Question 1

When a tax is placed on the buyers of a product, a result is that buyers effectively pay

Accepted Answer

A)   less than before the tax, and sellers effectively receive less than before the tax.
B)   less than before the tax, and sellers effectively receive more than before the tax.
C)   more than before the tax, and sellers effectively receive less than before the tax.
D)   more than before the tax, and sellers effectively receive more than before the tax.E) C) and D)
F) B) and C)

Question 2

Other things equal, the deadweight loss of a tax

Accepted Answer

A)   decreases as the size of the tax increases.
B)   increases as the size of the tax increases, but the increase in the deadweight loss is less rapid than the increase in the size of the tax.
C)   increases as the size of the tax increases, and the increase in the deadweight loss is more rapid than the increase in the size of the tax.
D)   increases as the price elasticities of demand and/or supply increase, but the deadweight loss does not change as the size of the tax increases.E) B) and C)
F) A) and B)

Question 3

When a tax is imposed on a good, consumer surplus decreases and producer surplus remains unchanged.

Accepted Answer

A) True 
 B)False

Question 4

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The imposition of the tax causes the price received by sellers to

Accepted Answer

A)   increase from $600 to $800.
B)   decrease from $800 to $300.
C)   decrease from $600 to $300.
D)   remain unchanged at $600.E) A) and B)
F) C) and D)

Question 5

If the government imposes a $3 tax in a market, the equilibrium price will rise by $3.

Accepted Answer

A) True 
 B)False

Question 6

Figure 8-26 
-Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much is the deadweight loss from this tax?

Accepted Answer

The deadweight loss from this tax is 0.5...

Question 7

Figure 8-17 
-Refer to Figure 8-17. Suppose the government imposes a $1 tax in each of the four markets represented by demand curves D1, D2, D3, and D4. The deadweight will be the largest in the market represented by

Accepted Answer

A)   D1.
B)   D2.
C)   D3.
D)   D4.E) B) and C)
F) All of the above

Question 8

Taxes on labor encourage which of the following?

Accepted Answer

A)   labor demand to be more inelastic
B)   mothers to stay at home rather than work in the labor force
C)   workers to work overtime
D)   fathers to take on second jobsE) B) and C)
F) None of the above

Question 9

Figure 8-13 
-Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The per-unit burden of the tax on buyers is

Accepted Answer

A)   $1.
B)   $2.
C)   $3.
D)   $5.E) B) and D)
F) A) and B)

Question 10

A deadweight loss is a consequence of a tax on a good because the tax

Accepted Answer

A)   induces the government to increase its expenditures.
B)   induces buyers to consume less, and sellers to produce less.
C)   increases the equilibrium price in the market.
D)   imposes a loss on buyers that is greater than the loss to sellers.E) B) and D)
F) None of the above

Question 11

Figure 8-26 
-Refer to Figure 8-26. How much is total surplus at the market equilibrium?

Accepted Answer

Total surplus is the sum of co...

Question 12

Ronald Reagan believed that reducing income tax rates would

Accepted Answer

A)   do little, if anything, to encourage hard work.
B)   result in large increases in deadweight losses.
C)   raise economic well-being and perhaps even tax revenue.
D)   lower economic well-being, even though tax revenue could possibly increase.E) A) and D)
F) C) and D)

Question 13

Figure 8-4
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-4. The tax results in a loss of producer surplus that amounts to

Accepted Answer

A)   $75.50.
B)   $90.00.
C)   $112.50.
D)   $127.50.E) All of the above
F) B) and C)

Question 14

Taxes on labor tend to increase the number of hours that people choose to work.

Accepted Answer

A) True 
 B)False

Question 15

Figure 8-11 
-Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then the deadweight loss of the tax is

Accepted Answer

A)   $6.
B)   $8.
C)   $9.
D)   $12.E) B) and D)
F) B) and C)

Question 16

Figure 8-6
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-6. When the tax is imposed in this market, the price sellers effectively receive is

Accepted Answer

A)   $4.
B)   $6.
C)   $10.
D)   $16.E) B) and D)
F) All of the above

Question 17

Figure 8-3
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-3. Which of the following equations is valid for the tax revenue that the tax provides to the government?

Accepted Answer

A)   Tax revenue = (P2 - P1) xQ1
B)   Tax revenue = (P3 - P1) xQ1
C)   Tax revenue = (P3 - P2) xQ1
D)   Tax revenue = (P3 - P1) x(Q2 - Q1) E) All of the above
F) None of the above

Question 18

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The loss of consumer surplus as a result of the tax is

Accepted Answer

A)   $2,000.
B)   $4,000.
C)   $6,000.
D)   $8,000.E) A) and B)
F) A) and C)

Question 19

For a good that is taxed, the area on the relevant supply­and­demand graph that represents government's tax revenue is a

Accepted Answer

A)   triangle.
B)   rectangle.
C)   trapezoid.
D)   None of the above is correct; government's tax revenue is the area between the supply and demand curves, above the horizontal axis, and below the effective price to buyersE) B) and C)
F) A) and D)

Question 20

An increase in the size of a tax is most likely to increase tax revenue in a market with

Accepted Answer

A)   elastic demand and elastic supply.
B)   elastic demand and inelastic supply.
C)   inelastic demand and elastic supply.
D)   inelastic demand and inelastic supply.E) A) and B)
F) A) and D)

Exam 8: Application: The Costs of Taxation

Figure 8-11 -Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then the deadweight loss of the tax is

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Taxes on labor encourage which of the following?

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Figure 8-26 -Refer to Figure 8-26. How much is total surplus at the market equilibrium?

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Figure 8-13 -Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The per-unit burden of the tax on buyers is

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For a good that is taxed, the area on the relevant supply­and­demand graph that represents government's tax revenue is a

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Taxes on labor tend to increase the number of hours that people choose to work.

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Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. When the tax is imposed in this market, the price sellers effectively receive is

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Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. Which of the following equations is valid for the tax revenue that the tax provides to the government?

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When a tax is placed on the buyers of a product, a result is that buyers effectively pay

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When a tax is imposed on a good, consumer surplus decreases and producer surplus remains unchanged.

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A deadweight loss is a consequence of a tax on a good because the tax

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Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The imposition of the tax causes the price received by sellers to

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If the government imposes a $3 tax in a market, the equilibrium price will rise by $3.

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Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4. The tax results in a loss of producer surplus that amounts to

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Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The loss of consumer surplus as a result of the tax is

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An increase in the size of a tax is most likely to increase tax revenue in a market with

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Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much is the deadweight loss from this tax?

Correct AnswerverifiedThe deadweight loss from this tax is 0.5...View AnswerShow Answer

Figure 8-17 -Refer to Figure 8-17. Suppose the government imposes a $1 tax in each of the four markets represented by demand curves D1, D2, D3, and D4. The deadweight will be the largest in the market represented by

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Other things equal, the deadweight loss of a tax

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Ronald Reagan believed that reducing income tax rates would

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Total surplus is the sum of co...
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For a good that is taxed, the area on the relevant supplyanddemand graph that represents government's tax revenue is a

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The deadweight loss from this tax is 0.5...
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