Which of the Ffollowing are Examples of Excise Taxes

1. Which of the following are examples of excise taxes? Select all that apply. a. Excise Tax i. a $0.50 tax on pizza ii. a $1.00 tax on stamps iii. an 8% tax on a plane ticket b. Not an Excise Tax i. a 25% tax on payroll ii. a 15% tax on income iii. 1% capital gains tax 2. Pedro wants to buy a new car. The most he is willing to pay is $21,000. If he finds a car for $18,000, what will his consumer surplus be? a. $3,000 3. Identify the two situations with the highest total surplus. a. Jay buys a house for $40,000 less than he was willing to pay. He bought his home from sellers who received $2,000 more than they were willing to sell for. b. Kevin wanted to spend $50 on a dishwasher and bought one at $45 from a producer who was hoping to receive $40. 4. Determine whether each of the following actions is based on equity or efficiency. Match the correct term with each action. a. Equity i. A children’s baseball league makes a rule that all team members must receive some amount of playing time in every game. b. Efficiency i. A doughnut shop offers a discount on all doughnuts purchased after 5 p.m. to reduce the number of doughnuts the shop must discard at the end of the day. ii. A university adopts a policy to make sure that there are no unused classrooms during the school day. 5. Assume that the government places a tax on the buyers of televisions, and the demand curve decreases. What is the price without the tax, and what prices do the consumers pay and producers receive after the tax is imposed? Drag the labels to the corresponding dotted gray lines on the graph. a. 6. Suppose a scathing medical study is released that describes the detrimental effects of drinking soda. Because of this, consumers switch their preferences toward healthier drinks and buy less soda. What will happen to the consumer and producer surplus? Drag each label to the appropriate graph. a. 7. Calculate the deadweight loss for refrigerators if a $2 excise tax is imposed on refrigerators, and quantity demanded falls from 500 to 300. Use the figure for reference as needed. a. 200 8. The graphs below show the impact of a $6 excise tax on each good. Based on the elasticity of demand for each good, how much tax revenue and deadweight loss will result from the tax? a. The good in graph A has elastic demand, which yields tax revenue of $900 and a deadweight loss of $150. The good in graph B has perfectly inelastic demand, which creates tax revenue of $1200 and $0 of deadweight loss. If the government places an equal tax on two goods, there will be more tax revenue and less deadweight loss generated by the good that has the more inelastic demand. 9. Jennifer, Tony, and Becky are students in a history class. All three plan on selling their textbooks back at the end of the year. The bookstore will buy each textbook back for $95. Jennifer is willing to sell her textbook back for $87, Tony is willing to sell his textbook back for $45, and Becky is willing to sell her textbook back for $105. Based on each student’s producer surplus for this situation, order them from highest surplus to lowest surplus. a. Tony b. Jennifer c. Becky 10. Eric enjoys making pizza. When he makes pizza for his friends, sometimes Eric cares about how the pieces are distributed, and sometimes he doesn’t. Which of Eric’s actions are associated with equity, and which of his actions are associated with efficiency? a. Equity i. He cuts the pie into many slices so that everyone gets a piece. ii. He cuts the pie into eight equal slices b. Efficiency i. He makes sure that the whole pie is eaten. ii. He lets one person eat the whole pie. 11. If the government places a $2 tax per bag of potato chips on the producers, what would the consumers of potato chips observe? a. The price of potato chips would rise. 12. When the price of a good or service is low enough, it will encourage consumers to buy. However, the price also has to be high enough to encourage producers to sell. In this way, both parties benefit from the sale. In order to calculate producer surplus, sellers must understand their direct costs and their opportunity costs, while consumers must consider their reservation price based on the value they place on a particular good or service. 13. The government might levy an excise tax on a product if it wants to collect tax revenue from the purchase of that particular good or service. The government would prefer to tax goods with a highly inelastic demand. The government might also tax a product to incentivize consumers to modify their behavior. If taxes are too high on a certain good or service, many consumers will cease buying that good. 14. When an allocation of resources maximizes total surplus, the result is said to be efficient. a. True 15. Airbnb, a vacation rental company that is considered a normal good, had record sales prior to the public health crisis of 2020. With the country thrown into a recession, many people had to put their vacations on hold. This drop in consumer income caused the demand curve for Airbnb to shift to the left, which led to a decrease in producer surplus. 16. It is likely that consumer surplus will decrease and producer surplus will decrease 17. Initially, Alice’s willingness to pay for pumpkin pie is $7.00 per slice, point A; and Betty’s is $5.00, point B. Drag new labels to the graph to show what it would look like if Alice’s willingness to pay for pumpkin pie was instead $6.00 per slice, point A'; and Betty’s willingness to pay was $4.00, point B'. The price of a slice of pie stays the same at $4.00 a slice. a. 18. The table below shows the value that three students place on their economics textbooks. Not every label will be used. Label the consumer surplus that each consumer experiences under the three different prices depicted in the graph. a. 19. Nick wants to buy a box of crackers for $1.75. Cracker producers want to sell their product for $1.25. When Nick gets to the store, he finds that the crackers he wants to buy are marked $1.68. What is the total surplus generated from this transaction? a. 50 cents 20. It is unlikely that Joe will buy the bat because the price is higher than Joe’s willingness to pay. If Joe bought the bat, it would be an example of voluntary consumer loss 21. Suppose the government imposes a tax on three products with differing demand elasticities. Match the product to the group that will most likely bear the incidence of the tax. a. Consumers highly inelastic b. consumers and producers somewhat elastic c. producers highly elastic 22. The current market price of a car wash is $20. Jeff is willing to supply a car wash for $10, whereas the lowest amount Steve will accept to supply a car wash is $15. Drag the labels to the correct part of the graph to indicate each producer’s surplus. a. 23. Steve sells his home to Srivani and ends up with a producer surplus of $100,000. Srivani has a consumer surplus of $1,000 from the sale. What is true about the surplus from the sale? a. Both parties experience surplus, but there is inequity because Steve has a much larger producer surplus. 24. If a price is low enough to attract buyers, it will always encourage producers to sell. a. False 25. Judy purchased a speedboat for $120,000. She was willing to pay $150,000. After a few years, she wanted to sell the boat for $85,000 and ended up selling it to Gary for $90,000. What is true about the surplus generated by the speedboat? Select all that apply. a. Judy’s consumer surplus is $30,000. b. Judy’s producer surplus is $5,000.