Question 1

Suppose a tax is levied on the buyers of a good;

Accepted Answer

A)  then the supply curve shifts upward by the amount of the tax.
B)  then the quantity supplied decreases for all conceivable prices of the good.
C)  this means that the buyers of the good will send tax payments to the government.
D)  this means that the buyers of the good will pay a higher effective price for the good, not that they will send tax payments to the government.E) All of the above
F) B) and C)

Question 2

Normally,both buyers and sellers of a good become worse off when the good is taxed.

Accepted Answer

A) True 
 B)False

Question 3

A tax raises the price received by sellers and lowers the price paid by buyers.

Accepted Answer

A) True 
 B)False

Question 4

Suppose that instead of a supply-demand diagram,you are given the following information:
Qs = 100 + 3P
Qd = 400 - 2P
From this information compute equilibrium price and quantity.Now suppose that a tax is placed on buyers so that
Qd = 400 - (2P + T).
If T = 15,solve for the new equilibrium price and quantity.(Note: P is the price received by sellers and P + T is the price paid by buyers.)Compare these answers for equilibrium price and quantity with your first answers.What does this show you?

Accepted Answer

Prior to the tax,the equilibrium price w...

Question 5

Figure 8-2
 
-Refer to Figure 8-2.The per unit burden of the tax on buyers is

Accepted Answer

A)  P₃ - P₁.
B)  P₃ - P₂.
C)  P₂ - P₁.
D)  Q₂ - Q₁.E) B) and D)
F) All of the above

Question 6

Figure 8-4
 
-Refer to Figure 8-4.Producer surplus before the tax was levied is represented by area

Accepted Answer

A)  a.
B)  A + B + C.
C)  D + E + F.
D)  F.E) A) and D)
F) B) and D)

Question 7

Which of the following statements is correct regarding a tax on a good and the resulting deadweight loss?

Accepted Answer

A)  The greater are the price elasticities of supply and demand, the greater is the deadweight loss.
B)  The greater is the price elasticity of supply and the smaller is the price elasticity of demand, the greater is the deadweight loss.
C)  The smaller are the decreases in quantity demanded and quantity supplied, the greater the deadweight loss.
D)  The smaller is the wedge between the effective price to sellers and the effective price to buyers, the greater is the deadweight loss.E) C) and D)
F) A) and B)

Question 8

According to the economist Milton Friedman,the "least bad" tax is a tax on

Accepted Answer

A)  income received from profits and interest.
B)  labor income.
C)  the unimproved value of land.
D)  the value of land including the improvements to the land.E) None of the above
F) C) and D)

Question 9

Who once said that taxes are the price we pay for a civilized society?

Accepted Answer

A)  Aristotle
B)  George Washington
C)  Oliver Wendell Holmes
D)  Ronald ReaganE) A) and D)
F) All of the above

Question 10

Figure 8-4
 
-Refer to Figure 8-4.The tax causes a reduction in consumer surplus that is represented by area

Accepted Answer

A)  a.
B)  B + C.
C)  D + E.
D)  F.E) A) and D)
F) A) and C)

Question 11

Figure 8-3
 
-Refer to Figure 8-3.The amount of tax revenue received by the government is equal to

Accepted Answer

A)  $210.
B)  $420.
C)  $560.
D)  $980.E) None of the above
F) B) and C)

Question 12

Figure 8-4
 
-Refer to Figure 8-4.The total surplus (consumer,producer,and government) with the tax is represented by area

Accepted Answer

A)  C + E.
B)  A + B + C.
C)  D + E + F.
D)  A + B + D + F.E) C) and D)
F) B) and D)

Question 13

Illustrate on three demand-and-supply graphs how the size of a tax (small,medium and large)can alter total revenue and deadweight loss.

Accepted Answer

The answer of Illustrate on three demand-and-supply graphs how the...

Question 14

Taxes cause deadweight losses because they

Accepted Answer

A)  lead to losses in surplus for consumers and for producers that, when taken together, exceed tax revenue collected by the government.
B)  distort incentives to both buyers and sellers.
C)  prevent buyers and sellers from realizing some of the gains from trade.
D)  All of the above are correct.E) B) and C)
F) None of the above

Question 15

Figure 8-1
 
-Refer to Figure 8-1.When the market is in equilibrium,consumer surplus is represented by area

Accepted Answer

A)  a.
B)  B.
C)  C.
D)  D.E) A) and D)
F) C) and D)

Question 16

The decrease in total surplus that results from a market distortion,such as a tax,is called a

Accepted Answer

A)  wedge loss.
B)  revenue loss.
C)  deadweight loss.
D)  shrinkage of consumer surplus.E) A) and B)
F) A) and C)

Question 17

Figure 8-6
 
-Refer to Figure 8-6.The deadweight loss associated with this tax amounts to

Accepted Answer

A)  $60, and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses.
B)  $60, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers.
C)  $40, and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses.
D)  $40, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers.E) A) and C)
F) B) and C)

Question 18

When a country is on the downward-sloping side of the Laffer curves,a cut in the tax rate will

Accepted Answer

A)  decrease tax revenue and decrease the deadweight loss.
B)  decrease tax revenue and increase the deadweight loss.
C)  increase tax revenue and decrease the deadweight loss.
D)  increase tax revenue and increase the deadweight loss.E) A) and D)
F) All of the above

Question 19

Relative to a situation in which liquor is not taxed,the imposition of a tax on liquor causes

Accepted Answer

A)  the equilibrium quantity of liquor demanded to decrease and the equilibrium quantity of liquor supplied to decrease.
B)  the equilibrium quantity of liquor demanded to decrease and the equilibrium quantity of liquor supplied to increase.
C)  the equilibrium quantity of liquor demanded to increase and the equilibrium quantity of liquor supplied to decrease.
D)  the equilibrium quantity of liquor demanded to increase and the equilibrium quantity of liquor supplied to increase.E) A) and B)
F) A) and D)

Question 20

Figure 8-7 The graph below represents a $10 per unit tax on a good. On the graph, Q represents quantity and P represents price.
 
-Refer to Figure 8-7.The decrease in consumer and producer surpluses that is not offset by tax revenue is the area

Accepted Answer

A)  C.
B)  F.
C)  G.
D)  C + F.E) C) and D)
F) A) and D)

Exam 8: Application: the Costs of Taxation

Figure 8-7 The graph below represents a $10 per unit tax on a good. On the graph, Q represents quantity and P represents price. -Refer to Figure 8-7.The decrease in consumer and producer surpluses that is not offset by tax revenue is the area

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Figure 8-4 -Refer to Figure 8-4.Producer surplus before the tax was levied is represented by area

Correct Answer
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Prior to the tax,the equilibrium price w...
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Figure 8-1 -Refer to Figure 8-1.When the market is in equilibrium,consumer surplus is represented by area

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Which of the following statements is correct regarding a tax on a good and the resulting deadweight loss?

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Figure 8-4 -Refer to Figure 8-4.The total surplus (consumer,producer,and government) with the tax is represented by area

Correct Answer
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Who once said that taxes are the price we pay for a civilized society?

Correct Answer
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Figure 8-4 -Refer to Figure 8-4.The tax causes a reduction in consumer surplus that is represented by area

Correct Answer
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Illustrate on three demand-and-supply graphs how the size of a tax (small,medium and large)can alter total revenue and deadweight loss.

Correct Answer
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Figure 8-3 -Refer to Figure 8-3.The amount of tax revenue received by the government is equal to

Correct Answer
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Relative to a situation in which liquor is not taxed,the imposition of a tax on liquor causes

Correct Answer
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Suppose a tax is levied on the buyers of a good;

Correct Answer
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Figure 8-2 -Refer to Figure 8-2.The per unit burden of the tax on buyers is

Correct Answer
verified

When a country is on the downward-sloping side of the Laffer curves,a cut in the tax rate will

Correct Answer
verified

The decrease in total surplus that results from a market distortion,such as a tax,is called a

Correct Answer
verified

Normally,both buyers and sellers of a good become worse off when the good is taxed.

Correct Answer
verified

A tax raises the price received by sellers and lowers the price paid by buyers.

Correct Answer
verified

According to the economist Milton Friedman,the "least bad" tax is a tax on

Correct Answer
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Figure 8-6 -Refer to Figure 8-6.The deadweight loss associated with this tax amounts to

Correct Answer
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Taxes cause deadweight losses because they

Correct Answer
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Exam 8: Application: the Costs of Taxation

Figure 8-7 The graph below represents a $10 per unit tax on a good. On the graph, Q represents quantity and P represents price. -Refer to Figure 8-7.The decrease in consumer and producer surpluses that is not offset by tax revenue is the area

Correct AnswerverifiedShow Answer

Figure 8-4 -Refer to Figure 8-4.Producer surplus before the tax was levied is represented by area

Correct AnswerverifiedShow Answer

Correct AnswerverifiedPrior to the tax,the equilibrium price w...View AnswerShow Answer

Figure 8-1 -Refer to Figure 8-1.When the market is in equilibrium,consumer surplus is represented by area

Correct AnswerverifiedShow Answer

Which of the following statements is correct regarding a tax on a good and the resulting deadweight loss?

Correct AnswerverifiedShow Answer

Figure 8-4 -Refer to Figure 8-4.The total surplus (consumer,producer,and government) with the tax is represented by area

Correct AnswerverifiedShow Answer

Who once said that taxes are the price we pay for a civilized society?

Correct AnswerverifiedShow Answer

Figure 8-4 -Refer to Figure 8-4.The tax causes a reduction in consumer surplus that is represented by area

Correct AnswerverifiedShow Answer

Illustrate on three demand-and-supply graphs how the size of a tax (small,medium and large)can alter total revenue and deadweight loss.

Correct AnswerverifiedShow Answer

Figure 8-3 -Refer to Figure 8-3.The amount of tax revenue received by the government is equal to

Correct AnswerverifiedShow Answer

Relative to a situation in which liquor is not taxed,the imposition of a tax on liquor causes

Correct AnswerverifiedShow Answer

Suppose a tax is levied on the buyers of a good;

Correct AnswerverifiedShow Answer

Figure 8-2 -Refer to Figure 8-2.The per unit burden of the tax on buyers is

Correct AnswerverifiedShow Answer

When a country is on the downward-sloping side of the Laffer curves,a cut in the tax rate will

Correct AnswerverifiedShow Answer

The decrease in total surplus that results from a market distortion,such as a tax,is called a

Correct AnswerverifiedShow Answer

Normally,both buyers and sellers of a good become worse off when the good is taxed.

Correct AnswerverifiedShow Answer

A tax raises the price received by sellers and lowers the price paid by buyers.

Correct AnswerverifiedShow Answer

According to the economist Milton Friedman,the "least bad" tax is a tax on

Correct AnswerverifiedShow Answer

Figure 8-6 -Refer to Figure 8-6.The deadweight loss associated with this tax amounts to

Correct AnswerverifiedShow Answer

Taxes cause deadweight losses because they

Correct AnswerverifiedShow Answer

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Prior to the tax,the equilibrium price w...
View Answer

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