Lecture 4-2

Question 1

The economy is as “large” and efficient as possible. You assume that the market is perfectly competitive and there are no externalities.

Answer 1

First Welfare Theorem

Question 2

The producer and consumer equally bear this burden

Answer 2

Tax Burden

Question 3

The “difference” between what a consumer pays and producer receives

Answer 3

Tax Wedge

Question 4

“Reverse tax”

Answer 4

Subsidies

Question 5

Which “side of the tax bears the greater burden”

Answer 5

The more Inelastic side

Question 6

How policy affects the size of the “economic pie”

Answer 6

Welfare Analysis

Question 7

Tax revenue

Answer 7

Government surplus

Question 8

What happens to efficiency of a market, or the “size of the pies” in markets with taxes?

Answer 8

The social pie is pushed to be smaller