True or False

1. The price elasticities of supply and demand affect both the size of the deadweight loss from a tax and the tax incidence.

2. Buyers of a product will bear the larger part of the tax burden, and sellers will bear a smaller part of the tax burden, when the supply of the product is more elastic than the demand for the product.

3. Suppose a tax of $1 per unit is imposed on a good. The more elastic the supply of the good, other things equal, the larger is the deadweight loss of the tax.

4. A price ceiling is a legal minimum on the price at which a good or service can be sold.

5. A price ceiling set below the equilibrium price causes quantity demanded to exceed quantity supplied.

 6. Suppose the government is considering levying a tax in one or more of the markets described in the table. Which of the markets will allow the government to minimize the deadweight loss(es) from the tax?

8. The vertical distance between points A and B represents a tax in the market.

a) The imposition of the tax causes the quantity sold to increase or decrease by _____ units?

b) The imposition of the tax causes the price paid by buyers to increase or decrease by $_____

c) The imposition of the tax causes the price received by sellers to increase or decrease by $____

d) The amount of the tax on each unit of the good is $_________

e) The per-unit burden of the tax on buyers is $_________

f) The per-unit burden of the tax on sellers is $ _______

g) The amount of tax revenue received by the government is $ ________

h) The amount of deadweight loss as a result of the tax is $________

i) The loss of consumer surplus as a result of the tax is $_______

j) The loss of producer surplus as a result of the tax is $______

k) Consumer surplus without the tax is $ ______

l) Producer surplus without the tax is $______

m) Total surplus without the tax is $_______

9. The vertical distance between points A and B represents a tax in the market.

a) The equilibrium price before the tax is imposed is $______ and quantity is _______

b) The price that buyers effectively pay after the tax is imposed is $________

c) The price that sellers effectively receive after the tax is imposed is $_______

d) The per-unit burden of the tax on buyers is $________

e) The per-unit burden of the tax on sellers is $_______

f) The amount of tax revenue received by the government is equal to $__________

g) The amount of deadweight loss as a result of the tax is $__________

h) The tax results in a loss of consumer surplus that amounts to $_________

i) The tax results in a loss of producer surplus that amounts to $_________

10a. Refer to Figure above: Which of the following price controls would cause a shortage of 20 units of the good?

10b. Refer to Figure above: Which of the following price controls would cause a surplus of 20 units of the good?

10c. Refer to Figure above. Suppose a price ceiling of $5 is imposed on this market. As a result,

10d. Refer to Figure above. Suppose a price floor of $7 is imposed on this market. As a result,