Question 1

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, buyers effectively pay what amount of the $10 tax?

Accepted Answer

A)   $0
B)   $4
C)   $6
D)   $10E) A) and D)
F) A) and B)

Question 2

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?

Accepted Answer

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)

Question 3

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

Accepted Answer

A)   $35.
B)   $45.
C)   $70.
D)   $80.E) B) and D)
F) B) and C)

Question 4

A tax of $0.25 is imposed on each bag of potato chips that is sold. The tax decreases producer surplus by $600 per day, generates tax revenue of $1,220 per day, and decreases the equilibrium quantity of potato chips by 120 bags per day. The tax

Accepted Answer

A)   decreases consumer surplus by $645 per day.
B)   decreases the equilibrium quantity from 6,000 bags per day to 5,880 bags per day.
C)   decreases total surplus from $3,000 to $1,800 per day.
D)   creates a deadweight loss of $15 per day.E) A) and D)
F) A) and B)

Question 5

Assume the price of gasoline is $2.40 per gallon, and the equilibrium quantity of gasoline is 12 million gallons per day with no tax on gasoline. Starting from this initial situation, which of the following scenarios would result in the largest deadweight loss?

Accepted Answer

A)   A 10 percent increase in the price of gasoline reduces the quantity of gasoline demanded by 2 percent and it increases the quantity of gasoline supplied by 5 percent; and the tax on gasoline amounts to $0.40 per gallon.
B)   A 10 percent increase in the price of gasoline reduces the quantity of gasoline demanded by 2 percent and it increases the quantity of gasoline supplied by 7 percent; and the tax on gasoline amounts to $0.40 per gallon.
C)   A 10 percent increase in the price of gasoline reduces the quantity of gasoline demanded by 1 percent and it increases the quantity of gasoline supplied by 8 percent; and the tax on gasoline amounts to $0.35 per gallon.
D)   There is insufficient information to make this determination.E) C) and D)
F) B) and C)

Question 6

Suppose the demand curve and the supply curve in a market are both linear. To begin, there was a $5 tax per unit, and the $5 tax resulted in a deadweight loss of $1,500. Now, the tax per unit is higher, with the higher tax resulting in a deadweight loss of $6,000. What is the amount of the new tax per unit?

Accepted Answer

The new tax per unit is $10. D...

Question 7

Figure 8-25 
-Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is consumer surplus after the tax is imposed?

Accepted Answer

Consumer s...

Question 8

Which of the following ideas is the most plausible?

Accepted Answer

A)   Reducing a high tax rate is less likely to increase tax revenue than is reducing a low tax rate.
B)   Reducing a high tax rate is more likely to increase tax revenue than is reducing a low tax rate.
C)   Reducing a high tax rate will have the same effect on tax revenue as reducing a low tax rate.
D)   Reducing a tax rate can never increase tax revenue.E) A) and B)
F) C) and D)

Question 9

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, total surplus in this market is

Accepted Answer

A)   $3,000.
B)   $4,800.
C)   $6,000.
D)   $7,200.E) A) and C)
F) A) and D)

Question 10

In which of the following instances would the deadweight loss of the tax on cartons of cigarettes increase by a factor of 9?

Accepted Answer

A)   The tax on cartons of cigarettes increases from $10 to $11.11.
B)   The tax on cartons of cigarettes increases from $10 to $20.
C)   The tax on cartons of cigarettes increases from $10 to $30.
D)   The tax on cartons of cigarettes increases from $10 to $90.E) B) and C)
F) A) and D)

Question 11

Figure 8-25 
-Refer to Figure 8-25. Suppose the government places a $4 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

A tax

Accepted Answer

A)   lowers the price buyers pay and raises the price sellers receive.
B)   raises the price buyers pay and lowers the price sellers receive.
C)   places a wedge between the price buyers pay and the price sellers receive.
D)   Both b)  and c)  are correct.E) None of the above
F) All of the above

Question 13

The idea that tax cuts would increase the quantity of labor supplied, thus increasing tax revenue, became known as supply-side economics.

Accepted Answer

A) True 
 B)False

Question 14

When the government places a tax on a product, the cost of the tax to buyers and sellers

Accepted Answer

A)   is less than the revenue raised from the tax by the government.
B)   is equal to the revenue raised from the tax by the government.
C)   exceeds the revenue raised from the tax by the government.
D)   Without additional information, such as the elasticity of demand for this product, it is impossible to compare the cost of a tax to buyers and sellers with tax revenue.E) A) and C)
F) A) and D)

Question 15

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

Accepted Answer

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) None of the above
F) All of the above

Question 16

Figure 8-3
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-3. The amount of deadweight loss associated with the tax is equal to

Accepted Answer

A)   P3ACP1.
B)   ABC.
C)   P2ADP3.
D)   P1DCP2.E) A) and D)
F) A) and B)

Question 17

The amount of deadweight loss that results from a tax of a given size is determined by

Accepted Answer

A)   whether the tax is levied on buyers or sellers.
B)   the number of buyers in the market relative to the number of sellers.
C)   the price elasticities of demand and supply.
D)   the ratio of the tax per unit to the effective price received by sellers.E) B) and C)
F) None of the above

Question 18

Suppose the government increases the size of a tax by 20 percent. The deadweight loss from that tax

Accepted Answer

A)   increases by 20 percent.
B)   increases by more than 20 percent.
C)   increases but by less than 20 percent.
D)   decreases by 20 percent.E) A) and D)
F) B) and D)

Question 19

Figure 8-8
Suppose the government imposes a $10 per unit tax on a good. 
-Refer to Figure 8-8. The tax causes consumer surplus to decrease by the area

Accepted Answer

A)   A.
B)   B+C.
C)   A+B+C.
D)   A+B+C+D+F.E) C) and D)
F) All of the above

Question 20

When a tax is levied on the sellers of a good, the

Accepted Answer

A)   supply curve shifts upward by the amount of the tax.
B)   quantity demanded decreases for all conceivable prices of the good.
C)   quantity supplied increases for all conceivable prices of the good.
D)   None of the above is correct.E) None of the above
F) B) and C)

Exam 8: Application: The Costs of Taxation

A tax

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The new tax per unit is $10. D...
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When the government places a tax on a product, the cost of the tax to buyers and sellers

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The idea that tax cuts would increase the quantity of labor supplied, thus increasing tax revenue, became known as supply-side economics.

Correct Answer
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When a tax is levied on the sellers of a good, the

Correct Answer
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Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. The tax causes consumer surplus to decrease by the area

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, buyers effectively pay what amount of the $10 tax?

Correct Answer
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Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 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 $...
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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?

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Assume the price of gasoline is $2.40 per gallon, and the equilibrium quantity of gasoline is 12 million gallons per day with no tax on gasoline. Starting from this initial situation, which of the following scenarios would result in the largest deadweight loss?

Correct Answer
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Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is consumer surplus after the tax is imposed?

Correct Answer
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Consumer s...
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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. The amount of deadweight loss associated with the tax is equal to

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 consumer surplus resulting from this tax is

Correct Answer
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Suppose the government increases the size of a tax by 20 percent. The deadweight loss from that tax

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. Without a tax, total surplus in this market is

Correct Answer
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The amount of deadweight loss that results from a tax of a given size is determined by

Correct Answer
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Which of the following ideas is the most plausible?

Correct Answer
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A tax of $0.25 is imposed on each bag of potato chips that is sold. The tax decreases producer surplus by $600 per day, generates tax revenue of $1,220 per day, and decreases the equilibrium quantity of potato chips by 120 bags per day. The tax

Correct Answer
verified

In which of the following instances would the deadweight loss of the tax on cartons of cigarettes increase by a factor of 9?

Correct Answer
verified

Exam 8: Application: The Costs of Taxation

A tax

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe new tax per unit is $10. D...View AnswerShow Answer

When the government places a tax on a product, the cost of the tax to buyers and sellers

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The idea that tax cuts would increase the quantity of labor supplied, thus increasing tax revenue, became known as supply-side economics.

Correct AnswerverifiedShow Answer

When a tax is levied on the sellers of a good, the

Correct AnswerverifiedShow Answer

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. The tax causes consumer surplus to decrease by the area

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, buyers effectively pay what amount of the $10 tax?

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Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 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 8-7 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?

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Assume the price of gasoline is $2.40 per gallon, and the equilibrium quantity of gasoline is 12 million gallons per day with no tax on gasoline. Starting from this initial situation, which of the following scenarios would result in the largest deadweight loss?

Correct AnswerverifiedShow Answer

Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is consumer surplus after the tax is imposed?

Correct AnswerverifiedConsumer s...View AnswerShow Answer

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. The amount of deadweight loss associated with the tax is equal to

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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 consumer surplus resulting from this tax is

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Suppose the government increases the size of a tax by 20 percent. The deadweight loss from that tax

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. Without a tax, total surplus in this market is

Correct AnswerverifiedShow Answer

The amount of deadweight loss that results from a tax of a given size is determined by

Correct AnswerverifiedShow Answer

Which of the following ideas is the most plausible?

Correct AnswerverifiedShow Answer

A tax of $0.25 is imposed on each bag of potato chips that is sold. The tax decreases producer surplus by $600 per day, generates tax revenue of $1,220 per day, and decreases the equilibrium quantity of potato chips by 120 bags per day. The tax

Correct AnswerverifiedShow Answer

In which of the following instances would the deadweight loss of the tax on cartons of cigarettes increase by a factor of 9?

Correct AnswerverifiedShow Answer

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The new tax per unit is $10. D...
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Consumers will pay $...
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Consumer s...
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