Question 1

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. 
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.

Question 2

Assume that for good X the supply curve for a good is a typical, upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. If the good is taxed, and the tax is tripled, the

Accepted Answer

A) base of the triangle that represents the deadweight loss triples. 
B) height of the triangle that represents the deadweight loss triples. 
C) deadweight loss of the tax increases by a factor of nine. 
D) All of the above are correct. 
A) base of the triangle that represents the deadweight loss triples. 
B) height of the triangle that represents the deadweight loss triples. 
C) deadweight loss of the tax increases by a factor of nine. 
D) All of the above are correct.

Question 3

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. Without the tax, the total surplus is

Accepted Answer

A) [1/2 x (P0-P5) x Q5] + [1/2 x (P5-0) x Q5]. 
B) [1/2 x (P0-P2) x Q2] +[(P2-P8) x Q2] + [1/2 x (P8-0) x Q2]. 
C) (P2-P8) x Q2. 
D) 1/2 x (P2-P8) x (Q5-Q2). 
A) [1/2 x (P0-P5) x Q5] + [1/2 x (P5-0) x Q5]. 
B) [1/2 x (P0-P2) x Q2] +[(P2-P8) x Q2] + [1/2 x (P8-0) x Q2]. 
C) (P2-P8) x Q2. 
D) 1/2 x (P2-P8) x (Q5-Q2).

Question 4

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 price will sellers receive and what price will buyers pay after the tax is imposed?

Accepted Answer

Buyers wil

Question 5

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. 
A) A. 
B) B+C. 
C) A+B+C. 
D) A+B+D+J+K.

Question 6

Suppose a tax is imposed on the sellers of fast-food French fries. The burden of the tax will

Accepted Answer

A) fall entirely on the buyers of fast-food French fries. 
B) fall entirely on the sellers of fast-food French fries. 
C) be shared equally by the buyers and sellers of fast-food French fries. 
D) be shared by the buyers and sellers of fast-food French fries but not necessarily equally. 
A) fall entirely on the buyers of fast-food French fries. 
B) fall entirely on the sellers of fast-food French fries. 
C) be shared equally by the buyers and sellers of fast-food French fries. 
D) be shared by the buyers and sellers of fast-food French fries but not necessarily equally.

Question 7

John has been in the habit of mowing Willa's lawn each week for $20. John's opportunity cost is $15, and Willa would be willing to pay $25 to have her lawn mowed. What is the maximum tax the government can impose on lawn mowing without discouraging John and Willa from continuing their mutually beneficial arrangement?

Accepted Answer

If the tax is less than $10, there will

Question 8

Total surplus with a tax is equal to

Accepted Answer

A) consumer surplus plus producer surplus. 
B) consumer surplus minus producer surplus. 
C) consumer surplus plus producer surplus minus tax revenue. 
D) consumer surplus plus producer surplus plus tax revenue. 
A) consumer surplus plus producer surplus. 
B) consumer surplus minus producer surplus. 
C) consumer surplus plus producer surplus minus tax revenue. 
D) consumer surplus plus producer surplus plus tax revenue.

Question 9

The elasticities of the supply and demand curves in the market for cigarettes affect how much a tax distorts that market.

Accepted Answer

A) True 
 B)False

Question 10

A tax on a good

Accepted Answer

A) gives buyers an incentive to buy less of the good than they otherwise would buy. 
B) gives sellers an incentive to produce more of the good than they otherwise would produce. 
C) creates a benefit to the government, the size of which exceeds the loss in surplus to buyers and sellers. 
D) All of the above are correct. 
A) gives buyers an incentive to buy less of the good than they otherwise would buy. 
B) gives sellers an incentive to produce more of the good than they otherwise would produce. 
C) creates a benefit to the government, the size of which exceeds the loss in surplus to buyers and sellers. 
D) All of the above are correct.

Question 11

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:   If T = 40, what price will buyers pay and what price will sellers receive?

Accepted Answer

Buyers will pay $80

Question 12

Figure 8-12  
-Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The per-unit burden of the tax on sellers is

Accepted Answer

A) $1. 
B) $2. 
C) $3. 
D) $4. 
A) $1. 
B) $2. 
C) $3. 
D) $4.

Question 13

The deadweight loss from a tax of $2 per unit will be smallest 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. 
A) inelastic supply and elastic demand. 
B) inelastic supply and inelastic demand. 
C) elastic supply and elastic demand. 
D) elastic supply and inelastic demand.

Question 14

When the price of a good is measured in dollars, then the size of the deadweight loss that results from taxing that good is measured in

Accepted Answer

A) units of the good that is being taxed. 
B) units of a related good that is not being taxed. 
C) dollars. 
D) percentage change. 
A) units of the good that is being taxed. 
B) units of a related good that is not being taxed. 
C) dollars. 
D) percentage change.

Question 15

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. 
A) $2. 
B) $3. 
C) $4. 
D) $5.

Question 16

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, consumer surplus in this market is

Accepted Answer

A) $1,500. 
B) $2,400. 
C) $3,000. 
D) $3,600. 
A) $1,500. 
B) $2,400. 
C) $3,000. 
D) $3,600.

Question 17

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:   If T = 40, how much will be the deadweight loss from this tax?

Accepted Answer

The deadwe

Question 18

When a tax is levied on buyers, the

Accepted Answer

A) supply curves shifts upward by the amount of the tax. 
B) tax creates a wedge between the price buyers effectively pay and the price sellers receive. 
C) tax has no effect on the well-being of sellers. 
D) All of the above are correct. 
A) supply curves shifts upward by the amount of the tax. 
B) tax creates a wedge between the price buyers effectively pay and the price sellers receive. 
C) tax has no effect on the well-being of sellers. 
D) All of the above are correct.

Question 19

In the market for widgets, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. The equilibrium quantity in the market for widgets is 200 per month when there is no tax. Then a tax of $5 per widget is imposed. As a result, the government is able to raise $800 per month in tax revenue. We can conclude that the equilibrium quantity of widgets has fallen by

Accepted Answer

A) 40 per month. 
B) 50 per month. 
C) 75 per month. 
D) 100 per month. 
A) 40 per month. 
B) 50 per month. 
C) 75 per month. 
D) 100 per month.

Question 20

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. 
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.

When a tax is imposed on a good, the

Assume that for good X the supply curve for a good is a typical, upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. If the good is taxed, and the tax is tripled, the

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. Without the tax, the total surplus is

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 price will sellers receive and what price will buyers pay after the tax is imposed?

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

Suppose a tax is imposed on the sellers of fast-food French fries. The burden of the tax will

Total surplus with a tax is equal to

The elasticities of the supply and demand curves in the market for cigarettes affect how much a tax distorts that market.

A tax on a good

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: If T = 40, what price will buyers pay and what price will sellers receive?

Figure 8-12 -Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The per-unit burden of the tax on sellers is

The deadweight loss from a tax of $2 per unit will be smallest in a market with

When the price of a good is measured in dollars, then the size of the deadweight loss that results from taxing that good is measured in

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

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, consumer surplus in this market is

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: If T = 40, how much will be the deadweight loss from this tax?

When a tax is levied on buyers, the

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

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

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Exam 8: Application: The Costs of Taxation

When a tax is imposed on a good, the

Assume that for good X the supply curve for a good is a typical, upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. If the good is taxed, and the tax is tripled, the

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. Without the tax, the total surplus is

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 price will sellers receive and what price will buyers pay after the tax is imposed?

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

Suppose a tax is imposed on the sellers of fast-food French fries. The burden of the tax will

Total surplus with a tax is equal to

The elasticities of the supply and demand curves in the market for cigarettes affect how much a tax distorts that market.

A tax on a good

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: If T = 40, what price will buyers pay and what price will sellers receive?

Figure 8-12 -Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The per-unit burden of the tax on sellers is

The deadweight loss from a tax of $2 per unit will be smallest in a market with

When the price of a good is measured in dollars, then the size of the deadweight loss that results from taxing that good is measured in

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

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, consumer surplus in this market is

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: If T = 40, how much will be the deadweight loss from this tax?

When a tax is levied on buyers, the

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

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Filters