Question 1

The Laffer curve:

Accepted Answer

A) relates income tax rates to total income taxes collected 
B) was so ridiculous that economists took it as a joke, hence the name, Laffer Curve 
C) relates tax rates to deadweight welfare losses 
D) relates government welfare payments to the birth rate 
A) relates income tax rates to total income taxes collected 
B) was so ridiculous that economists took it as a joke, hence the name, Laffer Curve 
C) relates tax rates to deadweight welfare losses 
D) relates government welfare payments to the birth rate A

Question 2

Assume that a tax is levied on a good and the government uses the funds to build statues of former prime ministers.In this case there would be:

Accepted Answer

A) a decrease in consumer surplus to consumers of the taxed good 
B) a decrease in producer surplus to producers of the taxed good 
C) a probable decrease in the welfare of society that exceeded the deadweight economic loss from the tax 
D) all of the above would occur 
A) a decrease in consumer surplus to consumers of the taxed good 
B) a decrease in producer surplus to producers of the taxed good 
C) a probable decrease in the welfare of society that exceeded the deadweight economic loss from the tax 
D) all of the above would occur D

Question 3

According to the information provided, assume that Joe is required to pay a tax of $30 when he hires someone to clean his house.Which of the following is true?

Accepted Answer

A) Jane will continue to clean Joe's home, but consumer surplus will decline 
B) Joe will now clean his own home 
C) Jane will continue to cleans Joe's home but her producer surplus will decline 
D) total economic welfare (consumer surplus plus producer surplus plus tax revenue) will increase 
A) Jane will continue to clean Joe's home, but consumer surplus will decline 
B) Joe will now clean his own home 
C) Jane will continue to cleans Joe's home but her producer surplus will decline 
D) total economic welfare (consumer surplus plus producer surplus plus tax revenue) will increase A

Question 4

When a tax is levied on a good it usually leads to a change in quantity demanded.All else equal, this change in quantity will be greater the more inelastic the demand curve.

Accepted Answer

A) True 
 B)False

Question 5

If the supply of labour is inelastic, the deadweight loss from labour taxes is large.

Accepted Answer

A) True 
 B)False

Question 6

Graph 8-3   
-According to Graph 8-3, the reduction in consumer surplus caused by the tax is:

Accepted Answer

A) $750 
B) $1125 
C) $375 
D) $1000 
A) $750 
B) $1125 
C) $375 
D) $1000

Question 7

Economists generally agree that the most important tax in the Australian economy is the tax on:

Accepted Answer

A) property 
B) consumption 
C) labour 
D) income 
A) property 
B) consumption 
C) labour 
D) income

Question 8

Although tax revenue eventually begins to fall as tax rates increase, the revenue will always be greater than zero, no matter how large the tax is.

Accepted Answer

A) True 
 B)False

Question 9

What factors must be taken into account in order to fully understand the effect of taxes on economic wellbeing?

Accepted Answer

In order to assess the impact of taxes o

Question 10

Suppose a tax is imposed on a good, this generates a loss in total surplus called:

Accepted Answer

A) opportunity cost 
B) tax evasion 
C) deadweight loss 
D) public sector employee wages 
A) opportunity cost 
B) tax evasion 
C) deadweight loss 
D) public sector employee wages

Question 11

Graph 8-1  
-According to Graph 8-1, the price sellers receive after the tax is:

Accepted Answer

A) P₃ 
B) P₂ 
C) P₁ 
D) impossible to determine 
A) P₃ 
B) P₂ 
C) P₁ 
D) impossible to determine

Question 12

A tax on unimproved land falls entirely on landowners, because the supply of land is perfectly inelastic.

Accepted Answer

A) True 
 B)False

Question 13

A tax on a good:

Accepted Answer

A) raises the price buyers pay and lowers the price sellers receive 
B) raises the price buyers pay and raises the price sellers receive 
C) lowers the price buyers pay and lowers the price sellers receive 
D) lowers the price buyers pay and raises the price sellers receive 
A) raises the price buyers pay and lowers the price sellers receive 
B) raises the price buyers pay and raises the price sellers receive 
C) lowers the price buyers pay and lowers the price sellers receive 
D) lowers the price buyers pay and raises the price sellers receive

Question 14

'Assume that the demand for entertainment is more elastic than the demand for petrol'.According to this statement, a tax levied on petrol will cause the loss of consumer surplus to be:

Accepted Answer

A) zero (because raising the price of gasoline has no effect on the amount purchased) 
B) relatively large 
C) relatively small 
D) either small or large (depending on the elasticity of supply) 
A) zero (because raising the price of gasoline has no effect on the amount purchased) 
B) relatively large 
C) relatively small 
D) either small or large (depending on the elasticity of supply)

Question 15

When a tax is imposed on a market, the government collects revenues.These revenues however, are less than the loss in consumer surplus and producer surplus.

Accepted Answer

A) True 
 B)False

Question 16

'Assume that the demand for entertainment is more elastic than the demand for petrol'.According to this statement, compared to the decline in purchases from a similar percentage tax on petrol, we would expect that a tax on entertainment will cause the quantity of entertainment purchased to decline:

Accepted Answer

A) more 
B) less 
C) the same 
D) neither more nor less 
A) more 
B) less 
C) the same 
D) neither more nor less

Question 17

Taxes on land are relatively efficient as the supply of land is inelastic.

Accepted Answer

A) True 
 B)False

Question 18

A source of the deadweight loss of taxation is the inefficient use of tax revenue by the government.

Accepted Answer

A) True 
 B)False

Question 19

The benefit received by buyers in the market for good X is measured by:

Accepted Answer

A) the market price 
B) the total expenditure of buyers 
C) consumer surplus 
D) the total cost to sellers of producing the good X 
A) the market price 
B) the total expenditure of buyers 
C) consumer surplus 
D) the total cost to sellers of producing the good X

Question 20

The greater the social pressure for mothers to be housekeepers and stay out of the labour force the:

Accepted Answer

A) more elastic the supply of labour 
B) less elastic the supply of labour 
C) flatter the labour supply curve 
D) greater the reduction in output caused by a tax on labour 
A) more elastic the supply of labour 
B) less elastic the supply of labour 
C) flatter the labour supply curve 
D) greater the reduction in output caused by a tax on labour

Exam 8: Application: the Costs of Taxation

The Laffer curve:

Assume that a tax is levied on a good and the government uses the funds to build statues of former prime ministers.In this case there would be:

According to the information provided, assume that Joe is required to pay a tax of $30 when he hires someone to clean his house.Which of the following is true?

When a tax is levied on a good it usually leads to a change in quantity demanded.All else equal, this change in quantity will be greater the more inelastic the demand curve.

If the supply of labour is inelastic, the deadweight loss from labour taxes is large.

Graph 8-3 -According to Graph 8-3, the reduction in consumer surplus caused by the tax is:

Economists generally agree that the most important tax in the Australian economy is the tax on:

Although tax revenue eventually begins to fall as tax rates increase, the revenue will always be greater than zero, no matter how large the tax is.

What factors must be taken into account in order to fully understand the effect of taxes on economic wellbeing?

Suppose a tax is imposed on a good, this generates a loss in total surplus called:

Graph 8-1 -According to Graph 8-1, the price sellers receive after the tax is:

A tax on unimproved land falls entirely on landowners, because the supply of land is perfectly inelastic.

A tax on a good:

'Assume that the demand for entertainment is more elastic than the demand for petrol'.According to this statement, a tax levied on petrol will cause the loss of consumer surplus to be:

When a tax is imposed on a market, the government collects revenues.These revenues however, are less than the loss in consumer surplus and producer surplus.

'Assume that the demand for entertainment is more elastic than the demand for petrol'.According to this statement, compared to the decline in purchases from a similar percentage tax on petrol, we would expect that a tax on entertainment will cause the quantity of entertainment purchased to decline:

Taxes on land are relatively efficient as the supply of land is inelastic.

A source of the deadweight loss of taxation is the inefficient use of tax revenue by the government.

The benefit received by buyers in the market for good X is measured by:

The greater the social pressure for mothers to be housekeepers and stay out of the labour force the:

Ten Lessons From 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

Business Strategy and Oligopoly

Competition Policy

The Markets for the Factors of Production

Earnings, Unions and Discrimination

Income Inequity and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

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 Trade-Off Between Inflation and Unemployment

Global Financial Crisis of 2008 and Beyond

Five Debates Over Macroeconomic Policy

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