Question 1

Suppose the government imposes a tax on cheese. The deadweight loss from this tax will likely be greater in the

Accepted Answer

A) first year after it is imposed than in the eighth year after it is imposed because demand and supply will be more elastic in the first year than in the eighth year. 
B) first year after it is imposed than in the eighth year after it is imposed because demand and supply will be less elastic in the first year than in the eighth year. 
C) eighth year after it is imposed than in the first year after it is imposed because demand and supply will be more elastic in the first year than in the eighth year. 
D) eighth year after it is imposed than in the first year after it is imposed because demand and supply will be less elastic in the first year than in the eighth year. 
A) first year after it is imposed than in the eighth year after it is imposed because demand and supply will be more elastic in the first year than in the eighth year. 
B) first year after it is imposed than in the eighth year after it is imposed because demand and supply will be less elastic in the first year than in the eighth year. 
C) eighth year after it is imposed than in the first year after it is imposed because demand and supply will be more elastic in the first year than in the eighth year. 
D) eighth year after it is imposed than in the first year after it is imposed because demand and supply will be less elastic in the first year than in the eighth year.

Question 2

Taxes affect market participants by increasing the price paid by the buyer and received by the seller.

Accepted Answer

A) True 
 B)False

Question 3

Figure 8-1  
-Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by M represents

Accepted Answer

A) consumer surplus after the tax. 
B) consumer surplus before the tax. 
C) producer surplus after the tax. 
D) producer surplus before the tax. 
A) consumer surplus after the tax. 
B) consumer surplus before the tax. 
C) producer surplus after the tax. 
D) producer surplus before the tax.

Question 4

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 5

If a tax did not induce buyers or sellers to change their behavior, it would not cause a deadweight loss.

Accepted Answer

A) True 
 B)False

Question 6

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 $40 when she hires someone to clean her house for a week. Which of the following is correct?

Accepted Answer

A) Erin will now clean her own house. 
B) Ernesto will continue to clean Erin's house, but his producer surplus will decline. 
C) Total economic welfare (consumer surplus plus producer surplus plus tax revenue) will increase. 
D) Erin will continue to hire Ernesto to clean her house, but her consumer surplus will decline. 
A) Erin will now clean her own house. 
B) Ernesto will continue to clean Erin's house, but his producer surplus will decline. 
C) Total economic welfare (consumer surplus plus producer surplus plus tax revenue) will increase. 
D) Erin will continue to hire Ernesto to clean her house, but her consumer surplus will decline.

Question 7

If the size of a tax increases, tax revenue

Accepted Answer

A) increases. 
B) decreases. 
C) remains the same. 
D) may increase, decrease, or remain the same. 
A) increases. 
B) decreases. 
C) remains the same. 
D) may increase, decrease, or remain the same.

Question 8

What happens to the total surplus in a market when the government imposes a tax?

Accepted Answer

A) Total surplus increases by the amount of the tax. 
B) Total surplus increases but by less than the amount of the tax. 
C) Total surplus decreases. 
D) Total surplus is unaffected by the tax. 
A) Total surplus increases by the amount of the tax. 
B) Total surplus increases but by less than the amount of the tax. 
C) Total surplus decreases. 
D) Total surplus is unaffected by the tax.

Question 9

Figure 8-9
​
   ​
-Refer to Figure 8-9. Suppose the government places a $4 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 10

Scenario 8-3
​
Suppose the market demand and market supply curves are given by the equations:
​
QS1U1P1D S1S1P0= 200 - P
-Refer to Scenario 8-3. Suppose that a tax of T is placed on buyers so that the demand curve becomes:
QD = 200 - (P + T)
How much tax revenue will be collected after this tax is imposed?

Accepted Answer

The tax re

Question 11

Use the following graph shown to fill in the table that follows.
   $$\begin{array} { | l | l | l | l | } 
\hline & \text { WITHOUT TAX } & \text { WITH TAX } & \text { CHANGE } \
\hline \text { Consumer surplus } & & & \
\hline \text { Producer surplus } & & & \
\hline \text { Tax revenue } & & & \
\hline \text { Total surplus } & & & \
\hline
\end{array}$$

Accepted Answer

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

Question 12

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 Ernesto cleans Erin's house for $90, Ernesto's producer surplus is

Accepted Answer

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

Question 13

The demand for bread is less elastic than the demand for donuts; hence, a tax on bread will create a larger deadweight loss than will the same tax on donuts, other things equal.

Accepted Answer

A) True 
 B)False

Question 14

Suppose a tax is imposed on each new hearing aid that is sold. The supply curve is a typical upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. As a result of the tax, the equilibrium quantity of hearing aids decreases from 10,000 to 9,000, and the deadweight loss of the tax is $60,000. We can conclude that the tax on each hearing aid is

Accepted Answer

A) $60. 
B) $120. 
C) $160. 
D) $200. 
A) $60. 
B) $120. 
C) $160. 
D) $200.

Question 15

The decrease in total surplus that results from a market distortion, such as a tax, is called a

Accepted Answer

A) wedge loss. 
B) revenue loss. 
C) deadweight loss. 
D) consumer surplus loss. 
A) wedge loss. 
B) revenue loss. 
C) deadweight loss. 
D) consumer surplus loss.

Question 16

Figure 8-2
The vertical distance between points C and D represents a tax in the market.
​   ​
​
​
​
-Refer to Figure 8-2. The per-unit burden of the tax on buyers is

Accepted Answer

A) $2. 
B) $6. 
C) $4. 
D) $12. 
A) $2. 
B) $6. 
C) $4. 
D) $12.

Question 17

Figure 8-1  
-Refer to Figure 8-1. Suppose the government imposes a tax of P'' - P. The area measured by J + K + I represents

Accepted Answer

A) consumer surplus after the tax. 
B) consumer surplus before the tax. 
C) producer surplus after the tax. 
D) producer surplus before the tax. 
A) consumer surplus after the tax. 
B) consumer surplus before the tax. 
C) producer surplus after the tax. 
D) producer surplus before the tax.

Question 18

Figure 8-2
The vertical distance between points C and D represents a tax in the market.
​   ​
​
​
​
-Refer to Figure 8-2. The imposition of the tax causes the price received by sellers to

Accepted Answer

A) decrease by $4. 
B) increase by $4. 
C) decrease by $6. 
D) increase by $6. 
A) decrease by $4. 
B) increase by $4. 
C) decrease by $6. 
D) increase by $6.

Question 19

Suppose the demand curve and the supply curve in a market are both linear, and suppose the price elasticity of supply is 0.5. Will the deadweight loss from a $3 tax per unit be larger if the price elasticity of demand is 0.3 or if the price elasticity of demand is 0.7?

Accepted Answer

The deadweight loss

Question 20

Figure 8-9
​
   ​
-Refer to Figure 8-9. How much is producer surplus at the market equilibrium?

Accepted Answer

Producer s

Exam 8: Applications: The Costs of Taxation

Suppose the government imposes a tax on cheese. The deadweight loss from this tax will likely be greater in the

Taxes affect market participants by increasing the price paid by the buyer and received by the seller.

Figure 8-1 -Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by M represents

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

If a tax did not induce buyers or sellers to change their behavior, it would not cause a deadweight loss.

If the size of a tax increases, tax revenue

What happens to the total surplus in a market when the government imposes a tax?

Figure 8-9 ​ ​ -Refer to Figure 8-9. Suppose the government places a $4 tax per unit on this good. What price will sellers receive for the good after the tax is imposed?

Scenario 8-3 ​ Suppose the market demand and market supply curves are given by the equations: ​ QD = 200 - P -Refer to Scenario 8-3. Suppose that a tax of T is placed on buyers so that the demand curve becomes: QD = 200 - (P + T) How much tax revenue will be collected after this tax is imposed?

Use the following graph shown to fill in the table that follows. WITHOUT TAX WITH TAX CHANGE Consumer surplus Producer surplus Tax revenue Total surplus

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 Ernesto cleans Erin's house for $90, Ernesto's producer surplus is

The demand for bread is less elastic than the demand for donuts; hence, a tax on bread will create a larger deadweight loss than will the same tax on donuts, other things equal.

The decrease in total surplus that results from a market distortion, such as a tax, is called a

Figure 8-2 The vertical distance between points C and D represents a tax in the market. ​ ​ ​ ​ ​ -Refer to Figure 8-2. The per-unit burden of the tax on buyers is

Figure 8-1 -Refer to Figure 8-1. Suppose the government imposes a tax of P'' - P. The area measured by J + K + I represents

Figure 8-2 The vertical distance between points C and D represents a tax in the market. ​ ​ ​ ​ ​ -Refer to Figure 8-2. The imposition of the tax causes the price received by sellers to

Suppose the demand curve and the supply curve in a market are both linear, and suppose the price elasticity of supply is 0.5. Will the deadweight loss from a $3 tax per unit be larger if the price elasticity of demand is 0.3 or if the price elasticity of demand is 0.7?

Figure 8-9 ​ ​ -Refer to Figure 8-9. How much is producer surplus at the market equilibrium?

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

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

Figure 8-9 -Refer to Figure 8-9. Suppose the government places a $4 tax per unit on this good. What price will sellers receive for the good after the tax is imposed?

Scenario 8-3 Suppose the market demand and market supply curves are given by the equations: Q^D= 200 - P -Refer to Scenario 8-3. Suppose that a tax of T is placed on buyers so that the demand curve becomes: Q^D= 200 - (P + T) How much tax revenue will be collected after this tax is imposed?

Figure 8-2 The vertical distance between points C and D represents a tax in the market. -Refer to Figure 8-2. The per-unit burden of the tax on buyers is

Figure 8-2 The vertical distance between points C and D represents a tax in the market. -Refer to Figure 8-2. The imposition of the tax causes the price received by sellers to

Figure 8-9 -Refer to Figure 8-9. How much is producer surplus at the market equilibrium?