Question 1

Figure 8-26  
-Refer to Figure 8-26. How much is total surplus at the market equilibrium?

Accepted Answer

Total surplus is the sum of co

Question 2

Figure 8-26  
-Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. What price will sellers receive for the good after the tax is imposed?

Accepted Answer

Sellers will receive

Question 3

A tax levied on the buyers of a good shifts the

Accepted Answer

A) supply curve upward (or to the left). 
B) supply curve downward (or to the right). 
C) demand curve downward (or to the left). 
D) demand curve upward (or to the right). 
A) supply curve upward (or to the left). 
B) supply curve downward (or to the right). 
C) demand curve downward (or to the left). 
D) demand curve upward (or to the right).

Question 4

A $2 tax per gallon of paint placed on the buyers of paint will shift the demand curve

Accepted Answer

A) downward by exactly $2. 
B) downward by less than $2. 
C) upward by exactly $2. 
D) upward by less than $2. 
A) downward by exactly $2. 
B) downward by less than $2. 
C) upward by exactly $2. 
D) upward by less than $2.

Question 5

Figure 8-5
Suppose that the government imposes a tax of P3 - P1.  
-Refer to Figure 8-5. The loss in total welfare that results from the tax is represented by area

Accepted Answer

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

Question 6

As the size of a tax rises, the deadweight loss

Accepted Answer

A) rises, and tax revenue first rises, then falls. 
B) rises as does tax revenue. 
C) falls, and tax revenue first rises, then falls. 
D) falls as does tax revenue. 
A) rises, and tax revenue first rises, then falls. 
B) rises as does tax revenue. 
C) falls, and tax revenue first rises, then falls. 
D) falls as does tax revenue.

Question 7

Figure 8-21  
-Refer to Figure 8-21. Suppose the market is represented by Demand 1 and Supply 1. At first the government places a $3 per-unit tax on this good. Then the government decides to raise the tax to $6 per unit. Compared to the original tax rate, the higher tax will

Accepted Answer

A) increase tax revenue and increase the deadweight loss from the tax. 
B) not change tax revenue and increase the deadweight loss from the tax. 
C) decrease tax revenue and increase the deadweight loss from the tax. 
D) decrease tax revenue and decrease the deadweight loss from the tax. 
A) increase tax revenue and increase the deadweight loss from the tax. 
B) not change tax revenue and increase the deadweight loss from the tax. 
C) decrease tax revenue and increase the deadweight loss from the tax. 
D) decrease tax revenue and decrease the deadweight loss from the tax.

Question 8

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 consumer surplus is

Accepted Answer

A) (P0-P2) x Q2. 
B) 1/2 x (P0-P2) x Q2. 
C) (P0-P5) x Q5. 
D) 1/2 x (P0-P5) x Q5. 
A) (P0-P2) x Q2. 
B) 1/2 x (P0-P2) x Q2. 
C) (P0-P5) x Q5. 
D) 1/2 x (P0-P5) x Q5.

Question 9

Figure 8-11  
-Refer to Figure 8-11. Neither a shift of the demand curve nor a shift of the supply curve is shown on the figure. However, we know that, when the tax is imposed,

Accepted Answer

A) the demand curve will shift. 
B) the supply curve will shift. 
C) either the demand curve or the supply curve will shift. 
D) None of the above are correct; the tax causes neither the demand curve nor the supply curve to shift. 
A) the demand curve will shift. 
B) the supply curve will shift. 
C) either the demand curve or the supply curve will shift. 
D) None of the above are correct; the tax causes neither the demand curve nor the supply curve to shift.

Question 10

Suppose the government places a per-unit tax on a good. The smaller the price elasticities of demand and supply for the good, the

Accepted Answer

A) smaller the deadweight loss from the tax. 
B) greater the deadweight loss from the tax. 
C) less efficient is the tax. 
D) more equitable is the distribution of the tax burden between buyers and sellers. 
A) smaller the deadweight loss from the tax. 
B) greater the deadweight loss from the tax. 
C) less efficient is the tax. 
D) more equitable is the distribution of the tax burden between buyers and sellers.

Question 11

The demand for energy drinks is more elastic than the demand for milk. Would a tax on energy drinks or a tax on milk have a larger deadweight loss? Explain.

Accepted Answer

A tax on energy drinks would have a larg

Question 12

When a tax is imposed on a good, consumer surplus decreases and producer surplus remains unchanged.

Accepted Answer

A) True 
 B)False

Question 13

The more elastic are supply and demand in a market, the greater are the distortions caused by a tax on that market, and the more likely it is that a tax cut in that market will raise tax revenue.

Accepted Answer

A) True 
 B)False

Question 14

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 B on the curve, then an increase 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 15

Figure 8-18  
-Refer to Figure 8-18. Suppose the government imposes a $1 tax in each of the four markets represented by supply curves S1, S2, S3, and S4. The deadweight will be the largest in the market represented by

Accepted Answer

A) S1. 
B) S2. 
C) S3. 
D) S4. 
A) S1. 
B) S2. 
C) S3. 
D) S4.

Question 16

The Social Security tax is a tax on

Accepted Answer

A) capital. 
B) labor. 
C) land. 
D) savings. 
A) capital. 
B) labor. 
C) land. 
D) savings.

Question 17

The deadweight loss from a tax of $x per unit will be smallest in a market

Accepted Answer

A) in which demand is elastic and supply is inelastic. 
B) in which demand is inelastic and supply is elastic. 
C) in which demand is inelastic and supply is inelastic. 
D) None of the above are correct; we need to know the value of x in order to determine the answer. 
A) in which demand is elastic and supply is inelastic. 
B) in which demand is inelastic and supply is elastic. 
C) in which demand is inelastic and supply is inelastic. 
D) None of the above are correct; we need to know the value of x in order to determine the answer.

Question 18

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 $175. Rebecca and Susan agree on a price of $185. Suppose the government imposes a tax of $30 on dog sitting. What is the deadweight loss of the tax?

Accepted Answer

A) the maximum value that Rebecca would pay for dog sitting 
B) the $30 tax 
C) the lost benefit to Rebecca and Susan because after the tax, Susan will not dog sit for Rebecca 
D) the lost benefit to Rebecca of being unable to hire a dog sitter because Rebecca is the one who would pay the tax 
A) the maximum value that Rebecca would pay for dog sitting 
B) the $30 tax 
C) the lost benefit to Rebecca and Susan because after the tax, Susan will not dog sit for Rebecca 
D) the lost benefit to Rebecca of being unable to hire a dog sitter because Rebecca is the one who would pay the tax

Question 19

Figure 8-4
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-4. The amount of deadweight loss as a result of the tax is

Accepted Answer

A) $35.00. 
B) $45.25. 
C) $52.50. 
D) $105.00. 
A) $35.00. 
B) $45.25. 
C) $52.50. 
D) $105.00.

Question 20

Figure 8-5
Suppose that the government imposes a tax of P3 - P1.  
-Refer to Figure 8-5. Producer surplus before the tax was levied is represented by area

Accepted Answer

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

Exam 8: Application: The Costs of Taxation

Figure 8-26 -Refer to Figure 8-26. How much is total surplus at the market equilibrium?

Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. What price will sellers receive for the good after the tax is imposed?

A tax levied on the buyers of a good shifts the

A $2 tax per gallon of paint placed on the buyers of paint will shift the demand curve

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. The loss in total welfare that results from the tax is represented by area

As the size of a tax rises, the deadweight loss

Figure 8-21 -Refer to Figure 8-21. Suppose the market is represented by Demand 1 and Supply 1. At first the government places a $3 per-unit tax on this good. Then the government decides to raise the tax to $6 per unit. Compared to the original tax rate, the higher tax will

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 consumer surplus is

Figure 8-11 -Refer to Figure 8-11. Neither a shift of the demand curve nor a shift of the supply curve is shown on the figure. However, we know that, when the tax is imposed,

Suppose the government places a per-unit tax on a good. The smaller the price elasticities of demand and supply for the good, the

The demand for energy drinks is more elastic than the demand for milk. Would a tax on energy drinks or a tax on milk have a larger deadweight loss? Explain.

When a tax is imposed on a good, consumer surplus decreases and producer surplus remains unchanged.

The more elastic are supply and demand in a market, the greater are the distortions caused by a tax on that market, and the more likely it is that a tax cut in that market will raise tax revenue.

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 B on the curve, then an increase in the tax rate will

Figure 8-18 -Refer to Figure 8-18. Suppose the government imposes a $1 tax in each of the four markets represented by supply curves S1, S2, S3, and S4. The deadweight will be the largest in the market represented by

The Social Security tax is a tax on

The deadweight loss from a tax of $x per unit will be smallest in a market

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4. The amount of deadweight loss as a result of the tax is

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. Producer surplus before the tax was levied is represented by area

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