Question 1

There is little evidence that the Australian economy is currently in the downward sloping section of the Laffer curve.

Accepted Answer

A) True 
 B)False

Question 2

Graph 8-1  
-According to Graph 8-1, the total surplus (consumer, producer, and government) with the tax is represented by area:

Accepted Answer

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

Question 3

Graph 8-3   
-According to Graph 8-3, after the tax is levied, consumer surplus is:

Accepted Answer

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

Question 4

Graph 8-3   
-According to Graph 8-3, the price buyers pay after the tax is:

Accepted Answer

A) $5 
B) $10 
C) $15 
D) $20 
A) $5 
B) $10 
C) $15 
D) $20

Question 5

Assume that a tax is levied on a good and the government uses the revenue to clean up lethal toxic waste that would cause irreparable harm to a large number of people.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 increase in the total economic welfare of society 
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 increase in the total economic welfare of society 
D) all of the above would occur

Question 6

The higher a country's tax rates, the more likely that country will be:

Accepted Answer

A) on the top of the Laffer curve 
B) on the positively sloped part of the Laffer curve 
C) above the Laffer curve 
D) on the negatively sloped part of the Laffer curve 
A) on the top of the Laffer curve 
B) on the positively sloped part of the Laffer curve 
C) above the Laffer curve 
D) on the negatively sloped part of the Laffer curve

Question 7

The deadweight loss of a tax rises even more rapidly than the size of the tax.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) Don will gain $15 per week 
B) Don will gain $45 per week 
C) Don will gain $35 per week 
D) Don will gain not consumer surplus 
A) Don will gain $15 per week 
B) Don will gain $45 per week 
C) Don will gain $35 per week 
D) Don will gain not consumer surplus

Question 9

Graph 8-1  
-According to Graph 8-1, producer surplus before the tax 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

The amount of deadweight loss from taxes depends on:

Accepted Answer

A) the price elasticity of demand and supply 
B) how much of the tax revenue the government plans to spend 
C) the product the government is planning to tax 
D) all of the above are correct 
A) the price elasticity of demand and supply 
B) how much of the tax revenue the government plans to spend 
C) the product the government is planning to tax 
D) all of the above are correct

Question 11

Graph 8-3   
-According to Graph 8-3, the price sellers receive after the tax is:

Accepted Answer

A) $5 
B) $10 
C) $15 
D) $20 
A) $5 
B) $10 
C) $15 
D) $20

Question 12

One result of a tax on a good is that the equilibrium quantity sold tends to rise.

Accepted Answer

A) True 
 B)False

Question 13

Which economic tool that can predict whether reducing a tax in a market will increase or decrease tax revenue?

Accepted Answer

The best predictor is the elasticity of

Question 14

Revenue from a tax accruing to Government detracts from total welfare.

Accepted Answer

A) True 
 B)False

Question 15

The deadweight loss of a tax is the reduction in total surplus in excess of the tax revenue collected that results from the tax.

Accepted Answer

A) True 
 B)False

Question 16

When a tax is levied on the sellers of a good:

Accepted Answer

A) both buyers and sellers are economically worse off 
B) only sellers are worse off because they have to pay the tax 
C) only buyers are worse off because sellers pass the tax on to them 
D) there is no change because sellers will produce a different good for buyers to purchase 
A) both buyers and sellers are economically worse off 
B) only sellers are worse off because they have to pay the tax 
C) only buyers are worse off because sellers pass the tax on to them 
D) there is no change because sellers will produce a different good for buyers to purchase

Question 17

Suppose that instead of a supply-demand diagram, you are given the following information:
Qs = 100 + P
Qd = 500- 4P
From this information, compute the equilibrium price (P) and quantity (Q).Now suppose that a tax (T) is placed on sellers so that
Qs = 100 + (P -T).If T = 20, solve for the new equilibrium price and quantity.(Note: P-T is the price received by sellers and P is the price paid by buyers.) Compare these answers for equilibrium price and quantity with your first answers.What does this show you?

Accepted Answer

Before the tax, the market equilibrium p

Question 18

Graph 8-3   
-According to Graph 8-3, the total surplus (consumer, producer and government) before the tax is:

Accepted Answer

A) $6000 
B) $3000 
C) $1500 
D) $750 
A) $6000 
B) $3000 
C) $1500 
D) $750

Question 19

Suppose a tax is placed on wine, this will mean:

Accepted Answer

A) the quantity of wine sold in the market will be unchanged because wine has perfectly inelastic supply 
B) the tax will be entirely passed on to the buyers 
C) the quantity of wine sold in the market will fall 
D) the tax will be paid entirely by the sellers 
A) the quantity of wine sold in the market will be unchanged because wine has perfectly inelastic supply 
B) the tax will be entirely passed on to the buyers 
C) the quantity of wine sold in the market will fall 
D) the tax will be paid entirely by the sellers

Question 20

According to the information provided, if Jane cleans Joe's house, the producer surplus is:

Accepted Answer

A) $20 
B) $140 
C) $160 
D) $200 
A) $20 
B) $140 
C) $160 
D) $200

Exam 8: Application: the Costs of Taxation

There is little evidence that the Australian economy is currently in the downward sloping section of the Laffer curve.

Graph 8-1 -According to Graph 8-1, the total surplus (consumer, producer, and government) with the tax is represented by area:

Graph 8-3 -According to Graph 8-3, after the tax is levied, consumer surplus is:

Graph 8-3 -According to Graph 8-3, the price buyers pay after the tax is:

Assume that a tax is levied on a good and the government uses the revenue to clean up lethal toxic waste that would cause irreparable harm to a large number of people.In this case there would be:

The higher a country's tax rates, the more likely that country will be:

The deadweight loss of a tax rises even more rapidly than the size of the tax.

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

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

The amount of deadweight loss from taxes depends on:

Graph 8-3 -According to Graph 8-3, the price sellers receive after the tax is:

One result of a tax on a good is that the equilibrium quantity sold tends to rise.

Which economic tool that can predict whether reducing a tax in a market will increase or decrease tax revenue?

Revenue from a tax accruing to Government detracts from total welfare.

The deadweight loss of a tax is the reduction in total surplus in excess of the tax revenue collected that results from the tax.

When a tax is levied on the sellers of a good:

Graph 8-3 -According to Graph 8-3, the total surplus (consumer, producer and government) before the tax is:

Suppose a tax is placed on wine, this will mean:

According to the information provided, if Jane cleans Joe's house, the producer surplus is:

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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