Question 1

Figure 8-6
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-6. The amount of the tax on each unit of the good is

Accepted Answer

A)  $6.
B)  $8.
C)  $10.
D)  $12.E) A) and D)
F) C) and D)

Question 2

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

Accepted Answer

A)  M.
B)  L+M+Y.
C)  J.
D)  J+K+I.E) B) and C)
F) A) and D)

Question 3

The deadweight loss from a $3 tax will be largest in a market with

Accepted Answer

A)  inelastic supply and elastic demand.
B)  inelastic supply and inelastic demand.
C)  elastic supply and elastic demand.
D)  elastic supply and inelastic demand.E) A) and B)
F) All of the above

Question 4

Figure 8-19
The vertical distance between points A and B represents the original tax. 
-Refer to Figure 8-19. The original tax can be represented by the vertical distance AB. Suppose the government is deciding whether to lower the tax to CD or raise it to FG. Which of the following statements is not correct?

Accepted Answer

A)  Compared to the original tax, the larger tax will increase tax revenue.
B)  Compared to the original tax, the smaller tax will decrease deadweight loss.
C)  Compared to the original tax, the smaller tax will decrease tax revenue.
D)  Compared to the original tax, the larger tax will increase deadweight loss.E) None of the above
F) All of the above

Question 5

Figure 8-15  
-Refer to Figure 8-15. Panel (a)  and Panel (b)  each illustrate a $4 tax placed on a market. In comparison to Panel (a) , Panel (b)  illustrates which of the following statements?

Accepted Answer

A)  When demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic.
B)  When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic.
C)  When supply is relatively inelastic, the deadweight loss of a tax is smaller than when supply is relatively elastic.
D)  When supply is relatively elastic, the deadweight loss of a tax is larger than when supply is relatively inelastic.E) A) and B)
F) None of the above

Question 6

For a good that is taxed, the area on the relevant supply-and-demand graph that represents government's tax revenue is a

Accepted Answer

A)  triangle.
B)  rectangle.
C)  trapezoid.
D)  None of the above is correct; government's tax revenue is the area between the supply and demand curves, above the horizontal axis, and below the effective price to buyers.E) B) and D)
F) All of the above

Question 7

Figure 8-8
Suppose the government imposes a $10 per unit tax on a good. 
-Refer to Figure 8-8. After the tax goes into effect, consumer surplus is the area

Accepted Answer

A)  A.
B)  B+C.
C)  A+B+C.
D)  A+B+D+J+K.E) A) and B)
F) None of the above

Question 8

A tax placed on a good

Accepted Answer

A)  causes the effective price to sellers to increase.
B)  affects the welfare of buyers of the good but not the welfare of sellers.
C)  causes the equilibrium quantity of the good to decrease.
D)  creates a burden that is usually borne entirely by the sellers of the good.E) A) and D)
F) C) and D)

Question 9

To fully understand how taxes affect economic well-being, we must compare the

Accepted Answer

A)  benefit to buyers with the loss to sellers.
B)  price paid by buyers to the price received by sellers.
C)  profits earned by firms to the losses incurred by consumers.
D)  decrease in total surplus to the increase in revenue raised by the government.E) A) and B)
F) A) and D)

Question 10

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 B)
F) A) and D)

Question 11

If the size of a tax doubles, the deadweight loss doubles.

Accepted Answer

A) True 
 B)False

Question 12

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

Question 13

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

Question 14

Is the United States' labor supply more inelastic or more elastic? Briefly summarize the competing theories.

Accepted Answer

Some labor economists believe that most ...

Question 15

Assume the price of gasoline is $2.00 per gallon, and the equilibrium quantity of gasoline is 10 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)  The price elasticity of demand for gasoline is 0.1; the price elasticity of supply for gasoline is 0.6; and the gasoline tax amounts to $0.20 per gallon.
B)  The price elasticity of demand for gasoline is 0.1; the price elasticity of supply for gasoline is 0.4; and the gasoline tax amounts to $0.20 per gallon.
C)  The price elasticity of demand for gasoline is 0.2; the price elasticity of supply for gasoline is 0.6; and the gasoline tax amounts to $0.30 per gallon.
D)  There is insufficient information to make this determination.E) All of the above
F) A) and C)

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

Question 17

Scenario 8-2
Roland mows Karla's lawn for $25. Roland's opportunity cost of mowing Karla's lawn is $20, and Karla's willingness to pay Roland to mow her lawn is $28.
-Refer to Scenario 8-2. If Karla hires Roland to mow her lawn, Karla's consumer surplus is

Accepted Answer

A)  $3.
B)  $5.
C)  $8.
D)  $25.E) A) and B)
F) None of the above

Question 18

Figure 8-13 
-Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The per-unit burden of the tax on sellers is

Accepted Answer

A)  $1.
B)  $2.
C)  $3.
D)  $5.E) A) and D)
F) A) and C)

Question 19

If a tax shifts the demand curve downward (or to the left) , we can infer that the tax was levied on

Accepted Answer

A)  buyers of the good.
B)  sellers of the good.
C)  both buyers and sellers of the good.
D)  We cannot infer anything because the shift described is not consistent with a tax.E) B) and C)
F) All of the above

Question 20

Scenario 8-3
Suppose the market demand and market supply curves are given by the equations: 
-Refer to Scenario 8-3. Suppose that a tax of T is placed on buyers so that the demand curve becomes:  
What quantity will be bought and sold after the tax is imposed?

Accepted Answer

The quanti...

Exam 8: Applications: the Costs of Taxation

Assume the price of gasoline is $2.00 per gallon, and the equilibrium quantity of gasoline is 10 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 8-15 -Refer to Figure 8-15. Panel (a) and Panel (b) each illustrate a $4 tax placed on a market. In comparison to Panel (a) , Panel (b) illustrates which of the following statements?

Correct Answer
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Correct Answer
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For a good that is taxed, the area on the relevant supply-and-demand graph that represents government's tax revenue is a

Correct Answer
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Scenario 8-2 Roland mows Karla's lawn for $25. Roland's opportunity cost of mowing Karla's lawn is $20, and Karla's willingness to pay Roland to mow her lawn is $28. -Refer to Scenario 8-2. If Karla hires Roland to mow her lawn, Karla's consumer surplus is

Correct Answer
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The deadweight loss from a $3 tax will be largest in a market with

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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Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. After the tax goes into effect, consumer surplus is the area

Correct Answer
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Scenario 8-3 Suppose the market demand and market supply curves are given by the equations: -Refer to Scenario 8-3. Suppose that a tax of T is placed on buyers so that the demand curve becomes: What quantity will be bought and sold after the tax is imposed?

Correct Answer
verified
The quanti...
View Answer

A tax placed on a good

Correct Answer
verified

If the size of a tax doubles, the deadweight loss doubles.

Correct Answer
verified

If a tax shifts the demand curve downward (or to the left) , we can infer that the tax was levied on

Correct Answer
verified

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
verified

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. The amount of the tax on each unit of the good is

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. Which of the following equations is valid for the deadweight loss of the tax?

Correct Answer
verified

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

Correct Answer
verified

To fully understand how taxes affect economic well-being, we must compare the

Correct Answer
verified

Figure 8-13 -Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The per-unit burden of the tax on sellers is

Correct Answer
verified

Is the United States' labor supply more inelastic or more elastic? Briefly summarize the competing theories.

Correct Answer
verified
Some labor economists believe that most ...
View Answer

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

Correct Answer
verified

Exam 8: Applications: the Costs of Taxation

Assume the price of gasoline is $2.00 per gallon, and the equilibrium quantity of gasoline is 10 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 8-15 -Refer to Figure 8-15. Panel (a) and Panel (b) each illustrate a $4 tax placed on a market. In comparison to Panel (a) , Panel (b) illustrates which of the following statements?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

For a good that is taxed, the area on the relevant supply-and-demand graph that represents government's tax revenue is a

Correct AnswerverifiedShow Answer

Scenario 8-2 Roland mows Karla's lawn for $25. Roland's opportunity cost of mowing Karla's lawn is $20, and Karla's willingness to pay Roland to mow her lawn is $28. -Refer to Scenario 8-2. If Karla hires Roland to mow her lawn, Karla's consumer surplus is

Correct AnswerverifiedShow Answer

The deadweight loss from a $3 tax will be largest in a market with

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 consumer surplus resulting from this tax is

Correct AnswerverifiedShow Answer

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. After the tax goes into effect, consumer surplus is the area

Correct AnswerverifiedShow Answer

Scenario 8-3 Suppose the market demand and market supply curves are given by the equations: -Refer to Scenario 8-3. Suppose that a tax of T is placed on buyers so that the demand curve becomes: What quantity will be bought and sold after the tax is imposed?

Correct AnswerverifiedThe quanti...View AnswerShow Answer

A tax placed on a good

Correct AnswerverifiedShow Answer

If the size of a tax doubles, the deadweight loss doubles.

Correct AnswerverifiedShow Answer

If a tax shifts the demand curve downward (or to the left) , we can infer that the tax was levied on

Correct AnswerverifiedShow 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 AnswerverifiedShow Answer

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. The amount of the tax on each unit of the good 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 8-1 -Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The consumer surplus before the tax is measured by the area

Correct AnswerverifiedShow Answer

To fully understand how taxes affect economic well-being, we must compare the

Correct AnswerverifiedShow Answer

Figure 8-13 -Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The per-unit burden of the tax on sellers is

Correct AnswerverifiedShow Answer

Is the United States' labor supply more inelastic or more elastic? Briefly summarize the competing theories.

Correct AnswerverifiedSome labor economists believe that most ...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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The quanti...
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Some labor economists believe that most ...
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Correct Answer
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