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Figure 8-6 The vertical distance between points A and B represents a tax in the market. Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. Without a tax, producer surplus in this market is A) $1,500. B) $2,400. C) $3,000. D) $3,600. -Refer to Figure 8-6. Without a tax, producer surplus in this market is


A) $1,500.
B) $2,400.
C) $3,000.
D) $3,600.

E) A) and B)
F) All of the above

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The benefit to buyers of participating in a market is measured by


A) consumer surplus.
B) producer surplus.
C) total surplus.
D) deadweight loss.

E) A) and D)
F) All of the above

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If the labor supply curve is nearly vertical, a tax on labor


A) has a large deadweight loss.
B) raises a small amount of tax revenue.
C) has little impact on the amount of work that workers are willing to do.
D) results in a large tax burden on the firms that hire labor.

E) A) and B)
F) None of the above

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The loss in total surplus resulting from a tax is called


A) a deficit.
B) economic loss.
C) deadweight loss.
D) inefficiency.

E) None of the above
F) All of the above

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Deadweight loss measures the loss


A) in a market to buyers and sellers that is not offset by an increase in government revenue.
B) in revenue to the government when buyers choose to buy less of the product because of the tax.
C) of equality in a market due to government intervention.
D) of total revenue to business firms due to the price wedge caused by the tax.

E) A) and D)
F) A) and C)

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Figure 8-22 Figure 8-22 -Refer to Figure 8-22. Suppose the government changed the per-unit tax on this good from $3.00 to $1.50. Compared to the original tax rate, this lower tax rate would A) increase tax revenue and increase the deadweight loss from the tax. B) increase tax revenue and decrease the deadweight loss from the tax. C) decrease tax revenue and increase the deadweight loss from the tax. D) decrease tax revenue and decrease the deadweight loss from the tax. -Refer to Figure 8-22. Suppose the government changed the per-unit tax on this good from $3.00 to $1.50. Compared to the original tax rate, this lower tax rate would


A) increase tax revenue and increase the deadweight loss from the tax.
B) increase tax revenue and decrease the deadweight loss from the tax.
C) decrease tax revenue and increase the deadweight loss from the tax.
D) decrease tax revenue and decrease the deadweight loss from the tax.

E) B) and D)
F) All of the above

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The Social Security tax is a labor tax.

A) True
B) False

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Figure 8-9 The vertical distance between points A and C represents a tax in the market. Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The consumer surplus without the tax is A) $2,000. B) $5,000. C) $8,000. D) $16,000. -Refer to Figure 8-9. The consumer surplus without the tax is


A) $2,000.
B) $5,000.
C) $8,000.
D) $16,000.

E) A) and D)
F) None of the above

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Figure 8-4 The vertical distance between points A and B represents a tax in the market. 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 consumer surplus that amounts to A) $105. B) $140. C) $170. D) $210. -Refer to Figure 8-4. The tax results in a loss of consumer surplus that amounts to


A) $105.
B) $140.
C) $170.
D) $210.

E) A) and B)
F) B) and D)

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When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic.

A) True
B) False

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Figure 8-7 The vertical distance between points A and B represents a tax in the market. Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7. Which of the following statements is correct? A) Total surplus before the tax is imposed is $500. B) After the tax is imposed, consumer surplus is 45 percent of its pre-tax value. C) After the tax is imposed, producer surplus is 45 percent of its pre-tax value. D) All of the above are correct. -Refer to Figure 8-7. Which of the following statements is correct?


A) Total surplus before the tax is imposed is $500.
B) After the tax is imposed, consumer surplus is 45 percent of its pre-tax value.
C) After the tax is imposed, producer surplus is 45 percent of its pre-tax value.
D) All of the above are correct.

E) A) and C)
F) A) and B)

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Figure 8-10 Figure 8-10 -Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. The size of the tax is A) P0-P2. B) P2-P8. C) P2-P5. D) P5-P8. -Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. The size of the tax is


A) P0-P2.
B) P2-P8.
C) P2-P5.
D) P5-P8.

E) A) and B)
F) All of the above

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

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Consumer surplus is ...

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Figure 8-9 The vertical distance between points A and C represents a tax in the market. Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The amount of the tax on each unit of the good is A) $20. B) $200. C) $300. D) $500. -Refer to Figure 8-9. The amount of the tax on each unit of the good is


A) $20.
B) $200.
C) $300.
D) $500.

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

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Figure 8-9 The vertical distance between points A and C represents a tax in the market. Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The total surplus without the tax is A) $8,000. B) $12,000. C) $20,000. D) $40,000. -Refer to Figure 8-9. The total surplus without the tax is


A) $8,000.
B) $12,000.
C) $20,000.
D) $40,000.

E) None of the above
F) C) and D)

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Figure 8-19 The vertical distance between points A and B represents the original tax. Figure 8-19 The vertical distance between points A and B represents the original tax. -Refer to Figure 8-19. If the government changed the per-unit tax from $5.00 to $2.50, then the price paid by buyers would be $7.50, the price received by sellers would be $5, and the quantity sold in the market would be 1.5 units. Compared to the original tax rate, this lower tax rate would A) increase government revenue and increase the deadweight loss from the tax. B) increase government revenue and decrease the deadweight loss from the tax. C) decrease government revenue and increase the deadweight loss from the tax. D) decrease government revenue and decrease the deadweight loss from the tax. -Refer to Figure 8-19. If the government changed the per-unit tax from $5.00 to $2.50, then the price paid by buyers would be $7.50, the price received by sellers would be $5, and the quantity sold in the market would be 1.5 units. Compared to the original tax rate, this lower tax rate would


A) increase government revenue and increase the deadweight loss from the tax.
B) increase government revenue and decrease the deadweight loss from the tax.
C) decrease government revenue and increase the deadweight loss from the tax.
D) decrease government revenue and decrease the deadweight loss from the tax.

E) All of the above
F) B) and C)

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Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. One effect of the tax is to A) reduce consumer surplus from $180 to $72. B) reduce producer surplus from $96 to $24. C) create a deadweight loss of $72. D) All of the above are correct. -Refer to Figure 8-8. One effect of the tax is to


A) reduce consumer surplus from $180 to $72.
B) reduce producer surplus from $96 to $24.
C) create a deadweight loss of $72.
D) All of the above are correct.

E) A) and D)
F) A) and C)

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Figure 8-24. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. Figure 8-24. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-24. Tax revenue would A) decrease if the economy began at point B and then the tax rate was decreased. B) increase if the economy began at point F and then the tax rate was decreased. C) decrease if the economy began at point C and then the tax rate was increased. D) All of the above are correct. -Refer to Figure 8-24. Tax revenue would


A) decrease if the economy began at point B and then the tax rate was decreased.
B) increase if the economy began at point F and then the tax rate was decreased.
C) decrease if the economy began at point C and then the tax rate was increased.
D) All of the above are correct.

E) A) and B)
F) A) and D)

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Figure 8-1 Figure 8-1 -Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by I+J+K+L+M+Y represents A) total surplus before the tax. B) total surplus after the tax. C) consumer surplus before the tax. D) deadweight loss from the tax. -Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by I+J+K+L+M+Y represents


A) total surplus before the tax.
B) total surplus after the tax.
C) consumer surplus before the tax.
D) deadweight loss from the tax.

E) A) and B)
F) A) and D)

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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.

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