Question 1

A tax places a wedge between the price buyers pay and the price sellers receive.

Accepted Answer

A) True 
 B)False

Question 2

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 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 3

Figure 8-7
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-7. As a result of the tax, consumer surplus decreases by

Accepted Answer

A) $130, producer surplus decreases by $170, tax revenue is $240, and deadweight loss is $60. 
B) $150, producer surplus decreases by $150, tax revenue is $240, and deadweight loss is $60. 
C) $160, producer surplus decreases by $160, tax revenue is $240, and deadweight loss is $80. 
D) $240, producer surplus decreases by $240, tax revenue is $400, and deadweight loss is $80. 
A) $130, producer surplus decreases by $170, tax revenue is $240, and deadweight loss is $60. 
B) $150, producer surplus decreases by $150, tax revenue is $240, and deadweight loss is $60. 
C) $160, producer surplus decreases by $160, tax revenue is $240, and deadweight loss is $80. 
D) $240, producer surplus decreases by $240, tax revenue is $400, and deadweight loss is $80.

Question 4

The size of a tax and the deadweight loss that results from the tax are

Accepted Answer

A) positively related. 
B) negatively related. 
C) independent of each other. 
D) equal to each other. 
A) positively related. 
B) negatively related. 
C) independent of each other. 
D) equal to each other.

Question 5

Figure 8-11  
-Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then, when the tax is imposed,

Accepted Answer

A) consumer surplus decreases by $13. 
B) producer surplus decreases by $13. 
C) the deadweight loss amounts to $6. 
D) the amount of the good that is sold remains unchanged. 
A) consumer surplus decreases by $13. 
B) producer surplus decreases by $13. 
C) the deadweight loss amounts to $6. 
D) the amount of the good that is sold remains unchanged.

Question 6

When a tax is imposed on sellers, producer surplus decreases but consumer surplus increases.

Accepted Answer

A) True 
 B)False

Question 7

As the tax on a good increases from $1 per unit to $2 per unit to $3 per unit and so on, the

Accepted Answer

A) tax revenue increases at first, but it eventually peaks and then decreases. 
B) deadweight loss increases at first, but it eventually peaks and then decreases. 
C) tax revenue always increases, and the deadweight loss always increases. 
D) tax revenue always decreases, and the deadweight loss always increases. 
A) tax revenue increases at first, but it eventually peaks and then decreases. 
B) deadweight loss increases at first, but it eventually peaks and then decreases. 
C) tax revenue always increases, and the deadweight loss always increases. 
D) tax revenue always decreases, and the deadweight loss always increases.

Question 8

Economists use the government's tax revenue to measure the public benefit from a tax.

Accepted Answer

A) True 
 B)False

Question 9

A tax

Accepted Answer

A) lowers the price buyers pay and raises the price sellers receive. 
B) raises the price buyers pay and lowers the price sellers receive. 
C) places a wedge between the price buyers pay and the price sellers receive. 
D) Both b) and c) are correct. 
A) lowers the price buyers pay and raises the price sellers receive. 
B) raises the price buyers pay and lowers the price sellers receive. 
C) places a wedge between the price buyers pay and the price sellers receive. 
D) Both b) and c) are correct.

Question 10

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. Assume Roland is required to pay a tax of $3 each time he mows a lawn. Which of the following results is most likely?

Accepted Answer

A) Karla now will decide to mow her own lawn, and Roland will decide it is no longer in his interest to mow Karla's lawn. 
B) Karla is willing to pay Roland to mow her lawn, but Roland will decline her offer. 
C) Roland is willing to mow Karla's lawn, but Karla will decide to mow her own lawn. 
D) Roland and Karla still can engage in a mutually-agreeable trade. 
A) Karla now will decide to mow her own lawn, and Roland will decide it is no longer in his interest to mow Karla's lawn. 
B) Karla is willing to pay Roland to mow her lawn, but Roland will decline her offer. 
C) Roland is willing to mow Karla's lawn, but Karla will decide to mow her own lawn. 
D) Roland and Karla still can engage in a mutually-agreeable trade.

Question 11

When a tax is imposed on a good for which the demand is relatively elastic and the supply is relatively inelastic,

Accepted Answer

A) buyers of the good will bear most of the burden of the tax. 
B) sellers of the good will bear most of the burden of the tax. 
C) buyers and sellers will each bear 50 percent of the burden of the tax. 
D) the effective price paid by buyers will decrease as a result of the tax. 
A) buyers of the good will bear most of the burden of the tax. 
B) sellers of the good will bear most of the burden of the tax. 
C) buyers and sellers will each bear 50 percent of the burden of the tax. 
D) the effective price paid by buyers will decrease as a result of the tax.

Question 12

Figure 8-9
The vertical distance between points A and C represents a tax in the market.  
-Refer to Figure 8-9. The consumer surplus with the tax is

Accepted Answer

A) $2,000. 
B) $4,000. 
C) $6,000. 
D) $8,000. 
A) $2,000. 
B) $4,000. 
C) $6,000. 
D) $8,000.

Question 13

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. After the tax, what is the loss in total surplus?

Accepted Answer

A) $50 
B) $30 
C) $25 
D) $0 
A) $50 
B) $30 
C) $25 
D) $0

Question 14

Figure 8-3
The vertical distance between points A and C represents a tax in the market.  
-Refer to Figure 8-3. The loss in consumer surplus caused by the tax is measured by the area

Accepted Answer

A) P1P3AC. 
B) P3ABP2. 
C) P1P3ABC. 
D) ABC. 
A) P1P3AC. 
B) P3ABP2. 
C) P1P3ABC. 
D) ABC.

Question 15

Ronald Reagan believed that reducing income tax rates would

Accepted Answer

A) do little, if anything, to encourage hard work. 
B) result in large increases in deadweight losses. 
C) raise economic well-being and perhaps even tax revenue. 
D) lower economic well-being, even though tax revenue could possibly increase. 
A) do little, if anything, to encourage hard work. 
B) result in large increases in deadweight losses. 
C) raise economic well-being and perhaps even tax revenue. 
D) lower economic well-being, even though tax revenue could possibly increase.

Question 16

Figure 8-25  
-Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is consumer surplus after the tax is imposed?

Accepted Answer

Consumer s

Question 17

Figure 8-4
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-4. The price that buyers effectively pay after the tax is imposed is

Accepted Answer

A) $12. 
B) between $8 and $12. 
C) between $5 and $8. 
D) $5. 
A) $12. 
B) between $8 and $12. 
C) between $5 and $8. 
D) $5.

Question 18

Suppose a tax of $3 is imposed on each new garden hose that is sold, resulting in a deadweight loss of $22,500. The supply curve is a typical upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. Before the tax was imposed, the equilibrium quantity of garden hoses was 100,000. We can conclude that the equilibrium quantity of garden hoses after the tax is imposed is

Accepted Answer

A) 75,000. 
B) 85,000. 
C) 90,000. 
D) 95,000. 
A) 75,000. 
B) 85,000. 
C) 90,000. 
D) 95,000.

Question 19

Figure 8-7
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-7. As a result of the tax,

Accepted Answer

A) consumer surplus decreases from $200 to $80. 
B) producer surplus decreases from $200 to $145. 
C) the market experiences a deadweight loss of $80. 
D) All of the above are correct. 
A) consumer surplus decreases from $200 to $80. 
B) producer surplus decreases from $200 to $145. 
C) the market experiences a deadweight loss of $80. 
D) All of the above are correct.

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 imposition of the tax causes the quantity sold to

Accepted Answer

A) increase by 1 unit. 
B) decrease by 1 unit. 
C) increase by 2 units. 
D) decrease by 2 units. 
A) increase by 1 unit. 
B) decrease by 1 unit. 
C) increase by 2 units. 
D) decrease by 2 units.

A tax places a wedge between the price buyers pay and the price sellers receive.

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 total surplus is

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7. As a result of the tax, consumer surplus decreases by

The size of a tax and the deadweight loss that results from the tax are

Figure 8-11 -Refer to Figure 8-11. Suppose Q₁ = 4; Q₂ = 7; P₁ = $6; P₂ = $8; and P₃ = $10. Then, when the tax is imposed,

When a tax is imposed on sellers, producer surplus decreases but consumer surplus increases.

As the tax on a good increases from $1 per unit to $2 per unit to $3 per unit and so on, the

Economists use the government's tax revenue to measure the public benefit from a tax.

A tax

When a tax is imposed on a good for which the demand is relatively elastic and the supply is relatively inelastic,

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The consumer surplus with the tax is

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. After the tax, what is the loss in total surplus?

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. The loss in consumer surplus caused by the tax is measured by the area

Ronald Reagan believed that reducing income tax rates would

Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is consumer surplus after the tax is imposed?

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4. The price that buyers effectively pay after the tax is imposed is

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7. As a result of the tax,

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 quantity sold to

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

Exam 8: Application: The Costs of Taxation

A tax places a wedge between the price buyers pay and the price sellers receive.

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 total surplus is

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7. As a result of the tax, consumer surplus decreases by

The size of a tax and the deadweight loss that results from the tax are

Figure 8-11 -Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then, when the tax is imposed,

When a tax is imposed on sellers, producer surplus decreases but consumer surplus increases.

As the tax on a good increases from $1 per unit to $2 per unit to $3 per unit and so on, the

Economists use the government's tax revenue to measure the public benefit from a tax.

A tax

When a tax is imposed on a good for which the demand is relatively elastic and the supply is relatively inelastic,

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The consumer surplus with the tax is

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. After the tax, what is the loss in total surplus?

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. The loss in consumer surplus caused by the tax is measured by the area

Ronald Reagan believed that reducing income tax rates would

Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is consumer surplus after the tax is imposed?

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4. The price that buyers effectively pay after the tax is imposed is

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7. As a result of the tax,

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 quantity sold to

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

Figure 8-11 -Refer to Figure 8-11. Suppose Q₁ = 4; Q₂ = 7; P₁ = $6; P₂ = $8; and P₃ = $10. Then, when the tax is imposed,