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 equilibrium price and quantity before the imposition of the tax is

Accepted Answer

A)   P=$800 and Q=20.
B)   P=$600 and Q=20.
C)   P=$300 and Q=20.
D)   P=$600 and Q=40.E) None of the above
F) All of the above

Question 2

Figure 8-2
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-2. The imposition of the tax causes the price paid by buyers to

Accepted Answer

A)   decrease by $2.
B)   increase by $3.
C)   decrease by $4.
D)   increase by $5.E) A) and B)
F) A) and C)

Question 3

Figure 8-6
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-6. The tax results in a deadweight loss that amounts to

Accepted Answer

A)   $600.
B)   $900.
C)   $1,500.
D)   $1,800.E) None of the above
F) A) and C)

Question 4

The size of the deadweight loss generated from a tax is affected by the

Accepted Answer

A)   elasticities of both supply and demand.
B)   elasticity of demand only.
C)   elasticity of supply only.
D)   total revenue collected by the government.E) A) and B)
F) None of the above

Question 5

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. With the tax, the producer surplus is

Accepted Answer

A)   (P5-0)  x Q5.
B)   1/2 x (P5-0)  x Q5.
C)   (P8-0)  x Q2.
D)   1/2 x (P8-0)  x Q2.E) All of the above
F) A) and B)

Question 6

Figure 8-8
Suppose the government imposes a $10 per unit tax on a good. 
-Refer to Figure 8-8. The decrease in consumer and producer surpluses that is not offset by tax revenue is the area

Accepted Answer

A)   C.
B)   F.
C)   G.
D)   C+F.E) A) and B)
F) A) and C)

Question 7

When a tax is imposed on the buyers of a good, the demand curve shifts

Accepted Answer

A)   downward by the amount of the tax.
B)   upward by the amount of the tax.
C)   downward by less than the amount of the tax.
D)   upward by more than the amount of the tax.E) A) and B)
F) A) and D)

Question 8

Tax revenues increase in direct proportion to increases in the size of the tax.

Accepted Answer

A) True 
 B)False

Question 9

In terms of gains from trade, why is it true that taxes cause deadweight losses?

Accepted Answer

Taxes cause deadweight losses ...

Question 10

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

Question 11

When a tax is levied on a good,

Accepted Answer

A)   government revenues exceed the loss in total welfare.
B)   there is a decrease in the quantity of the good bought and sold in the market.
C)   the price that sellers receive exceeds the price that buyers pay.
D)   All of the above are correct.E) None of the above
F) A) and D)

Question 12

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 as a result of the tax is

Accepted Answer

A)   $1.50.
B)   $3.
C)   $4.50.
D)   $6.E) All of the above
F) A) and B)

Question 13

Figure 8-5
Suppose that the government imposes a tax of P3 - P1. 
-Refer to Figure 8-5. The total surplus with the tax is represented by area

Accepted Answer

A)   C+H.
B)   A+B+C.
C)   D+H+F.
D)   A+B+D+F.E) A) and D)
F) A) and C)

Question 14

Suppose Rebecca needs a dog sitter so that she can travel to her sister's wedding. Rebecca values dog sitting for the weekend at $200. Susan is willing to dog sit for Rebecca so long as she receives at least $175. Rebecca and Susan agree on a price of $185. Suppose the government imposes a tax of $30 on dog sitting. What is the deadweight loss of the tax?

Accepted Answer

A)   the maximum value that Rebecca would pay for dog sitting
B)   the $30 tax
C)   the lost benefit to Rebecca and Susan because after the tax, Susan will not dog sit for Rebecca
D)   the lost benefit to Rebecca of being unable to hire a dog sitter because Rebecca is the one who would pay the taxE) A) and B)
F) B) and C)

Question 15

Taxes on labor have the effect of encouraging

Accepted Answer

A)   workers to work more hours.
B)   the elderly to postpone retirement.
C)   second earners within a family to take a joc.
D)   unscrupulous people to take part in the underground economy.E) B) and D)
F) A) and B)

Question 16

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

Accepted Answer

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) C) and D)
F) A) and B)

Question 17

Suppose a tax of $1 per unit is imposed on a good. The more elastic the demand for the good, other things equal,

Accepted Answer

A)   the larger is the decrease in quantity demanded as a result of the tax.
B)   the smaller is the tax burden on buyers relative to the tax burden on sellers.
C)   the larger is the deadweight loss of the tax.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 18

Which of the following scenarios is consistent with the Laffer curve?

Accepted Answer

A)   The tax rate is 1 percent, and tax revenue is very low.
B)   The tax rate is 1 percent, and tax revenue is very high.
C)   The tax rate is 99 percent, and tax revenue is very high.
D)   The tax rate is moderate (between very high and very low) , and tax revenue is very low.E) A) and B)
F) All of the above

Question 19

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) B) and D)
F) B) and C)

Question 20

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

Accepted Answer

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

Exam 8: Application: The Costs of Taxation

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. The tax results in a deadweight loss that amounts to

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 as a result of the tax is

Correct Answer
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The size of the deadweight loss generated from a tax is affected by the

Correct Answer
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The price elasticities of supply and demand affect

Correct Answer
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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. With the tax, the producer surplus is

Correct Answer
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When a tax is imposed on the buyers of a good, the demand curve shifts

Correct Answer
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Tax revenues increase in direct proportion to increases in the size of the tax.

Correct Answer
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Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. The total surplus with the tax is represented by area

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 equilibrium price and quantity before the imposition of the tax is

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 decrease in consumer and producer surpluses that is not offset by tax revenue is the area

Correct Answer
verified

When a tax is imposed on a good, the

Correct Answer
verified

Which of the following scenarios is consistent with the Laffer curve?

Correct Answer
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Taxes on labor have the effect of encouraging

Correct Answer
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Suppose a tax of $1 per unit is imposed on a good. The more elastic the demand for the good, other things equal,

Correct Answer
verified

In terms of gains from trade, why is it true that taxes cause deadweight losses?

Correct Answer
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Taxes cause deadweight losses ...
View Answer

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

Correct Answer
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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

Correct Answer
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When a tax is levied on a good,

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 imposition of the tax causes the price paid by buyers to

Correct Answer
verified

Exam 8: Application: The Costs of Taxation

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. The tax results in a deadweight loss that amounts to

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 as a result of the tax is

Correct AnswerverifiedShow Answer

The size of the deadweight loss generated from a tax is affected by the

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The price elasticities of supply and demand affect

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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. With the tax, the producer surplus is

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When a tax is imposed on the buyers of a good, the demand curve shifts

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Tax revenues increase in direct proportion to increases in the size of the tax.

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Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. The total surplus with the tax is represented by area

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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 equilibrium price and quantity before the imposition of the tax is

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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 decrease in consumer and producer surpluses that is not offset by tax revenue is the area

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When a tax is imposed on a good, the

Correct AnswerverifiedShow Answer

Which of the following scenarios is consistent with the Laffer curve?

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Taxes on labor have the effect of encouraging

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Suppose a tax of $1 per unit is imposed on a good. The more elastic the demand for the good, other things equal,

Correct AnswerverifiedShow Answer

In terms of gains from trade, why is it true that taxes cause deadweight losses?

Correct AnswerverifiedTaxes cause deadweight losses ...View AnswerShow Answer

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

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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

Correct AnswerverifiedShow Answer

When a tax is levied on a good,

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 imposition of the tax causes the price paid by buyers to

Correct AnswerverifiedShow Answer

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Taxes cause deadweight losses ...
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