Question 1

The Laffer curve illustrates how taxes in markets with greater elasticities of demand compare to taxes in markets with smaller elasticities of supply.

Accepted Answer

A) True 
 B)False

Question 2

The Laffer curve is the curve showing how tax revenue varies as the size of the tax varies.

Accepted Answer

A) True 
 B)False

Question 3

Figure 8-9
The vertical distance between points A and C represents a tax in the market.  
-Refer to Figure 8-9. The per-unit burden of the tax on buyers is

Accepted Answer

A) $20. 
B) $200. 
C) $300. 
D) $500. 
A) $20. 
B) $200. 
C) $300. 
D) $500.

Question 4

When a tax is levied on a good,

Accepted Answer

A) neither buyers nor sellers are made worse off. 
B) only sellers are made worse off. 
C) only buyers are made worse off. 
D) both buyers and sellers are made worse off. 
A) neither buyers nor sellers are made worse off. 
B) only sellers are made worse off. 
C) only buyers are made worse off. 
D) both buyers and sellers are made worse off.

Question 5

If the government imposes a $3 tax in a market, the buyers and sellers will share an equal burden of the tax.

Accepted Answer

A) True 
 B)False

Question 6

Figure 8-5
Suppose that the government imposes a tax of P3 - P1.  
-Refer to Figure 8-5. 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 7

Suppose a tax of $3 per unit is imposed on a good. The supply curve is a typical upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. The tax decreases consumer surplus by $3,900 and decreases producer surplus by $3,000. The tax generates tax revenue of $6,000. The tax decreased the equilibrium quantity of the good from

Accepted Answer

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

Question 8

Taxes are of interest to

Accepted Answer

A) microeconomists because they consider how to balance equality and efficiency. 
B) microeconomists because they consider how best to design a tax system. 
C) macroeconomists because they consider how policymakers can use the tax system to stabilize economic activity. 
D) All of the above are correct. 
A) microeconomists because they consider how to balance equality and efficiency. 
B) microeconomists because they consider how best to design a tax system. 
C) macroeconomists because they consider how policymakers can use the tax system to stabilize economic activity. 
D) All of the above are correct.

Question 9

When motorcycles are taxed and sellers of motorcycles are required to pay the tax to the government,

Accepted Answer

A) the quantity of motorcycles bought and sold in the market is reduced. 
B) the price paid by buyers of motorcycles decreases. 
C) the demand for motorcycles decreases. 
D) there is a movement downward and to the right along the demand curve for motorcycles. 
A) the quantity of motorcycles bought and sold in the market is reduced. 
B) the price paid by buyers of motorcycles decreases. 
C) the demand for motorcycles decreases. 
D) there is a movement downward and to the right along the demand curve for motorcycles.

Question 10

A tax on a good causes the size of the market to increase.

Accepted Answer

A) True 
 B)False

Question 11

Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, the

Accepted Answer

A) larger is the price elasticity of demand. 
B) smaller is the price elasticity of supply. 
C) larger is the amount of the tax. 
D) All of the above are correct. 
A) larger is the price elasticity of demand. 
B) smaller is the price elasticity of supply. 
C) larger is the amount of the tax. 
D) All of the above are correct.

Question 12

An increase in the size of a tax is most likely to increase tax revenue in a market with

Accepted Answer

A) elastic demand and elastic supply. 
B) elastic demand and inelastic supply. 
C) inelastic demand and elastic supply. 
D) inelastic demand and inelastic supply. 
A) elastic demand and elastic supply. 
B) elastic demand and inelastic supply. 
C) inelastic demand and elastic supply. 
D) inelastic demand and inelastic supply.

Question 13

In which of the following instances would the deadweight loss of the tax on cartons of cigarettes increase by a factor of 9?

Accepted Answer

A) The tax on cartons of cigarettes increases from $10 to $11.11. 
B) The tax on cartons of cigarettes increases from $10 to $20. 
C) The tax on cartons of cigarettes increases from $10 to $30. 
D) The tax on cartons of cigarettes increases from $10 to $90. 
A) The tax on cartons of cigarettes increases from $10 to $11.11. 
B) The tax on cartons of cigarettes increases from $10 to $20. 
C) The tax on cartons of cigarettes increases from $10 to $30. 
D) The tax on cartons of cigarettes increases from $10 to $90.

Question 14

When a good is taxed,

Accepted Answer

A) both buyers and sellers of the good are made worse off. 
B) only buyers are made worse off, because they ultimately bear the burden of the tax. 
C) only sellers are made worse off, because they ultimately bear the burden of the tax. 
D) neither buyers nor sellers are made worse off, since tax revenue is used to provide goods and services that would otherwise not be provided in a market economy. 
A) both buyers and sellers of the good are made worse off. 
B) only buyers are made worse off, because they ultimately bear the burden of the tax. 
C) only sellers are made worse off, because they ultimately bear the burden of the tax. 
D) neither buyers nor sellers are made worse off, since tax revenue is used to provide goods and services that would otherwise not be provided in a market economy.

Question 15

The marginal tax rate on labor income for many workers in the United States is almost

Accepted Answer

A) 30 percent. 
B) 40 percent. 
C) 50 percent. 
D) 65 percent. 
A) 30 percent. 
B) 40 percent. 
C) 50 percent. 
D) 65 percent.

Question 16

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. 
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.

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 many units will be bought and sold after the tax is imposed?

Accepted Answer

120 units will be bo

Question 18

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 producer surplus caused by the tax is measured by the area

Accepted Answer

A) ABC. 
B) P1P3ABC. 
C) P1P2BC. 
D) P1C0. 
A) ABC. 
B) P1P3ABC. 
C) P1P2BC. 
D) P1C0.

Question 19

Which of the following is a tax on labor?

Accepted Answer

A) Medicare tax 
B) Social Security tax 
C) federal income tax 
D) All of the above are labor taxes. 
A) Medicare tax 
B) Social Security tax 
C) federal income tax 
D) All of the above are labor taxes.

Question 20

Figure 8-6
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-6. What happens to total surplus in this market when the tax is imposed?

Accepted Answer

A) Total surplus increases by $1,500. 
B) Total surplus increases by $3,000. 
C) Total surplus decreases by $1,500. 
D) Total surplus decreases by $,3000. 
A) Total surplus increases by $1,500. 
B) Total surplus increases by $3,000. 
C) Total surplus decreases by $1,500. 
D) Total surplus decreases by $,3000.

Exam 8: Application: The Costs of Taxation

The Laffer curve illustrates how taxes in markets with greater elasticities of demand compare to taxes in markets with smaller elasticities of supply.

The Laffer curve is the curve showing how tax revenue varies as the size of the tax varies.

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The per-unit burden of the tax on buyers is

When a tax is levied on a good,

If the government imposes a $3 tax in a market, the buyers and sellers will share an equal burden of the tax.

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. The equilibrium price before the tax is imposed is

Taxes are of interest to

When motorcycles are taxed and sellers of motorcycles are required to pay the tax to the government,

A tax on a good causes the size of the market to increase.

Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, the

An increase in the size of a tax is most likely to increase tax revenue in a market with

In which of the following instances would the deadweight loss of the tax on cartons of cigarettes increase by a factor of 9?

When a good is taxed,

The marginal tax rate on labor income for many workers in the United States is almost

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

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 many units will be bought and sold after the tax is imposed?

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 producer surplus caused by the tax is measured by the area

Which of the following is a tax on labor?

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. What happens to total surplus in this market when 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

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