When a per-unit tax is levied on a goods market in which supply is not perfectly inelastic but such a tax nevertheless does not give rise to any deadweight loss, consumers are made no worse off by the imposition of the tax.

Accepted Answer

A) True 
 B)False

Question 6

As demand and supply become more elastic, taxes reduce market output more and raise less tax revenue.

Accepted Answer

A) True 
 B)False

Question 7

Regardless of how price inelastic the supply curve, tax revenue from a per-unit tax rises the more price inelastic the demand curve is.

Accepted Answer

A) True 
 B)False

Question 8

If either the supply or the demand curve in a goods market is very elastic, a per-unit tax will end up not raising very much revenue.

Accepted Answer

A) True 
 B)False

Question 9

In perfectly competitive markets with identical firms, the burden of a tax is shared by consumers and producers in the short run so long as market demand is not perfectly elastic.

Accepted Answer

A) True 
 B)False

Question 10

Assuming upward sloping labor supply, wage subsidies are definitely more inefficient

Accepted Answer

A) the more elastic labor demand is. 
B) the more elastic labor supply is. 
C) the more substitutable consumption and leisure are. 
D) Both (a) and (b) 
E) Both (b) and c
F)Both (a) and (c)
G)All of the above
H)None of the above

Question 11

The statutory incidence of a tax is the same as the economic incidence of a tax whenever a tax is levied on a side of a market that is perfectly price-inelastic.

Accepted Answer

A) True 
 B)False

Question 12

The more inelastic the supply curve in a goods market, the smaller will be the deadweight loss from a per-unit tax in that market.

Accepted Answer

A) True 
 B)False

Exam 19: Distortionary Taxes and Subsidies

When tastes are quasilinear, the sole reason for the deadweight loss from a per-unit tax is that output falls under the tax.

The burden of a per-unit tax will fall disproportionately on consumers when the supply curve is relatively more elastic than the demand curve.

In most cases, the fact that one of the market curves is perfectly inelastic is not sufficient to conclude that a per-unit tax in that market is efficient.A tax on land rents is an exception.Can you explain why?

If demand is linear, tax revenue rises at a constant rate as per unit taxes increase.

When a per-unit tax is levied on a goods market in which supply is not perfectly inelastic but such a tax nevertheless does not give rise to any deadweight loss, consumers are made no worse off by the imposition of the tax.

As demand and supply become more elastic, taxes reduce market output more and raise less tax revenue.

Regardless of how price inelastic the supply curve, tax revenue from a per-unit tax rises the more price inelastic the demand curve is.

If either the supply or the demand curve in a goods market is very elastic, a per-unit tax will end up not raising very much revenue.

In perfectly competitive markets with identical firms, the burden of a tax is shared by consumers and producers in the short run so long as market demand is not perfectly elastic.

Assuming upward sloping labor supply, wage subsidies are definitely more inefficient

The statutory incidence of a tax is the same as the economic incidence of a tax whenever a tax is levied on a side of a market that is perfectly price-inelastic.

The more inelastic the supply curve in a goods market, the smaller will be the deadweight loss from a per-unit tax in that market.