Question 1

According to the information provided, what will be Phil's gain in producer surplus as a result of the proposed transaction?

Accepted Answer

A) Phil will gain $30 per week 
B) Phil will gain $15 per week 
C) Phil will gain $45 per week 
D) Phil will gain no producer surplus 
A) Phil will gain $30 per week 
B) Phil will gain $15 per week 
C) Phil will gain $45 per week 
D) Phil will gain no producer surplus

Question 2

When the size of a tax is doubled, the deadweight loss from the tax:

Accepted Answer

A) increases by the size of the tax 
B) doubles 
C) remains constant 
D) increases by four times 
A) increases by the size of the tax 
B) doubles 
C) remains constant 
D) increases by four times

Question 3

Graph 8-3   
-According to Graph 8-3, the benefits to the government (total tax revenue) is:

Accepted Answer

A) $1500 
B) $750 
C) $1125 
D) $375 
A) $1500 
B) $750 
C) $1125 
D) $375

Question 4

A major political problem with collecting taxes to finance government spending is that:

Accepted Answer

A) taxes make taxpayers worse off since government spending benefits no one 
B) taxes make taxpayers worse off since government spending benefits only those on welfare 
C) the people who pay the taxes are often not the same people who benefit from the government spending of tax funds 
D) taxes reduce economic welfare more than the expenditure of tax funds benefits society 
A) taxes make taxpayers worse off since government spending benefits no one 
B) taxes make taxpayers worse off since government spending benefits only those on welfare 
C) the people who pay the taxes are often not the same people who benefit from the government spending of tax funds 
D) taxes reduce economic welfare more than the expenditure of tax funds benefits society

Question 5

How is the deadweight loss of a tax affected by the elasticities of demand and supply?

Accepted Answer

The more elastic dem

Question 6

The deadweight economic loss from taxes:

Accepted Answer

A) does not depend on tax rates 
B) is higher when tax rates are higher than when tax rates are lower 
C) is lower when tax rates are higher than when tax rates are lower 
D) does not depend on the slope of the demand curve 
A) does not depend on tax rates 
B) is higher when tax rates are higher than when tax rates are lower 
C) is lower when tax rates are higher than when tax rates are lower 
D) does not depend on the slope of the demand curve

Question 7

Illustrate on three demand-supply graphs how the size of a tax (small, medium and large) can alter total revenue and deadweight loss.

Accepted Answer

The answer of Illustrate on three demand-supply graphs how the...

Question 8

Using demand-supply diagrams, show the difference in deadweight loss between a market with inelastic demand and supply curves and a market with elastic demand and supply curves.

Accepted Answer

The answer of Using demand-supply diagrams, show the difference in...

Question 9

Graph 8-1  
-According to Graph 8-1, consumer surplus before the tax was levied is represented by area:

Accepted Answer

A) A 
B) A + B + C 
C) D + E + F 
D) F 
A) A 
B) A + B + C 
C) D + E + F 
D) F

Question 10

Graph 8-1  
-According to Graph 8-1, the equilibrium market price before the tax is imposed is:

Accepted Answer

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

Question 11

According to the Laffer curve, what will happen to tax revenue if tax rates are reduced?

Accepted Answer

It depends on how high tax rates are to

Question 12

'Assume that the supply of forest products is relatively inelastic and the supply of coffee is relatively elastic'.According to this statement, a tax levied on coffee will cause the loss of producer surplus to be:

Accepted Answer

A) relatively large 
B) relatively small 
C) zero 
D) either small or large, depending on the elasticity of demand 
A) relatively large 
B) relatively small 
C) zero 
D) either small or large, depending on the elasticity of demand

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) zero 
B) relatively large 
C) relatively small 
D) either small or large (depending on the elasticity of supply) 
A) zero 
B) relatively large 
C) relatively small 
D) either small or large (depending on the elasticity of supply)

Question 15

When a tax is levied on the sellers of a good, the supply curve:

Accepted Answer

A) shifts right and down by less than the tax 
B) shifts left and up by an amount equal to the tax 
C) shifts left and down by an amount less than the tax 
D) shifts right and up by an amount equal to the tax 
A) shifts right and down by less than the tax 
B) shifts left and up by an amount equal to the tax 
C) shifts left and down by an amount less than the tax 
D) shifts right and up by an amount equal to the tax

Question 16

As the size of a tax decreases:

Accepted Answer

A) the deadweight loss from the tax declines 
B) the deadweight loss from the tax remains constant 
C) the deadweight loss from the tax increases 
D) the deadweight loss could increase or decrease depending on the relative elasticities of demand and supply 
A) the deadweight loss from the tax declines 
B) the deadweight loss from the tax remains constant 
C) the deadweight loss from the tax increases 
D) the deadweight loss could increase or decrease depending on the relative elasticities of demand and supply

Question 17

As the size of the tax increases, tax revenue will always increase.

Accepted Answer

A) True 
 B)False

Question 18

If demand is more inelastic than supply, levying a tax on demand will minimise the deadweight loss.

Accepted Answer

A) True 
 B)False

Question 19

To evaluate the welfare effects of taxes on economic activity, economists:

Accepted Answer

A) do nothing because taxes provide public services that are always valued 
B) measure changes to consumer and producer surplus 
C) measure changes to equilibrium price and quantity 
D) measure expenditures on social welfare by the government 
A) do nothing because taxes provide public services that are always valued 
B) measure changes to consumer and producer surplus 
C) measure changes to equilibrium price and quantity 
D) measure expenditures on social welfare by the government

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 8: Application: the Costs of Taxation

According to the information provided, what will be Phil's gain in producer surplus as a result of the proposed transaction?

When the size of a tax is doubled, the deadweight loss from the tax:

Graph 8-3 -According to Graph 8-3, the benefits to the government (total tax revenue) is:

A major political problem with collecting taxes to finance government spending is that:

How is the deadweight loss of a tax affected by the elasticities of demand and supply?

The deadweight economic loss from taxes:

Illustrate on three demand-supply graphs how the size of a tax (small, medium and large) can alter total revenue and deadweight loss.

Using demand-supply diagrams, show the difference in deadweight loss between a market with inelastic demand and supply curves and a market with elastic demand and supply curves.

Graph 8-1 -According to Graph 8-1, consumer surplus before the tax was levied is represented by area:

Graph 8-1 -According to Graph 8-1, the equilibrium market price before the tax is imposed is:

According to the Laffer curve, what will happen to tax revenue if tax rates are reduced?

'Assume that the supply of forest products is relatively inelastic and the supply of coffee is relatively elastic'.According to this statement, a tax levied on coffee will cause the loss of producer surplus to be:

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

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

When a tax is levied on the sellers of a good, the supply curve:

As the size of a tax decreases:

As the size of the tax increases, tax revenue will always increase.

If demand is more inelastic than supply, levying a tax on demand will minimise the deadweight loss.

To evaluate the welfare effects of taxes on economic activity, economists:

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

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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