Question 14In the long run, both supply and demand tend to become more elastic. This suggests that, in the longrun, thegovernment will likely reduce tax rates.deadweight loss from a tax will be less than it is in the short run.deadweight loss from a tax will be greater than it is in the short run.deadweight loss from a tax will be zero.O revenue generated from the tax will increase.

When the demand and supply are elastic a small change in price leads to a large change in Quantity.…

Answered: In the long run, both supply and demand…

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter8: Application: The Cost Of Taxation

Section: Chapter Questions

Problem 4CQQ

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Government levied a tax on good A. The less elastic the demand is, the greater or the smaller the tax burden consumers bear? Also, is the after-tax equilibrium quantity the greater or smaller? Consumers’ tax burden: After-tax equilibrium quantity:
Government levied a tax on good D. The elasticity of the supply changed without changing the no-tax equilibrium point. Because of the change, the buyers’ tax incidence rose. Answer how the elasticity changed: More elastic or Less elastic, and answer how the after-tax equilibrium quantity would change: Decrease or Increase. Hint: If you are not sure, draw a figure with two demand curves. Elasticity: After-tax equilibrium quantity:
If the government wants to increase the tax revenue they collect from sellers, then it should O Tax goods that have low elasticity of demand and high elasticity of supply. O Tax goods that have high elasticity of demand and supply. Tax goods that have high elasticity of demand and low elasticity of supply. O Tax goods that have low elasticity of demand and supply.
c. Compared to the short-run effect of an increase in the excise tax on gasoline, the long-run effect of an increase in the excise tax has a demanded of gasoline; it reduces consumption of gasoline by a tax revenue for the federal government. amount, and it generates a A. larger; smaller; smaller OB. smaller, larger; smaller C. smaller, smaller, larger OD. larger; larger; smaller effect on the quantity
If the supply curve is perfectly elastic, then this suggests that the O A. consumers pay a smaller portion of the excise tax. OB. consumer price does not change when an excise tax is added to the sale of a good OC. entire burden of the excise tax is borne by the sellers. O D. sellers absorb a portion of the excise tax. O E. entire burden of the excise tax is borne by the consumers.
N7
Question 16 All taxes create some deadweight loss except those on goods O that can be resold for a higher price. O with a very low demand. with a very elastic demand or supply. that everyone likes to consume. with a perfectly inelastic demand or supply.
Imagine there is a tax on cigarettes and that consumers and producers each bear some portion of the tax. Assume that when vape pens were introduced, they were not taxed. How would you expect that introduction of vape pens to affect the distribution of the tax burden associated with the cigarette tax? O It will decrease the consumer tax burden because demand for cigarettes will become more elastic. O It will increase the consumer tax burden because demand for cigarettes will become more elastic. O It will decrease the consumer tax burden because demand for cigarettes will become more inelastic. O It will increase the consumer tax burden because demand for cigarettes will become more inelastic.
After the excise tax is imposed, what is the new equilibrium quantity of sofas? d. What is the total amount of revenue collected by the government from the excise tax on sofas?
Assume that the demand for coal is more elastic than the supply. A tax on coal will a. increase the price of coal paid by buyers, and sellers bear a smaller burden of the tax b. decrease the price of coal that sellers really get, and sellers have to bear a bigger burden of the tax c. decrease the price of coal paid by buyers, and buyers have to bear a bigger burden of the tax d. increase the price of coal that sellers really get, and buyers bear a smaller burden of the tax
Suppose the government places a tax on a product. How does the cost of the tax compare with the revenue raised? The cost of the tax to buyers and sellers is less than the revenue raised from the tax by the government. O Without additional information, such as the elasticity of demand for this product, it is impossible to compare tax cost with tax revenue. The loss of surplus to buyers and sellers exceeds the revenue raised from the tax by the government. The cost of the tax to buyers and sellers equals the revenue raised from the tax by the government.
Why would consumers prefer that the government tax products with elastic, rather than inelastic, demand? O The share of a tax ultimately paid by consumers is lower. O The share of a tax ultimately paid by producers is lower.

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