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 placed on this good,the quantity sold

Accepted Answer

A)   is 600, and buyers effectively pay $10.
B)   is 300, and buyers effectively pay $10.
C)   is 600, and buyers effectively pay $16.
D)   is 300, and buyers effectively pay $16.E) A) and B)
F) A) and C)

Question 2

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

Question 3

The demand for potted plants is more elastic than the demand for wallpaper.Suppose the government levies an equivalent tax on potted plants and wallpaper.The deadweight loss would be larger in the market for

Accepted Answer

A)   potted plants than in the market for wallpaper because the quantity of potted plants would fall by more than the quantity of wallpaper.
B)   potted plants than in the market for wallpaper because the quantity of wallpaper would fall by more than the quantity of potted plants.
C)   wallpaper than in the market for potted plants because the quantity of potted plants would fall by more than the quantity of wallpaper.
D)   wallpaper than in the market for potted plants because the quantity of wallpaper would fall by more than the quantity of potted plants.E) A) and D)
F) None of the above

Question 4

Buyers of a product will bear the larger part of the tax burden,and sellers 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 D)
F) A) and B)

Question 5

The amount of deadweight loss from a tax depends upon the

Accepted Answer

A)   price elasticity of demand.
B)   price elasticity of supply.
C)   amount of the tax per unit.
D)   All of the above are correct.E) A) and B)
F) All of the above

Question 6

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 7

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

Accepted Answer

A) True 
 B)False

Question 8

Figure 8-16
 
-Refer to Figure 8-16.Suppose the government imposes a $1 tax in each of the four markets represented by supply curves S1,S2,S3,and S4.The deadweight will be the smallest in the market represented by

Accepted Answer

A)   S1.
B)   S2.
C)   S3.
D)   S4.E) B) and C)
F) A) and D)

Question 9

When a tax on a good is enacted,

Accepted Answer

A)   buyers and sellers share the burden of the tax regardless of whether the tax is levied on buyers or on sellers.
B)   buyers always bear the full burden of the tax.
C)   sellers always bear the full burden of the tax.
D)   sellers bear the full burden of the tax if the tax is levied on them; buyers bear the full burden of the tax if the tax is levied on them.E) A) and B)
F) All of the above

Question 10

Figure 8-4
The vertical distance between points A and B represents a tax in the market.
 
-Refer to Figure 8-4.The amount of deadweight loss as a result of the tax is

Accepted Answer

A)   $105.
B)   $210.
C)   $490.
D)   $600.E) A) and B)
F) A) and C)

Question 11

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,the price sellers effectively receive is

Accepted Answer

A)   $4.
B)   $6.
C)   $10.
D)   $16.E) A) and B)
F) A) and C)

Question 12

Figure 8-11
 
-Refer to Figure 8-11.The deadweight loss of the tax is represented by the

Accepted Answer

A)   length of the line segment connecting points A and B.
B)   length of the line segment connecting points A and C.
C)   length of the line segment connecting points B and C.
D)   area of the triangle bounded by the points A, B, and C.E) All of the above
F) A) and C)

Question 13

When a tax is imposed on a good,consumer surplus decreases and producer surplus remains unchanged.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Figure 8-9
The vertical distance between points A and C represent a tax in the market.
 
-Refer to Figure 8-9.The imposition of the tax causes the price paid by buyers to

Accepted Answer

A)   increase from $600 to $800.
B)   increase from $300 to $800.
C)   decrease from $600 to $300.
D)   remain unchanged at $600.E) A) and B)
F) All of the above

Question 16

Figure 8-5
Suppose that the government imposes a tax of P3 - P1.
 
-Refer to Figure 8-5.After the tax is levied,consumer surplus is represented by area

Accepted Answer

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

Question 17

Suppose a tax of $4 per unit is imposed on a good,and the tax causes the equilibrium quantity of the good to decrease from 2,000 units to 1,700 units.The tax decreases consumer surplus by $3,000 and decreases producer surplus by $4,400.The deadweight loss of the tax is

Accepted Answer

A)   $200.
B)   $400.
C)   $600.
D)   $1,200.E) All of the above
F) B) and C)

Question 18

Which of the following ideas is the most plausible?

Accepted Answer

A)   Tax revenue is more likely to increase when a low tax rate is increased than when a high tax rate is increased.
B)   Tax revenue is less likely to increase when a low tax rate is increased than when a high tax rate is increased.
C)   Tax revenue is likely to increase by the same amount when a low tax rate is increased and when a high tax rate is increased.
D)   Decreasing a tax rate can never increase tax revenue.E) B) and C)
F) All of the above

Question 19

If the size of a tax increases,tax revenue

Accepted Answer

A)   increases.
B)   decreases.
C)   remains the same.
D)   may increase, decrease, or remain the same.E) A) and B)
F) A) and C)

Question 20

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 associated with some buyers dropping out of the market as a result of the tax is

Accepted Answer

A)   $0.
B)   $1.50.
C)   $3.
D)   $4.50.E) C) and D)
F) A) and B)

Exam 8: Application: The Costs of Taxation.

When a tax on a good is enacted,

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Which of the following ideas is the most plausible?

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Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.After the tax is levied,consumer surplus is represented by area

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Figure 8-16 -Refer to Figure 8-16.Suppose the government imposes a $1 tax in each of the four markets represented by supply curves S1,S2,S3,and S4.The deadweight will be the smallest in the market represented by

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

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

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Figure 8-11 -Refer to Figure 8-11.The deadweight loss of the tax is represented by the

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When a tax is imposed on a good,consumer surplus decreases and producer surplus remains unchanged.

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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 amount of deadweight loss as a result of the tax is

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Suppose a tax of $4 per unit is imposed on a good,and the tax causes the equilibrium quantity of the good to decrease from 2,000 units to 1,700 units.The tax decreases consumer surplus by $3,000 and decreases producer surplus by $4,400.The deadweight loss of the tax is

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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 associated with some buyers dropping out of the market as a result of the tax is

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Figure 8-9 The vertical distance between points A and C represent a tax in the market. -Refer to Figure 8-9.The imposition of the tax causes the price paid by buyers to

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If the size of a tax increases,tax revenue

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The amount of deadweight loss from a tax depends upon the

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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 placed on this good,the quantity sold

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

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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,the price sellers effectively receive is

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Buyers of a product will bear the larger part of the tax burden,and sellers will bear a smaller part of the tax burden,when the

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The demand for potted plants is more elastic than the demand for wallpaper.Suppose the government levies an equivalent tax on potted plants and wallpaper.The deadweight loss would be larger in the market for

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

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