Question 1

When a tax is levied on a good, the buyers and sellers of the good share the burden,

Accepted Answer

A) provided the tax is levied on the sellers. 
B) provided the tax is levied on the buyers. 
C) provided a portion of the tax is levied on the buyers, with the remaining portion levied on the sellers. 
D) regardless of how the tax is levied. 
A) provided the tax is levied on the sellers. 
B) provided the tax is levied on the buyers. 
C) provided a portion of the tax is levied on the buyers, with the remaining portion levied on the sellers. 
D) regardless of how the tax is levied.

Question 2

Figure 8-8
Suppose the government imposes a $10 per unit tax on a good.  
-Refer to Figure 8-8. The decrease in consumer and producer surpluses that is not offset by tax revenue is the area

Accepted Answer

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

Question 3

Figure 8-29  
-Refer to Figure 8-29. As the size of the tax increases from $3 to $6 to $9, what happens to tax revenues?

Accepted Answer

When the tax is $3, tax revenue is $3 x

Question 4

Figure 8-16    
-Refer to Figure 8-16. Panel (a) and Panel (b) each illustrate a $2 tax placed on a market. In comparison to Panel (a), Panel (b) illustrates which of the following statements?

Accepted Answer

A) When demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic. 
B) When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic. 
C) When supply is relatively inelastic, the deadweight loss of a tax is smaller than when supply is relatively elastic. 
D) When supply is relatively elastic, the deadweight loss of a tax is larger than when supply is relatively inelastic. 
A) When demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic. 
B) When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic. 
C) When supply is relatively inelastic, the deadweight loss of a tax is smaller than when supply is relatively elastic. 
D) When supply is relatively elastic, the deadweight loss of a tax is larger than when supply is relatively inelastic.

Question 5

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. 
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.

Question 6

Total surplus in a market does not change when the government imposes a tax on that market because the loss of consumer surplus and producer surplus is equal to the gain of government revenue.

Accepted Answer

A) True 
 B)False

Question 7

Figure 8-3
The vertical distance between points A and C represents a tax in the market.  
-Refer to Figure 8-3. The equilibrium price before the tax is imposed is

Accepted Answer

A) P1. 
B) P2. 
C) P3. 
D) P4. 
A) P1. 
B) P2. 
C) P3. 
D) P4.

Question 8

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

Accepted Answer

A) increase from $600 to $800. 
B) decrease from $800 to $300. 
C) decrease from $600 to $300. 
D) remain unchanged at $600. 
A) increase from $600 to $800. 
B) decrease from $800 to $300. 
C) decrease from $600 to $300. 
D) remain unchanged at $600.

Question 9

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

Accepted Answer

A) assume that economic well-being is not affected if all tax revenue is spent on goods and services for the people who are being taxed. 
B) compare the taxes raised in the United States with those raised in other countries, especially France. 
C) compare the reduced welfare of buyers and sellers to the amount of revenue the government raises. 
D) take into account the fact that almost all taxes reduce the welfare of buyers, increase the welfare of sellers, and raise revenue for the government. 
A) assume that economic well-being is not affected if all tax revenue is spent on goods and services for the people who are being taxed. 
B) compare the taxes raised in the United States with those raised in other countries, especially France. 
C) compare the reduced welfare of buyers and sellers to the amount of revenue the government raises. 
D) take into account the fact that almost all taxes reduce the welfare of buyers, increase the welfare of sellers, and raise revenue for the government.

Question 10

The benefit to buyers of participating in a market is measured by

Accepted Answer

A) the price elasticity of demand. 
B) consumer surplus. 
C) the maximum amount that buyers are willing to pay for the good. 
D) the equilibrium price. 
A) the price elasticity of demand. 
B) consumer surplus. 
C) the maximum amount that buyers are willing to pay for the good. 
D) the equilibrium price.

Question 11

Figure 8-19
The vertical distance between points A and B represents the original tax.  
-Refer to Figure 8-19. The original tax can be represented by the vertical distance AB. Suppose the government is deciding whether to lower the tax to CD or raise it to FG. Which of the following statements is not correct?

Accepted Answer

A) Compared to the original tax, the larger tax will increase tax revenue. 
B) Compared to the original tax, the smaller tax will decrease deadweight loss. 
C) Compared to the original tax, the smaller tax will decrease tax revenue. 
D) Compared to the original tax, the larger tax will increase deadweight loss. 
A) Compared to the original tax, the larger tax will increase tax revenue. 
B) Compared to the original tax, the smaller tax will decrease deadweight loss. 
C) Compared to the original tax, the smaller tax will decrease tax revenue. 
D) Compared to the original tax, the larger tax will increase deadweight loss.

Question 12

The graph that represents the amount of deadweight loss (measured on the vertical axis) as a function of the size of the tax (measured on the horizontal axis) looks like

Accepted Answer

A) a U. 
B) an upside-down U. 
C) a horizontal straight line. 
D) an upward-sloping curve. 
A) a U. 
B) an upside-down U. 
C) a horizontal straight line. 
D) an upward-sloping curve.

Question 13

Figure 8-11  
-Refer to Figure 8-11. The price labeled as P2 on the vertical axis represents the

Accepted Answer

A) difference between the price paid by buyers after the tax is imposed and the price paid by buyers before the tax is imposed. 
B) difference between the price received by sellers before the tax is imposed and the price received by sellers after the tax is imposed. 
C) price of the good before the tax is imposed. 
D) price of the good after the tax is imposed. 
A) difference between the price paid by buyers after the tax is imposed and the price paid by buyers before the tax is imposed. 
B) difference between the price received by sellers before the tax is imposed and the price received by sellers after the tax is imposed. 
C) price of the good before the tax is imposed. 
D) price of the good after the tax is imposed.

Question 14

Suppose Rebecca needs a dog sitter so that she can travel to her sister's wedding. Rebecca values dog sitting for the weekend at $200. Susan is willing to dog sit for Rebecca so long as she receives at least $150. Rebecca and Susan agree on a price of $175. Suppose the government imposes a tax of $10 on dog sitting. The tax has made Rebecca and Susan worse off by a total of

Accepted Answer

A) $50. 
B) $40. 
C) $20. 
D) $10. 
A) $50. 
B) $40. 
C) $20. 
D) $10.

Question 15

Figure 8-3
The vertical distance between points A and C represents a tax in the market.  
-Refer to Figure 8-3. The per unit burden of the tax on buyers is

Accepted Answer

A) P3 - P1. 
B) P3 - P2. 
C) P2 - P1. 
D) P4 - P3. 
A) P3 - P1. 
B) P3 - P2. 
C) P2 - P1. 
D) P4 - P3.

Question 16

Figure 8-22  
-Refer to Figure 8-22. Suppose the government initially imposes a $3 per-unit tax on this good. Now suppose the government is deciding whether to lower the tax to $1.50 or raise it to $4.50. Which of the following statements is correct?

Accepted Answer

A) Compared to the original tax, the smaller tax will decrease both tax revenue and deadweight loss. 
B) Compared to the original tax, the larger tax will increase both tax revenue and deadweight loss. 
C) Compared to the original tax, the larger tax will decrease tax revenue and increase deadweight loss. 
D) Both a and b are correct. 
A) Compared to the original tax, the smaller tax will decrease both tax revenue and deadweight loss. 
B) Compared to the original tax, the larger tax will increase both tax revenue and deadweight loss. 
C) Compared to the original tax, the larger tax will decrease tax revenue and increase deadweight loss. 
D) Both a and b are correct.

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 tax results in a loss of producer surplus that amounts to

Accepted Answer

A) $75.50. 
B) $90.00. 
C) $112.50. 
D) $127.50. 
A) $75.50. 
B) $90.00. 
C) $112.50. 
D) $127.50.

Question 18

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

Accepted Answer

Producer s

Question 19

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, producer surplus is the area

Accepted Answer

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

Question 20

Use the following graph shown to fill in the table that follows.

Accepted Answer

The answer of Use the following graph shown to fill...

When a tax is levied on a good, the buyers and sellers of the good share the burden,

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. The decrease in consumer and producer surpluses that is not offset by tax revenue is the area

Figure 8-29 -Refer to Figure 8-29. As the size of the tax increases from $3 to $6 to $9, what happens to tax revenues?

Figure 8-16 -Refer to Figure 8-16. Panel (a) and Panel (b) each illustrate a $2 tax placed on a market. In comparison to Panel (a), Panel (b) illustrates which of the following statements?

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

Total surplus in a market does not change when the government imposes a tax on that market because the loss of consumer surplus and producer surplus is equal to the gain of government revenue.

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. The equilibrium price before the tax is imposed is

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

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

The benefit to buyers of participating in a market is measured by

The graph that represents the amount of deadweight loss (measured on the vertical axis) as a function of the size of the tax (measured on the horizontal axis) looks like

Figure 8-11 -Refer to Figure 8-11. The price labeled as P₂ on the vertical axis represents the

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. The per unit burden of the tax on buyers is

Figure 8-22 -Refer to Figure 8-22. Suppose the government initially imposes a $3 per-unit tax on this good. Now suppose the government is deciding whether to lower the tax to $1.50 or raise it to $4.50. Which of the following statements is correct?

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4. The tax results in a loss of producer surplus that amounts to

Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is producer surplus 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, producer surplus is the area

Use the following graph shown to fill in the table that follows.

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 levied on a good, the buyers and sellers of the good share the burden,

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. The decrease in consumer and producer surpluses that is not offset by tax revenue is the area

Figure 8-29 -Refer to Figure 8-29. As the size of the tax increases from $3 to $6 to $9, what happens to tax revenues?

Figure 8-16 -Refer to Figure 8-16. Panel (a) and Panel (b) each illustrate a $2 tax placed on a market. In comparison to Panel (a), Panel (b) illustrates which of the following statements?

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

Total surplus in a market does not change when the government imposes a tax on that market because the loss of consumer surplus and producer surplus is equal to the gain of government revenue.

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. The equilibrium price before the tax is imposed is

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

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

The benefit to buyers of participating in a market is measured by

The graph that represents the amount of deadweight loss (measured on the vertical axis) as a function of the size of the tax (measured on the horizontal axis) looks like

Figure 8-11 -Refer to Figure 8-11. The price labeled as P2 on the vertical axis represents the

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. The per unit burden of the tax on buyers is

Figure 8-22 -Refer to Figure 8-22. Suppose the government initially imposes a $3 per-unit tax on this good. Now suppose the government is deciding whether to lower the tax to $1.50 or raise it to $4.50. Which of the following statements is correct?

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4. The tax results in a loss of producer surplus that amounts to

Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is producer surplus 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, producer surplus is the area

Use the following graph shown to fill in the table that follows.

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. The price labeled as P₂ on the vertical axis represents the