Question 1

Figure 8-12  
-Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The amount of deadweight loss resulting from this tax is

Accepted Answer

A) $7.50. 
B) $15.00. 
C) $22.50. 
D) $45.00. 
A) $7.50. 
B) $15.00. 
C) $22.50. 
D) $45.00.

Question 2

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. Before the tax, what is the total surplus?

Accepted Answer

A) $60 
B) $50 
C) $30 
D) $25 
A) $60 
B) $50 
C) $30 
D) $25

Question 3

When the government places a tax on a product, the cost of the tax to buyers and sellers

Accepted Answer

A) is less than the revenue raised from the tax by the government. 
B) is equal to the revenue raised from the tax by the government. 
C) exceeds the revenue raised from the tax by the government. 
D) Without additional information, such as the elasticity of demand for this product, it is impossible to compare the cost of a tax to buyers and sellers with tax revenue. 
A) is less than the revenue raised from the tax by the government. 
B) is equal to the revenue raised from the tax by the government. 
C) exceeds the revenue raised from the tax by the government. 
D) Without additional information, such as the elasticity of demand for this product, it is impossible to compare the cost of a tax to buyers and sellers with tax revenue.

Question 4

Figure 8-25  
-Refer to Figure 8-25. Suppose the government increases the size of the tax on this good from $4 per unit to $6 per unit. Will the tax revenue collected from the tax increase, decrease, or stay the same?

Accepted Answer

Total tax

Question 5

When a good is taxed, the deadweight loss is larger the more elastic are demand and supply.

Accepted Answer

A) True 
 B)False

Question 6

Figure 8-6
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-6. Total surplus with the tax in place is

Accepted Answer

A) $1,500. 
B) $3,600. 
C) $4,500. 
D) $6,000. 
A) $1,500. 
B) $3,600. 
C) $4,500. 
D) $6,000.

Question 7

Figure 8-8
Suppose the government imposes a $10 per unit tax on a good.  
-Refer to Figure 8-8. The tax causes producer surplus to decrease by the area

Accepted Answer

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

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Suppose a tax of $4 per unit is imposed on a good, and the tax causes the equilibrium quantity of the good to decrease from 2,000 units to 1,700 units. The tax decreases consumer surplus by $3,000 and decreases producer surplus by $4,400. The deadweight loss of the tax is

Accepted Answer

A) $200. 
B) $400. 
C) $600. 
D) $1,200. 
A) $200. 
B) $400. 
C) $600. 
D) $1,200.

Question 10

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. The price that sellers receive is

Accepted Answer

A) P0. 
B) P2. 
C) P5. 
D) P8. 
A) P0. 
B) P2. 
C) P5. 
D) P8.

Question 11

If the size of a tax triples, the deadweight loss increases by a factor of six.

Accepted Answer

A) True 
 B)False

Question 12

Figure 8-13  
-Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The consumer surplus after this tax is

Accepted Answer

A) $80. 
B) $40. 
C) $30. 
D) $10. 
A) $80. 
B) $40. 
C) $30. 
D) $10.

Question 13

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 $11. 
B) producer surplus decreases by $11. 
C) the deadweight loss amounts to $6. 
D) All of the above are correct. 
A) consumer surplus decreases by $11. 
B) producer surplus decreases by $11. 
C) the deadweight loss amounts to $6. 
D) All of the above are correct.

Question 14

Figure 8-26  
-Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much is the deadweight loss from this tax?

Accepted Answer

The deadweight loss from this tax is 0.5

Question 15

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

Accepted Answer

Total tax revenue is

Question 16

If the tax on a good is increased from $1 per unit to $4 per unit, the deadweight loss from the tax increases by a factor of

Accepted Answer

A) 5. 
B) 9. 
C) 16. 
D) 24. 
A) 5. 
B) 9. 
C) 16. 
D) 24.

Question 17

Figure 8-3
The vertical distance between points A and C represents a tax in the market.  
-Refer to Figure 8-3. The price that sellers effectively receive after the tax is imposed is

Accepted Answer

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

Question 18

Which of the following would likely have the smallest deadweight loss relative to the tax revenue?

Accepted Answer

A) a head tax (that is, a tax everyone must pay regardless of what one does or buys) 
B) an income tax 
C) a tax on compact discs 
D) a tax on caviar 
A) a head tax (that is, a tax everyone must pay regardless of what one does or buys) 
B) an income tax 
C) a tax on compact discs 
D) a tax on caviar

Question 19

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

Accepted Answer

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

Question 20

If a tax shifts the demand curve upward (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.

Exam 8: Application: The Costs of Taxation

Figure 8-12 -Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The amount of deadweight loss resulting from this 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. Before the tax, what is the total surplus?

When the government places a tax on a product, the cost of the tax to buyers and sellers

Figure 8-25 -Refer to Figure 8-25. Suppose the government increases the size of the tax on this good from $4 per unit to $6 per unit. Will the tax revenue collected from the tax increase, decrease, or stay the same?

When a good is taxed, the deadweight loss is larger the more elastic are demand and supply.

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. Total surplus with the tax in place is

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. The tax causes producer surplus to decrease by the area

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

Suppose a tax of $4 per unit is imposed on a good, and the tax causes the equilibrium quantity of the good to decrease from 2,000 units to 1,700 units. The tax decreases consumer surplus by $3,000 and decreases producer surplus by $4,400. The deadweight loss of the tax is

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. The price that sellers receive is

If the size of a tax triples, the deadweight loss increases by a factor of six.

Figure 8-13 -Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The consumer surplus after this tax is

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,

Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much is the deadweight loss from this tax?

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

If the tax on a good is increased from $1 per unit to $4 per unit, the deadweight loss from the tax increases by a factor of

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. The price that sellers effectively receive after the tax is imposed is

Which of the following would likely have the smallest deadweight loss relative to the tax revenue?

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

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

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,