The figure shows the demand and supply curves in the salt market. The government imposes a sales tax of 30% on the price of salt, to be paid by the suppliers. This decreases the quantity traded from Q* to QT, decreases the price received by producers from P* to PT1, and increases the price paid by consumers from P* to PT2. Price of salt PT P* PT A B C D 39 E LL F QT Q* Market Supply Market Demand Quantity of salt Following the imposition of the tax, which of the following statements is correct? The deadweight loss is B+C+D+E The consumer surplus is A + B. The tax revenue is B + C. The total surplus is equal to A + B +D+F. Consider the figure in Question 3. Consider the case where a government introduces a specific tax on cigarettes, which reduces the consumption of cigarettes. Which of the following statements is correct? The more elastic (flat) the demand for cigarettes, the larger the tax revenue. The tax rate should be determined so as to maximize tax revenue. The tax may increase social welfare. This is a bad policy as it creates a deadweight loss. Which of the following markets best approximates perfect competition? The market for new textbooks. The market for milk. The market for cell phones. The market for Hamilton tickets.

Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter3: Market Demand And Supply
Section3.7: A Market Supply And Demand Analysis
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The figure shows the demand and supply curves in the salt market. The government imposes
a sales tax of 30% on the price of salt, to be paid by the suppliers. This decreases the quantity
traded from Q* to QT, decreases the price received by producers from P* to PT1, and
increases the price paid by consumers from P* to PT2.
Price
of salt
PT
P*
PT
A
B
C
D
39
E
LL
F
QT
Q*
Market
Supply
Market
Demand
Quantity of salt
Following the imposition of the tax, which of the following statements is correct?
The deadweight loss is B+C+D+E
The consumer surplus is A + B.
The tax revenue is B + C.
The total surplus is equal to A + B +D+F.
Transcribed Image Text:The figure shows the demand and supply curves in the salt market. The government imposes a sales tax of 30% on the price of salt, to be paid by the suppliers. This decreases the quantity traded from Q* to QT, decreases the price received by producers from P* to PT1, and increases the price paid by consumers from P* to PT2. Price of salt PT P* PT A B C D 39 E LL F QT Q* Market Supply Market Demand Quantity of salt Following the imposition of the tax, which of the following statements is correct? The deadweight loss is B+C+D+E The consumer surplus is A + B. The tax revenue is B + C. The total surplus is equal to A + B +D+F.
Consider the figure in Question 3. Consider the case where a government introduces a
specific tax on cigarettes, which reduces the consumption of cigarettes. Which of the
following statements is correct?
The more elastic (flat) the demand for cigarettes, the larger the tax revenue.
The tax rate should be determined so as to maximize tax revenue.
The tax may increase social welfare.
This is a bad policy as it creates a deadweight loss.
Which of the following markets best approximates perfect competition?
The market for new textbooks.
The market for milk.
The market for cell phones.
The market for Hamilton tickets.
Transcribed Image Text:Consider the figure in Question 3. Consider the case where a government introduces a specific tax on cigarettes, which reduces the consumption of cigarettes. Which of the following statements is correct? The more elastic (flat) the demand for cigarettes, the larger the tax revenue. The tax rate should be determined so as to maximize tax revenue. The tax may increase social welfare. This is a bad policy as it creates a deadweight loss. Which of the following markets best approximates perfect competition? The market for new textbooks. The market for milk. The market for cell phones. The market for Hamilton tickets.
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