Question 1

The price elasticities of supply and demand affect

Accepted Answer

A)  both the size of the deadweight loss from a tax and the tax incidence.
B)  the size of the deadweight loss from a tax but not the tax incidence.
C)  the tax incidence but not the size of the deadweight loss from a tax.
D)  neither the size of the deadweight loss from a tax nor the tax incidence.E) All of the above
F) A) and B)

Question 2

Suppose the demand curve and the supply curve in a market are both linear. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $3 tax per unit?

Accepted Answer

The deadwe...

Question 3

Economists disagree on whether labor taxes cause small or large deadweight losses. This disagreement arises primarily because economists hold different views about

Accepted Answer

A)  the size of labor taxes.
B)  the importance of labor taxes imposed by the federal government relative to the importance of labor taxes imposed by the various states.
C)  the elasticity of labor supply.
D)  the elasticity of labor demand.E) A) and C)
F) B) and C)

Question 4

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 D)
F) B) and C)

Question 5

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The producer surplus without the tax is

Accepted Answer

A)  $3,000.
B)  $8,000.
C)  $12,000.
D)  $24,000.E) B) and D)
F) B) and C)

Question 6

When a tax is imposed on a good, the

Accepted Answer

A)  supply curve for the good always shifts.
B)  demand curve for the good always shifts.
C)  amount of the good that buyers are willing to buy at each price always remains unchanged.
D)  equilibrium quantity of the good always decreases.E) None of the above
F) A) and B)

Question 7

Figure 8-2
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-2. Total surplus without the tax is

Accepted Answer

A)  $10, and total surplus with the tax is $2.50.
B)  $10, and total surplus with the tax is $7.50.
C)  $20, and total surplus with the tax is $2.50.
D)  $20, and total surplus with the tax is $7.50.E) B) and C)
F) All of the above

Question 8

The Laffer curve illustrates how taxes in markets with greater elasticities of demand compare to taxes in markets with smaller elasticities of supply.

Accepted Answer

A) True 
 B)False

Question 9

Assume that for good X the supply curve for a good is a typical, upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. If the good is taxed, and the tax is doubled, the

Accepted Answer

A)  base of the triangle that represents the deadweight loss quadruples.
B)  height of the triangle that represents the deadweight loss doubles.
C)  deadweight loss of the tax doubles.
D)  All of the above are correct.E) A) and C)
F) B) and C)

Question 10

Figure 8-12 
-Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The per-unit burden of the tax on buyers is

Accepted Answer

A)  $1.
B)  $2.
C)  $3.
D)  $4.E) None of the above
F) All of the above

Question 11

Figure 8-1 
-Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The producer surplus after the tax is measured by the area

Accepted Answer

A)  M.
B)  L+M+N+Y+B.
C)  L+M+Y.
D)  J.E) C) and D)
F) All of the above

Question 12

One result of a tax, regardless of whether the tax is placed on the buyers or the sellers, is that the

Accepted Answer

A)  equilibrium quantity of the good is unchanged.
B)  price the buyer effectively pays is lower.
C)  supply curve for the good shifts upward by the amount of the tax.
D)  tax reduces the welfare of both buyers and sellers.E) None of the above
F) A) and C)

Question 13

When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic,

Accepted Answer

A)  buyers of the good will bear most of the burden of the tax.
B)  sellers of the good will bear most of the burden of the tax.
C)  buyers and sellers will each bear 50 percent of the burden of the tax.
D)  both equilibrium price and quantity will increase.E) B) and C)
F) A) and D)

Question 14

Taxes cause deadweight losses because they prevent buyers and sellers from realizing some of the gains from trade.

Accepted Answer

A) True 
 B)False

Question 15

To measure the gains and losses from a tax on a good, economists use the tools of

Accepted Answer

A)  macroeconomics.
B)  welfare economics.
C)  international-trade theory.
D)  circular-flow analysis.E) A) and C)
F) A) and B)

Question 16

For widgets, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. A tax of $15 per unit is imposed on widgets. The tax reduces the equilibrium quantity in the market by 300 units. The deadweight loss from the tax is

Accepted Answer

A)  $1,750.
B)  $2,250.
C)  $3,000.
D)  $4,500.E) A) and B)
F) B) and C)

Question 17

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

Accepted Answer

A)  $105.
B)  $140.
C)  $170.
D)  $210.E) B) and C)
F) A) and B)

Question 18

Figure 8-26 
-Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much is consumer surplus after the tax is imposed?

Accepted Answer

Consumer surplus is ...

Question 19

Figure 8-3
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-3. The price that sellers effectively receive after the tax is imposed is

Accepted Answer

A)  P1.
B)  P2.
C)  P3.
D)  P4.E) A) and B)
F) B) and D)

Question 20

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) B) and C)

Exam 8: Applications: the Costs of Taxation

Figure 8-12 -Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The per-unit burden of the tax on buyers is

Correct Answer
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Suppose the demand curve and the supply curve in a market are both linear. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $3 tax per unit?

Correct Answer
verified
The deadwe...
View Answer

Correct Answer
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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 consumer surplus that amounts to

Correct Answer
verified

When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic,

Correct Answer
verified

The Laffer curve illustrates how taxes in markets with greater elasticities of demand compare to taxes in markets with smaller elasticities of supply.

Correct Answer
verified

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2. Total surplus without the tax is

Correct Answer
verified

For widgets, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. A tax of $15 per unit is imposed on widgets. The tax reduces the equilibrium quantity in the market by 300 units. The deadweight loss from the tax is

Correct Answer
verified

Taxes cause deadweight losses because they prevent buyers and sellers from realizing some of the gains from trade.

Correct Answer
verified

One result of a tax, regardless of whether the tax is placed on the buyers or the sellers, is that the

Correct Answer
verified

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

Correct Answer
verified

To measure the gains and losses from a tax on a good, economists use the tools of

Correct Answer
verified

Economists disagree on whether labor taxes cause small or large deadweight losses. This disagreement arises primarily because economists hold different views about

Correct Answer
verified

Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much is consumer surplus after the tax is imposed?

Correct Answer
verified
Consumer surplus is ...
View Answer

When a tax is imposed on a good, the

Correct Answer
verified

Figure 8-1 -Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The producer surplus after the tax is measured by the area

Correct Answer
verified

The price elasticities of supply and demand affect

Correct Answer
verified

Assume that for good X the supply curve for a good is a typical, upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. If the good is taxed, and the tax is doubled, the

Correct Answer
verified

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. The price that sellers effectively receive after the tax is imposed is

Correct Answer
verified

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The producer surplus without the tax is

Correct Answer
verified

Exam 8: Applications: the Costs of Taxation

Figure 8-12 -Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The per-unit burden of the tax on buyers is

Correct AnswerverifiedShow Answer

Suppose the demand curve and the supply curve in a market are both linear. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $3 tax per unit?

Correct AnswerverifiedThe deadwe...View AnswerShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic,

Correct AnswerverifiedShow Answer

The Laffer curve illustrates how taxes in markets with greater elasticities of demand compare to taxes in markets with smaller elasticities of supply.

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. Total surplus without the tax is

Correct AnswerverifiedShow Answer

For widgets, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. A tax of $15 per unit is imposed on widgets. The tax reduces the equilibrium quantity in the market by 300 units. The deadweight loss from the tax is

Correct AnswerverifiedShow Answer

Taxes cause deadweight losses because they prevent buyers and sellers from realizing some of the gains from trade.

Correct AnswerverifiedShow Answer

One result of a tax, regardless of whether the tax is placed on the buyers or the sellers, is that the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

To measure the gains and losses from a tax on a good, economists use the tools of

Correct AnswerverifiedShow Answer

Economists disagree on whether labor taxes cause small or large deadweight losses. This disagreement arises primarily because economists hold different views about

Correct AnswerverifiedShow Answer

Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much is consumer surplus after the tax is imposed?

Correct AnswerverifiedConsumer surplus is ...View AnswerShow Answer

When a tax is imposed on a good, the

Correct AnswerverifiedShow Answer

Figure 8-1 -Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The producer surplus after the tax is measured by the area

Correct AnswerverifiedShow Answer

The price elasticities of supply and demand affect

Correct AnswerverifiedShow Answer

Assume that for good X the supply curve for a good is a typical, upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. If the good is taxed, and the tax is doubled, the

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. The price that sellers effectively receive after the tax is imposed is

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 producer surplus without the tax is

Correct AnswerverifiedShow Answer

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The deadwe...
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Consumer surplus is ...
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