1) If a tax of 10 cents per orange is increased to 15 cents, what happens to the government's tax revenue?

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a

It rises by less than 50%

b

It rises by more than 50%

c

It rises by exactly 50%

d

It depends on which is more elastic: demand or supply.

2) A government is considering imposing a tax on a market: in Market 1 the tax would have a significant effect on the price sellers receive, but it would not affect the quantity sold significantly; in Market 2, the same size of tax would have an insignificant effect on the price sellers receive, but it would have a significant effect on the quantity sold. Which market would have the smallest deadweight loss from the tax?

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a

Market 1

b

Market 2

c

It will be the same in Market 1 and 2

d

We need to know the prices in these markets to answer this question

3) Tax revenue is likely to rise due to a higher tax rate if the elasticity of demand is ______ and the elasticity of supply is ______ .

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a

0.2; 0.7

b

2.7; 0.8

c

0.4; 4.2

d

1.9; 3.7

4) The number of seats in a cinema is 350. The government decided to levy a tax of $5 per ticket. As a result, the cinema owner increases the ticket price from $15 to $20 and still sells all 350 tickets. This tax on cinemas led to a change in consumer surplus of ______, a change in producer surplus of ______, and a deadweight loss of ______.

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a

-$5; $0; $5

b

-$1,750; $0; $1750

c

-$5; $0; $0

d

-$1750; $0; $0