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The demand for bread is less elastic than the demand for donuts;hence,a tax on bread will create a larger deadweight loss than will the same tax on donuts,other things equal.

A) True
B) False

Correct Answer

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Economists use the government's tax revenue to measure the public benefit from a tax.

A) True
B) False

Correct Answer

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The Laffer curve illustrates how taxes in markets with greater elasticities of demand compare to taxes in markets with smaller elasticities of supply.

A) True
B) False

Correct Answer

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The Laffer curve is the curve showing how tax revenue varies as the size of the tax varies.

A) True
B) False

Correct Answer

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The Social Security tax,and to a large extent,the federal income tax,are labor taxes.

A) True
B) False

Correct Answer

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If the size of a tax doubles,the deadweight loss doubles.

A) True
B) False

Correct Answer

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If the size of a tax triples,the deadweight loss increases by a factor of six.

A) True
B) False

Correct Answer

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When a tax is imposed on buyers,consumer surplus and producer surplus both decrease.

A) True
B) False

Correct Answer

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A tax on a good causes the size of the market to shrink.

A) True
B) False

Correct Answer

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The demand for beer is more elastic than the demand for milk,so a tax on beer would have a smaller deadweight loss than an equivalent tax on milk,all else equal.

A) True
B) False

Correct Answer

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A tax on insulin is likely to cause a very large deadweight loss to society.

A) True
B) False

Correct Answer

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A tax raises the price received by sellers and lowers the price paid by buyers.

A) True
B) False

Correct Answer

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The larger the deadweight loss from taxation,the larger the cost of government programs.

A) True
B) False

Correct Answer

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The more inelastic are demand and supply,the greater is the deadweight loss of a tax.

A) True
B) False

Correct Answer

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The more elastic the supply,the larger the deadweight loss from a tax,all else equal.

A) True
B) False

Correct Answer

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Taxes on labor tend to encourage the elderly to retire early.

A) True
B) False

Correct Answer

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As the size of a tax increases,the government's tax revenue rises,then falls.

A) True
B) False

Correct Answer

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A tax on a good causes the size of the market to increase.

A) True
B) False

Correct Answer

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Economists dismiss the idea that lower tax rates can lead to higher tax revenue,because there is a consensus that the relevant elasticities of demand and supply are very low.

A) True
B) False

Correct Answer

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Taxes on labor tend to increase the number of hours that people choose to work.

A) True
B) False

Correct Answer

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