Question 1

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) None of the above
F) All of the above

Question 2

Suppose the federal government doubles the gasoline tax. The deadweight loss associated with the tax

Accepted Answer

A)  also doubles.
B)  triples.
C)  quadruples.
D)  rises by a factor of 8.E) A) and D)
F) A) and B)

Question 3

Figure 8-11 
-Refer to Figure 8-11. The size of the tax is represented by the

Accepted Answer

A)  length of the line segment connecting points A and B.
B)  length of the line segment connecting points A and C.
C)  length of the line segment connecting points B and C.
D)  area of the triangle bounded by the points A, B, and C.E) A) and B)
F) A) and D)

Question 4

Figure 8-12 
-Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The loss of producer surplus resulting from this tax is

Accepted Answer

A)  $5.50.
B)  $17.50.
C)  $22.50.
D)  $45.00E) A) and B)
F) A) and C)

Question 5

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) None of the above
F) B) and C)

Question 6

The demand for chicken wings is more elastic than the demand for razor blades. Suppose the government levies an equivalent tax on chicken wings and razor blades. The deadweight loss would be larger in the market for

Accepted Answer

A)  chicken wings than in the market for razor blades because the quantity of chicken wings would fall by more than the quantity of razor blades.
B)  chicken wings than in the market for razor blades because the quantity of razor blades would fall by more than the quantity of chicken wings.
C)  razor blades than in the market for chicken wings because the quantity of chicken wings would fall by more than the quantity of razor blades.
D)  razor blades than in the market for chicken wings because the quantity of razor blades would fall by more than the quantity of chicken wings.E) A) and B)
F) B) and C)

Question 7

Figure 8-13 
-Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The tax causes the price paid by buyers to

Accepted Answer

A)  decrease by $5.
B)  increase by $5.
C)  increase by $3.
D)  increase by $2.E) A) and C)
F) None of the above

Question 8

Figure 8-2
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-2. The loss of consumer surplus associated with some buyers dropping out of the market as a result of the tax is

Accepted Answer

A)  $0.
B)  $1.50.
C)  $3.
D)  $4.50.E) B) and D)
F) All of the above

Question 9

Figure 8-11 3 on the vertical axis represents the price A) received by sellers before the tax is imposed. B) received by sellers after the tax is imposed. C) paid by buyers before the tax is imposed. D) paid by buyers after the tax is imposed." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 8-11. The price labeled as P3 on the vertical axis represents the price

Accepted Answer

A)  received by sellers before the tax is imposed.
B)  received by sellers after the tax is imposed.
C)  paid by buyers before the tax is imposed.
D)  paid by buyers after the tax is imposed.E) B) and C)
F) B) and D)

Question 10

The amount of deadweight loss from a tax depends upon the

Accepted Answer

A)  price elasticity of demand.
B)  price elasticity of supply.
C)  amount of the tax per unit.
D)  All of the above are correct.E) B) and C)
F) A) and D)

Question 11

Figure 8-26 
-Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. What price will consumers pay for the good after the tax is imposed?

Accepted Answer

Consumers will pay $...

Question 12

Kate is a personal trainer whose client William pays $80 per hour-long session. William values this service at $100 per hour, while the opportunity cost of Kate's time is $75 per hour. The government places a tax of $10 per hour on personal trainers. After the tax, what is likely to happen in the market for personal training?

Accepted Answer

A)  Kate and William will agree to a new price somewhere between $85 and $100.
B)  Kate and William will agree to a new price somewhere between $70 and $110.
C)  Kate will no longer offer personal training services to William because she must charge more than $100 in order to cover her opportunity costs and pay the tax.
D)  The price will remain at $80, and Kate will pay the $10 tax.E) B) and D)
F) None of the above

Question 13

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 deadweight loss of the tax?

Accepted Answer

A)  Deadweight loss = (1/2) (P2 - P1) (Q2 + Q1) 
B)  Deadweight loss = (1/2) (P3 - P1) (Q2 + Q1) 
C)  Deadweight loss = (1/2) (P3 - P2) (Q2 - Q1) 
D)  Deadweight loss = (1/2) (P3 - P1) (Q2 - Q1) E) A) and B)
F) A) and C)

Question 14

The benefit to sellers of participating in a market is measured by the

Accepted Answer

A)  amount of taxes collected on sales of the good.
B)  producer surplus.
C)  amount sellers receive for their product.
D)  sellers' willingness to sell.E) B) and D)
F) B) and C)

Question 15

Scenario 8-1
Erin would be willing to pay as much as $100 per week to have her house cleaned. Ernesto's opportunity cost of cleaning Erin's house is $70 per week.
-Refer to Scenario 8-1. Assume Erin is required to pay a tax of $40 when she hires someone to clean her house for a week. Which of the following is correct?

Accepted Answer

A)  Erin will now clean her own house.
B)  Ernesto will continue to clean Erin's house, but his producer surplus will decline.
C)  Total economic welfare (consumer surplus plus producer surplus plus tax revenue)  will increase.
D)  Erin will continue to hire Ernesto to clean her house, but her consumer surplus will decline.E) B) and D)
F) A) and D)

Question 16

Suppose that a university charges students a $100 "tax" to register for business classes. The next year the university raises the "tax" to $150. The deadweight loss from the "tax" triples.

Accepted Answer

A) True 
 B)False

Question 17

The demand for bread is less elastic than the demand for donuts; hence, a tax on bread will create a larger deadweight loss than will the same tax on donuts, other things equal.

Accepted Answer

A) True 
 B)False

Question 18

Suppose that the market for product X is characterized by a typical, downward-sloping, linear demand curve and a typical, upward-sloping, linear supply curve. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $6 tax per unit?

Accepted Answer

The deadweight loss will be $1...

Question 19

If the tax on a good is tripled, the deadweight loss of the tax

Accepted Answer

A)  remains constant.
B)  triples.
C)  increases by a factor of 9.
D)  increases by a factor of 12.E) B) and C)
F) A) and D)

Question 20

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, consumer surplus is

Accepted Answer

A)  $600.
B)  $900.
C)  $1,500.
D)  $3,000.E) None of the above
F) B) and C)

Exam 8: Application: The Costs of Taxation

Taxes on labor encourage which of the following?

Correct Answer
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Figure 8-12 -Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The loss of producer surplus resulting from this tax is

Correct Answer
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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 deadweight loss of the tax?

Correct Answer
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Figure 8-11 -Refer to Figure 8-11. The size of the tax is represented by the

Correct Answer
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Suppose that the market for product X is characterized by a typical, downward-sloping, linear demand curve and a typical, upward-sloping, linear supply curve. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $6 tax per unit?

Correct Answer
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The deadweight loss will be $1...
View Answer

The amount of deadweight loss from a tax depends upon the

Correct Answer
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Suppose that a university charges students a $100 "tax" to register for business classes. The next year the university raises the "tax" to $150. The deadweight loss from the "tax" triples.

Correct Answer
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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, consumer surplus is

Correct Answer
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The demand for bread is less elastic than the demand for donuts; hence, a tax on bread will create a larger deadweight loss than will the same tax on donuts, other things equal.

Correct Answer
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Correct Answer
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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

Correct Answer
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Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2. The loss of consumer surplus associated with some buyers dropping out of the market as a result of the tax is

Correct Answer
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Correct Answer
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The benefit to sellers of participating in a market is measured by the

Correct Answer
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Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. What price will consumers pay for the good after the tax is imposed?

Correct Answer
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Consumers will pay $...
View Answer

Figure 8-11 -Refer to Figure 8-11. The price labeled as P₃ on the vertical axis represents the price

Correct Answer
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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 tax causes the price paid by buyers to

Correct Answer
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If the tax on a good is tripled, the deadweight loss of the tax

Correct Answer
verified

The demand for chicken wings is more elastic than the demand for razor blades. Suppose the government levies an equivalent tax on chicken wings and razor blades. The deadweight loss would be larger in the market for

Correct Answer
verified

Suppose the federal government doubles the gasoline tax. The deadweight loss associated with the tax

Correct Answer
verified

Exam 8: Application: The Costs of Taxation

Taxes on labor encourage which of the following?

Correct AnswerverifiedShow Answer

Figure 8-12 -Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The loss of producer surplus resulting from this tax is

Correct AnswerverifiedShow Answer

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 deadweight loss of the tax?

Correct AnswerverifiedShow Answer

Figure 8-11 -Refer to Figure 8-11. The size of the tax is represented by the

Correct AnswerverifiedShow Answer

Suppose that the market for product X is characterized by a typical, downward-sloping, linear demand curve and a typical, upward-sloping, linear supply curve. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $6 tax per unit?

Correct AnswerverifiedThe deadweight loss will be $1...View AnswerShow Answer

The amount of deadweight loss from a tax depends upon the

Correct AnswerverifiedShow Answer

Suppose that a university charges students a $100 "tax" to register for business classes. The next year the university raises the "tax" to $150. The deadweight loss from the "tax" triples.

Correct AnswerverifiedShow Answer

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, consumer surplus is

Correct AnswerverifiedShow Answer

The demand for bread is less elastic than the demand for donuts; hence, a tax on bread will create a larger deadweight loss than will the same tax on donuts, other things equal.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2. The loss of consumer surplus associated with some buyers dropping out of the market as a result of the tax is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The benefit to sellers of participating in a market is measured by the

Correct AnswerverifiedShow Answer

Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. What price will consumers pay for the good after the tax is imposed?

Correct AnswerverifiedConsumers will pay $...View AnswerShow Answer

Figure 8-11 -Refer to Figure 8-11. The price labeled as P3 on the vertical axis represents the price

Correct AnswerverifiedShow Answer

Figure 8-13 -Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The tax causes the price paid by buyers to

Correct AnswerverifiedShow Answer

If the tax on a good is tripled, the deadweight loss of the tax

Correct AnswerverifiedShow Answer

The demand for chicken wings is more elastic than the demand for razor blades. Suppose the government levies an equivalent tax on chicken wings and razor blades. The deadweight loss would be larger in the market for

Correct AnswerverifiedShow Answer

Suppose the federal government doubles the gasoline tax. The deadweight loss associated with the tax

Correct AnswerverifiedShow Answer

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The deadweight loss will be $1...
View Answer

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Consumers will pay $...
View Answer

Figure 8-11 -Refer to Figure 8-11. The price labeled as P₃ on the vertical axis represents the price

Correct Answer
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