121. Taxes create deadweight loss when they a. distort behavior. b. cause the price of the product to increase. c. don’t raise sufficient government revenue. d. cannot be computed easily. 122. Caroline John and Jackie each like historical biographies. The current bestseller costs $25. Caroline values it at $30 John at $28 and Jackie at $26. Suppose that if the government taxes books at $2 each the selling price will rise to $27. A consequence of the tax is that a. consumer surplus shrinks by $9 and tax revenues increase by $6 so there is a deadweight loss of $3. b. consumer surplus shrinks by $6 and tax revenues increase by $6 so there is no deadweight loss. c. consumer surplus shrinks by $5 and tax revenues increase by $6 so there is no deadweight loss. d. consumer surplus shrinks by $5 and tax revenues increase by $4 so there is a deadweight loss of $1. 123. Mark Kerry Greg and Carlos each like Chicago Cubs baseball games. The single-game ticket price for an infield box seat is $50. Mark values a ticket at $70 Kerry at $65 Greg at $60 and Carlos at $55. Suppose that if the government taxes tickets at $5 each the selling price will rise to $55. A consequence of the tax is that a. consumer surplus shrinks by $50 and tax revenues increase by $20 so there is a deadweight loss of $30. b. consumer surplus shrinks by $30 and tax revenues increase by $20 so there is a deadweight loss of $10. c. consumer surplus shrinks by $20 and tax revenues increase by $20 so there is no deadweight loss. d. consumer surplus shrinks by $50 and tax revenues increase by $20 so there is no deadweight loss. 124. Kyle places a $10 value on a glass of red wine and Keith places an $8 value on it. If there is no tax on glasses of red wine the price of a glass of red wine reflects the cost of making it. The equilibrium price for a glass of red wine is $6. How much total consumer surplus do Kyle and Keith get? a. $2 b. $4 c. $6 d. $8 125. Kyle places a $10 value on a glass of red wine and Keith places an $8 value on it. If there is no tax on glasses of red wine the price of a glass of red wine reflects the cost of making it. The equilibrium price for a glass of red wine is $6. Suppose the government levies a tax of $2 on each glass of red wine and the equilibrium price of a glass of red wine increases to $8. How much tax revenue is collected? a. $0 b. $2 c. $4 d. $6 126. Kyle places a $10 value on a glass of red wine and Keith places an $8 value on it. If there is no tax on glasses of red wine the price of a glass of red wine reflects the cost of making it. The equilibrium price for a glass of red wine is $6. Suppose the government levies a tax of $2 on each glass of red wine and the equilibrium price of a glass of red wine increases to $8. What is total consumer surplus after the tax is levied? a. $0 b. $2 c. $4 d. $6 127. Kyle places a $10 value on a glass of red wine and Keith places an $8 value on it. If there is no tax on glasses of red wine the price of a glass of red wine reflects the cost of making it. The equilibrium price for a glass of red wine is $6. Suppose the government levies a tax of $2 on each glass of red wine and the equilibrium price of a glass of red wine increases to $8. Because total consumer surplus has a. fallen by more than the tax revenue the tax has a deadweight loss b. fallen by less than the tax revenue the tax has no dead weight loss. c. fallen by exactly the amount of the tax revenue the tax has no deadweight loss. d. increased by less than the tax revenue the tax has a deadweight loss. 128. Kyle places a $10 value on a glass of red wine and Keith places an $8 value on it. If there is no tax on glasses of red wine the price of a glass of red wine reflects the cost of making it. The equilibrium price for a glass of red wine is $6. Suppose the government levies a tax of $3 on each glass of red wine and the equilibrium price of a glass of red wine increases to $9. How much tax revenue is collected? a. $0 b. $3 c. $6 d. $9 129. Kyle places a $10 value on a glass of red wine and Keith places an $8 value on it. If there is no tax on glasses of red wine the price of a glass of red wine reflects the cost of making it. The equilibrium price for a glass of red wine is $6. Suppose the government levies a tax of $3 on each glass of red wine and the equilibrium price of a glass of red wine increases to $9. What is total consumer surplus after the tax is levied? a. $1 b. $3 c. $4 d. $6 130. Kyle places a $10 value on a glass of red wine and Keith places an $8 value on it. If there is no tax on glasses of red wine the price of a glass of red wine reflects the cost of making it. The equilibrium price for a glass of red wine is $6. Suppose the government levies a tax of $3 on each glass of red wine and the equilibrium price of a glass of red wine increases to $9. Because total consumer surplus has a. fallen by more than the tax revenue the tax has a deadweight loss. b. fallen by less than the tax revenue the tax has no deadweight loss. c. fallen by exactly the amount of the tax revenue the tax has no deadweight loss. d. increased by less than the tax revenue the tax has a deadweight loss.
