Question 1

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. 
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.

Question 2

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

Accepted Answer

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

Question 3

The deadweight loss of a tax rises even more rapidly than the size of the tax.

Accepted Answer

A) True 
 B)False

Question 4

When a tax is imposed on a good for which the supply is relatively elastic and the demand 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) both equilibrium price and quantity will increase. 
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) both equilibrium price and quantity will increase.

Question 5

Figure 8-26  
-Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much is consumer surplus after the tax is imposed?

Accepted Answer

Consumer surplus is

Question 6

The higher a country's tax rates, the more likely that country will be

Accepted Answer

A) at the top of the Laffer curve. 
B) on the positively sloped part of the Laffer curve. 
C) on the negatively sloped part of the Laffer curve. 
D) experiencing small deadweight losses. 
A) at the top of the Laffer curve. 
B) on the positively sloped part of the Laffer curve. 
C) on the negatively sloped part of the Laffer curve. 
D) experiencing small deadweight losses.

Question 7

Scenario 8-1
Erin would be willing to pay as much as $100 per week to have her house cleaned. Ernesto's opportunity cost of cleaning Erin's house is $70 per week.
-Refer to Scenario 8-1. If Erin pays Ernesto $90 to clean her house, Erin's consumer surplus is

Accepted Answer

A) $80. 
B) $30. 
C) $20. 
D) $10. 
A) $80. 
B) $30. 
C) $20. 
D) $10.

Question 8

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 producer surplus as a result of the tax is

Accepted Answer

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

Question 9

The benefit that government receives from a tax is measured by

Accepted Answer

A) deadweight loss. 
B) consumer surplus. 
C) tax incidence. 
D) tax revenue. 
A) deadweight loss. 
B) consumer surplus. 
C) tax incidence. 
D) tax revenue.

Question 10

Figure 8-23. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax.  
-Refer to Figure 8-23. If the economy is at point A on the curve, then a decrease in the tax rate will

Accepted Answer

A) increase the deadweight loss of the tax and increase tax revenue. 
B) increase the deadweight loss of the tax and decrease tax revenue. 
C) decrease the deadweight loss of the tax and increase tax revenue. 
D) decrease the deadweight loss of the tax and decrease tax revenue. 
A) increase the deadweight loss of the tax and increase tax revenue. 
B) increase the deadweight loss of the tax and decrease tax revenue. 
C) decrease the deadweight loss of the tax and increase tax revenue. 
D) decrease the deadweight loss of the tax and decrease tax revenue.

Question 11

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 sellers is

Accepted Answer

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

Question 12

Which of the following events is consistent with an increase in the deadweight loss of the gasoline tax from $30 million to $120 million?

Accepted Answer

A) The tax on gasoline increases from $0.30 per gallon to $0.45 per gallon. 
B) The tax on gasoline increases from $0.30 per gallon to $0.60 per gallon. 
C) The tax on gasoline increases from $0.25 per gallon to $0.45 per gallon. 
D) The tax on gasoline increases from $0.25 per gallon to $1.00 per gallon. 
A) The tax on gasoline increases from $0.30 per gallon to $0.45 per gallon. 
B) The tax on gasoline increases from $0.30 per gallon to $0.60 per gallon. 
C) The tax on gasoline increases from $0.25 per gallon to $0.45 per gallon. 
D) The tax on gasoline increases from $0.25 per gallon to $1.00 per gallon.

Question 13

If a tax shifts the supply curve downward (or to the right), 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. 
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.

Question 14

The larger the deadweight loss from taxation, the larger the cost of government programs.

Accepted Answer

A) True 
 B)False

Question 15

Suppose that instead of a supply-demand diagram, you are given the following information:
Qs = 100 + 3P
Qd = 400 - 2P
From this information compute equilibrium price and quantity. Now suppose that a tax is placed on buyers so that
Qd = 400 - 2(P + T).
If T = 15, solve for the new equilibrium price and quantity. (Note: P is the price received by sellers and P + T is the price paid by buyers.) Compare these answers for equilibrium price and quantity with your first answers. What does this show you?

Accepted Answer

Prior to the tax, the equilibrium price

Question 16

Scenario 8-1
Erin would be willing to pay as much as $100 per week to have her house cleaned. Ernesto's opportunity cost of cleaning Erin's house is $70 per week.
-Refer to Scenario 8-1. Assume Erin is required to pay a tax of $5 when she hires someone to clean her house. Which of the following is true?

Accepted Answer

A) Erin will continue to hire Ernesto to clean her house, but her consumer surplus will decline. 
B) Ernesto will continue to clean Erin's house, and his producer surplus will increase. 
C) Total economic welfare (consumer surplus plus producer surplus plus tax revenue) will decrease. 
D) All of the above are correct. 
A) Erin will continue to hire Ernesto to clean her house, but her consumer surplus will decline. 
B) Ernesto will continue to clean Erin's house, and his producer surplus will increase. 
C) Total economic welfare (consumer surplus plus producer surplus plus tax revenue) will decrease. 
D) All of the above are correct.

Question 17

Figure 8-5
Suppose that the government imposes a tax of P3 - P1.  
-Refer to Figure 8-5. The tax causes a reduction in consumer surplus that is represented by area

Accepted Answer

A) A. 
B) B+C. 
C) C+H. 
D) F. 
A) A. 
B) B+C. 
C) C+H. 
D) F.

Question 18

If a tax shifts the supply curve upward (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. 
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.

Question 19

Normally, both buyers and sellers of a good become worse off when the good is taxed.

Accepted Answer

A) True 
 B)False

Question 20

Figure 8-26  
-Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much is producer surplus after the tax is imposed?

Accepted Answer

Producer surplus is

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

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

The deadweight loss of a tax rises even more rapidly than the size of the tax.

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

Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much is consumer surplus after the tax is imposed?

The higher a country's tax rates, the more likely that country will be

Scenario 8-1 Erin would be willing to pay as much as $100 per week to have her house cleaned. Ernesto's opportunity cost of cleaning Erin's house is $70 per week. -Refer to Scenario 8-1. If Erin pays Ernesto $90 to clean her house, Erin's consumer surplus is

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 producer surplus as a result of the tax is

The benefit that government receives from a tax is measured by

Figure 8-23. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-23. If the economy is at point A on the curve, then a decrease in the tax rate will

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 sellers is

Which of the following events is consistent with an increase in the deadweight loss of the gasoline tax from $30 million to $120 million?

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

The larger the deadweight loss from taxation, the larger the cost of government programs.

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. The tax causes a reduction in consumer surplus that is represented by area

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

Normally, both buyers and sellers of a good become worse off when the good is taxed.

Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much is producer surplus after the tax is imposed?

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

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

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

The deadweight loss of a tax rises even more rapidly than the size of the tax.

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

Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much is consumer surplus after the tax is imposed?

The higher a country's tax rates, the more likely that country will be

Scenario 8-1 Erin would be willing to pay as much as $100 per week to have her house cleaned. Ernesto's opportunity cost of cleaning Erin's house is $70 per week. -Refer to Scenario 8-1. If Erin pays Ernesto $90 to clean her house, Erin's consumer surplus is

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 producer surplus as a result of the tax is

The benefit that government receives from a tax is measured by

Figure 8-23. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-23. If the economy is at point A on the curve, then a decrease in the tax rate will

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 sellers is

Which of the following events is consistent with an increase in the deadweight loss of the gasoline tax from $30 million to $120 million?

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

The larger the deadweight loss from taxation, the larger the cost of government programs.

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. The tax causes a reduction in consumer surplus that is represented by area

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

Normally, both buyers and sellers of a good become worse off when the good is taxed.

Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much is producer surplus after the tax is imposed?

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