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In a price ceiling graph, what area represents deadweight loss?
The triangle formed by the original equilibrium and the new quantities.
In a price floor graph, what area represents deadweight loss?
The triangle formed by the original equilibrium and the new quantities.
In an excise tax graph, what does the shift in the supply curve represent?
The increase in production costs due to the tax.
In an excise tax graph, what area represents tax revenue?
The rectangle formed by the tax amount and the new quantity.
In an excise tax graph, what area represents consumer surplus?
The area below the demand curve and above the new price.
In an excise tax graph, what area represents producer surplus?
The area above the supply curve and below the price received by producers (after tax).
What does the vertical distance between the original and new supply curve represent?
The per-unit tax amount.
What does the new equilibrium represent on an excise tax graph?
The new price and quantity after the tax is imposed.
How does the steepness of the demand curve affect tax incidence?
A steeper (more inelastic) demand curve means consumers bear more of the tax.
How does the steepness of the supply curve affect tax incidence?
A steeper (more inelastic) supply curve means producers bear more of the tax.
What is the impact of a price ceiling on market efficiency?
It reduces market efficiency due to deadweight loss.
What is the impact of a price floor on market efficiency?
It reduces market efficiency due to deadweight loss.
What is the impact of an excise tax on market efficiency?
It reduces market efficiency due to deadweight loss.
How does rent control affect the availability of housing?
It can lead to a shortage of available housing.
How does minimum wage affect employment?
It can lead to unemployment if set above the equilibrium wage.
What is a potential benefit of excise taxes?
They generate tax revenue for the government.
What is a potential drawback of excise taxes?
They create deadweight loss and reduce economic efficiency.
Does an excise tax reduce consumer surplus?
Yes, it reduces consumer surplus.
Does an excise tax reduce producer surplus?
Yes, it reduces producer surplus.
What happens to the size of deadweight loss when demand or supply is more elastic?
The deadweight loss from a tax is larger when demand or supply is more elastic.
How does a price ceiling below equilibrium affect the market?
It creates a shortage because quantity demanded exceeds quantity supplied.
How does a price floor above equilibrium affect the market?
It creates a surplus because quantity supplied exceeds quantity demanded.
How does an excise tax affect the supply curve?
It shifts the supply curve to the left, increasing production costs.
How does relatively elastic demand affect tax incidence?
Producers pay more of the tax burden.
How does relatively inelastic demand affect tax incidence?
Consumers pay more of the tax burden.
Rent control is an example of what?
A price ceiling.
Minimum wage is an example of what?
A price floor.
How does a non-effective price ceiling affect the market?
It has no effect; the market operates at equilibrium.
How does a non-effective price floor affect the market?
It has no effect; the market operates at equilibrium.
What is the effect of an excise tax on consumer surplus?
It reduces consumer surplus.