Section 9 Module 50
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1. Perfectly competitive markets with no deadweight loss are allocatively efficient. How do we all benefit from producer and consumer surplus?   *
Market Efficiency
2.  Explain how total surplus declines by $10 in the example above when sales are reallocated (Figure 50.3). *
3.  Explain how attempting to change the quantity lowers total surplus (Figure 50.4). *
4.  Summarize and/or paraphrase the important functions of an efficient market. *
5.  Even though a market is efficient it is not necessarily __________. *
1 point
6.  Describe how market failure and how markets can create outcomes good for some and bad for others. *
Equitable and Efficient Markets
7. Describe the differences between the three taxes listed above. *
Taxes and Consumer and Producer Surplus
8.  What is the equilibrium price and quantity for hotels in Potterville?
1 point
Clear selection
TAXING the Producers (Hotel Owners)
9.  An excise tax of $40 is placed on the hotel rooms.  What is the new equilibrium quantity? *
1 point
10.  Look at figure 50.6.  Where is the area of lost surplus or what we call deadweight loss? *
11.  Important Concept!  If the tax is $40 and the original price was $80, how is the hotel earning $60 per room rented? (HINT: look at the consumer burden). *
TAXING the Consumers of Hotel Rooms
12.  Explain why it does not matter if the consumer or the producer pays the tax in terms of the outcome of reduced quantity. *
Elasticity and Taxes
Can  you spot the deadweight loss?
13.  Explain how a relatively ELASTIC SUPPLY curve and a relatively INELASTIC DEMAND curve leads to a larger tax burden on consumers in the market for gasoline. *
Can you spot the deadweight loss?
14.  Explain how a relatively INELASTIC SUPPLY curve and a relatively ELASTIC DEMAND curve leads to a larger tax burden on producers in the market for parking spaces. *
Benefit / Cost Analysis of Taxation
15. Refer to Figure 50.10.  There is now deadweight loss, reduced consumer and producer surplus, and now the area of tax revenue.  Analyze the graph.  How can you tell that the $40 tax is split between the consumer and producer? *
Taxation and its Cost
16. Areas B & F are called deadweight loss.  What does that actually mean (not just the definition).   *
17.  What is the inefficiency that a tax creates? *
18.  Describe how a lump-sum tax and a per-unit (excise tax) are different in terms of the impact on society. *
Watch it...you can not just care the night or minutes before the test.  Care now and watch.
Use the pause feature to complete the practice.
Do you have any questions that you would like answered in class regarding taxation?
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