Question 1

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) All of the above
F) A) and C)

Question 2

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

Question 3

Figure 8-1 
-Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by K+L represents

Accepted Answer

A)   tax revenue.
B)   consumer surplus before the tax.
C)   producer surplus after the tax.
D)   total surplus before the tax.E) All of the above
F) A) and C)

Question 4

Tom walks Bethany's dog once a day for $50 per week. Bethany values this service at $60 per week, while the opportunity cost of Tom's time is $30 per week. The government places a tax of $35 per week on dog walkers. Before the tax, what is the total surplus?

Accepted Answer

A)   $60
B)   $50
C)   $30
D)   $25E) A) and D)
F) None of the above

Question 5

Suppose the tax on gasoline is decreased from $0.60 per gallon to $0.40 per gallon. As a result,

Accepted Answer

A)   tax revenue necessarily decreases.
B)   the deadweight loss of the tax necessarily decreases.
C)   the demand curve for gasoline necessarily becomes steeper.
D)   the supply curve for gasoline necessarily becomes flatter.E) B) and D)
F) C) and D)

Question 6

A tax on a good

Accepted Answer

A)   raises the price that buyers effectively pay and raises the price that sellers effectively receive.
B)   raises the price that buyers effectively pay and lowers the price that sellers effectively receive.
C)   lowers the price that buyers effectively pay and raises the price that sellers effectively receive.
D)   lowers the price that buyers effectively pay and lowers the price that sellers effectively receive.E) A) and B)
F) All of the above

Question 7

Sellers of a product will bear the larger part of the tax burden, and buyers will bear a smaller part of the tax burden, when the

Accepted Answer

A)   tax is placed on the sellers of the product.
B)   tax is placed on the buyers of the product.
C)   supply of the product is more elastic than the demand for the product.
D)   demand for the product is more elastic than the supply of the product.E) A) and B)
F) None of the above

Question 8

When a good is taxed, the tax revenue collected by the government equals the decrease in the welfare of buyers and sellers caused by the tax.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

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

Question 10

The optimal tax is difficult to determine because although revenues rise and fall as the size of the tax increases, deadweight loss continues to increase.

Accepted Answer

A) True 
 B)False

Question 11

Figure 8-17 
-Refer to Figure 8-17. Suppose the government imposes a $1 tax in each of the four markets represented by demand curves D1, D2, D3, and D4. The deadweight will be the smallest in the market represented by

Accepted Answer

A)   D1.
B)   D2.
C)   D3.
D)   D4.E) B) and D)
F) B) and C)

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 per-unit burden of the tax on buyers is

Accepted Answer

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

Question 13

When a tax is imposed on sellers, consumer surplus and producer surplus both decrease.

Accepted Answer

A) True 
 B)False

Question 14

Figure 8-14 
-Refer to Figure 8-14. Which of the following statements is correct?

Accepted Answer

A)   Supply 1 is more elastic than supply 2.
B)   Demand 2 is more elastic than demand 1.
C)   Demand 1 is more elastic than supply 1.
D)   All of the above are correct.E) None of the above
F) All of the above

Question 15

Figure 8-14 
-Refer to Figure 8-14. Which of the following combinations will maximize the deadweight loss from a tax?

Accepted Answer

A)   supply 1 and demand 1
B)   supply 2 and demand 2
C)   supply 1 and demand 2
D)   supply 2 and demand 1E) All of the above
F) None of the above

Question 16

Figure 8-25 
-Refer to Figure 8-25. How much is total surplus at the market equilibrium?

Accepted Answer

Total surp...

Question 17

Figure 8-7
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-7. Before the tax is imposed, the equilibrium price is

Accepted Answer

A)   $32, and the equilibrium quantity is 15.
B)   $24, and the equilibrium quantity is 15.
C)   $24, and the equilibrium quantity is 25.
D)   $16, and the equilibrium quantity is 15.E) B) and D)
F) None of the above

Question 18

When a tax is placed on the buyers of a product, a result is that buyers effectively pay

Accepted Answer

A)   less than before the tax, and sellers effectively receive less than before the tax.
B)   less than before the tax, and sellers effectively receive more than before the tax.
C)   more than before the tax, and sellers effectively receive less than before the tax.
D)   more than before the tax, and sellers effectively receive more than before the tax.E) B) and C)
F) A) and B)

Question 19

Suppose a tax is imposed on each new hearing aid that is sold. The supply curve is a typical upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. As a result of the tax, the equilibrium quantity of hearing aids decreases from 10,000 to 9,000, and the deadweight loss of the tax is $60,000. We can conclude that the tax on each hearing aid is

Accepted Answer

A)   $60.
B)   $120.
C)   $160.
D)   $200.E) A) and D)
F) A) and C)

Question 20

When a good is taxed, the deadweight loss is larger the more elastic are demand and supply.

Accepted Answer

A) True 
 B)False

Exam 8: Application: the Costs of Taxation

Correct Answer
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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. Before the tax is imposed, the equilibrium price is

Correct Answer
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Figure 8-14 -Refer to Figure 8-14. Which of the following statements is correct?

Correct Answer
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When a good is taxed, the deadweight loss is larger the more elastic are demand and supply.

Correct Answer
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The optimal tax is difficult to determine because although revenues rise and fall as the size of the tax increases, deadweight loss continues to increase.

Correct Answer
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When a good is taxed, the tax revenue collected by the government equals the decrease in the welfare of buyers and sellers caused by the tax.

Correct Answer
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Figure 8-25 -Refer to Figure 8-25. How much is total surplus at the market equilibrium?

Correct Answer
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Total surp...
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When a tax is imposed on sellers, consumer surplus and producer surplus both decrease.

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

Correct Answer
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Sellers of a product will bear the larger part of the tax burden, and buyers will bear a smaller part of the tax burden, when the

Correct Answer
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Figure 8-17 -Refer to Figure 8-17. Suppose the government imposes a $1 tax in each of the four markets represented by demand curves D1, D2, D3, and D4. The deadweight will be the smallest in the market represented by

Correct Answer
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Suppose the tax on gasoline is decreased from $0.60 per gallon to $0.40 per gallon. As a result,

Correct Answer
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When a tax is placed on the buyers of a product, a result is that buyers effectively pay

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

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 per-unit burden of the tax on buyers is

Correct Answer
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Figure 8-14 -Refer to Figure 8-14. Which of the following combinations will maximize the deadweight loss from a tax?

Correct Answer
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Tom walks Bethany's dog once a day for $50 per week. Bethany values this service at $60 per week, while the opportunity cost of Tom's time is $30 per week. The government places a tax of $35 per week on dog walkers. Before the tax, what is the total surplus?

Correct Answer
verified

Figure 8-1 -Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by K+L represents

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

A tax on a good

Correct Answer
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Exam 8: Application: the Costs of Taxation

Correct AnswerverifiedShow Answer

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7. Before the tax is imposed, the equilibrium price is

Correct AnswerverifiedShow Answer

Figure 8-14 -Refer to Figure 8-14. Which of the following statements is correct?

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When a good is taxed, the deadweight loss is larger the more elastic are demand and supply.

Correct AnswerverifiedShow Answer

The optimal tax is difficult to determine because although revenues rise and fall as the size of the tax increases, deadweight loss continues to increase.

Correct AnswerverifiedShow Answer

When a good is taxed, the tax revenue collected by the government equals the decrease in the welfare of buyers and sellers caused by the tax.

Correct AnswerverifiedShow Answer

Figure 8-25 -Refer to Figure 8-25. How much is total surplus at the market equilibrium?

Correct AnswerverifiedTotal surp...View AnswerShow Answer

When a tax is imposed on sellers, consumer surplus and producer surplus both decrease.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Sellers of a product will bear the larger part of the tax burden, and buyers will bear a smaller part of the tax burden, when the

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Figure 8-17 -Refer to Figure 8-17. Suppose the government imposes a $1 tax in each of the four markets represented by demand curves D1, D2, D3, and D4. The deadweight will be the smallest in the market represented by

Correct AnswerverifiedShow Answer

Suppose the tax on gasoline is decreased from $0.60 per gallon to $0.40 per gallon. As a result,

Correct AnswerverifiedShow Answer

When a tax is placed on the buyers of a product, a result is that buyers effectively pay

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?

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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 per-unit burden of the tax on buyers is

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Figure 8-14 -Refer to Figure 8-14. Which of the following combinations will maximize the deadweight loss from a tax?

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Tom walks Bethany's dog once a day for $50 per week. Bethany values this service at $60 per week, while the opportunity cost of Tom's time is $30 per week. The government places a tax of $35 per week on dog walkers. Before the tax, what is the total surplus?

Correct AnswerverifiedShow Answer

Figure 8-1 -Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by K+L represents

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

A tax on a good

Correct AnswerverifiedShow Answer

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Total surp...
View Answer

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