Practice Questions
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How does the price elasticity of demand affect the tax burden on consumers and producers?
When demand is inelastic, people still buy the product even if the price goes up. Other options are incorrect because Some might think that if demand ...
How does the introduction of a tax on a good affect market efficiency and create deadweight loss?
A tax on a good makes it more expensive. Other options are incorrect because This answer suggests that a tax decreases market efficiency but does not ...
How does vertical equity in taxation influence the overall economic welfare and potential deadweight loss in a market?
When higher-income people pay more taxes, it helps balance the system. Other options are incorrect because Some might think equal tax for everyone is ...
Which of the following scenarios best illustrates the trade-off between market efficiency and horizontal equity when a government imposes a tax on a good?
This option shows how a tax can help lower-income people while asking more from those who earn more. Other options are incorrect because This choice s...
How does government intervention to impose a tax burden affect horizontal equity in the market, particularly in relation to deadweight loss?
When the government imposes a tax, it can create unequal burdens on people with similar incomes. Other options are incorrect because This answer sugge...
What is the term used to describe the reduction in economic efficiency that occurs when the equilibrium for a good or service is not achieved due to taxation?
Deadweight loss happens when taxes prevent buyers and sellers from making trades that would benefit them. Other options are incorrect because Some mig...
What is the primary effect of a tax on a market in terms of deadweight loss?
A tax makes goods more expensive. Other options are incorrect because Some might think taxes help everyone; It's a common belief that taxes cover all ...
How does a tax on a good typically affect consumer surplus?
A tax on a good makes it more expensive for people to buy. Other options are incorrect because Some might think a tax helps consumers by improving ser...
When a tax is imposed on a good, which of the following best explains why both consumers and producers share the tax burden?
The way consumers and producers react to price changes affects how the tax is shared. Other options are incorrect because This idea suggests only cons...
Which of the following statements accurately describe the relationship between tax burden and deadweight loss? Select all that apply.
Other options are incorrect because This suggests that consumers always pay more tax than producers; This implies that if demand or supply is unchangi...
Tax burden is to consumers as deadweight loss is to ____?
Deadweight loss means that the economy is not using resources in the best way. Other options are incorrect because Some might think deadweight loss is...
When a tax is imposed in a market, which of the following is most likely to occur regarding the tax burden between consumers and producers?
When demand is inelastic, consumers cannot easily change their buying habits. Other options are incorrect because Some people think the tax burden is ...
A government imposes a tax on a product, resulting in a higher price for consumers and a lower price received by producers. Which of the following outcomes best illustrates the concept of deadweight loss and tax burden sharing between consumers and producers?
When a tax is added, the price goes up for buyers and down for sellers. Other options are incorrect because This option suggests that prices stay the ...
When a tax is imposed on a good, the financial responsibility is typically shared between consumers and producers, leading to a reduction in market efficiency known as ____. This inefficiency occurs because the equilibrium outcome is not achieved, causing a loss in total welfare.
Deadweight loss happens when a tax changes how much people buy and sell. Other options are incorrect because Some might think tax burden is the main i...
A government decides to impose a new tax on sugary beverages to curb consumption. Following the tax implementation, the price of sugary drinks increases by a small amount, and the quantity sold decreases significantly. How does this scenario illustrate the relationship between tax burden and deadweight loss, particularly considering the elasticity of demand and supply?
When demand is not very flexible, consumers pay most of the tax. Other options are incorrect because This suggests only consumers pay the tax; This im...
If a tax is imposed on a good with inelastic demand, how will the tax burden likely be distributed between consumers and producers?
When demand is inelastic, consumers don't change their buying habits much when prices go up. Other options are incorrect because This idea suggests pr...
Arrange the following steps in the correct order to understand the impact of a tax on market efficiency and the resulting deadweight loss: A) Tax is imposed on a good, B) Consumer prices increase and producer prices decrease, C) Market equilibrium is disrupted, D) Deadweight loss occurs due to reduced transactions.
First, a tax is added to a good. Other options are incorrect because This option suggests the market balance is disrupted before prices change; This c...
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