Question 1

Graph 8-3   
-According to Graph 8-3, the equilibrium market price before the tax is imposed is:

Accepted Answer

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

Question 2

A tax on insulin is likely to cause a tremendous deadweight loss to society.

Accepted Answer

A) True 
 B)False

Question 3

The deadweight loss of a tax increases as demand and supply curves become more inelastic.

Accepted Answer

A) True 
 B)False

Question 4

A tax on land:

Accepted Answer

A) would result in a huge deadweight tax loss 
B) would result in no deadweight tax loss 
C) causes resource allocation to not be guided by market forces 
D) would result in none of the above 
A) would result in a huge deadweight tax loss 
B) would result in no deadweight tax loss 
C) causes resource allocation to not be guided by market forces 
D) would result in none of the above

Question 5

Suppose supply is perfectly inelastic, while demand is relatively elastic.A tax of $1.00 is levied on the purchasers of the good.Which of the following statements is correct?

Accepted Answer

A) the government will fail to raise any tax revenue 
B) there will be a positive deadweight loss 
C) there will be no deadweight loss 
D) government revenue will be less than the deadweight loss of the tax. 
A) the government will fail to raise any tax revenue 
B) there will be a positive deadweight loss 
C) there will be no deadweight loss 
D) government revenue will be less than the deadweight loss of the tax.

Question 6

The 'underground' economy includes:

Accepted Answer

A) the mining industry 
B) the illegal drug trade 
C) working in a legitimate job 
D) both B and C 
A) the mining industry 
B) the illegal drug trade 
C) working in a legitimate job 
D) both B and C

Question 7

The Laffer curve indicates that income tax collections:

Accepted Answer

A) will be very low if income tax rates are very low 
B) will be very low if income tax rates are very high 
C) will be at a maximum if income tax rates are at some intermediate level between very low and very high 
D) all of the above are correct 
A) will be very low if income tax rates are very low 
B) will be very low if income tax rates are very high 
C) will be at a maximum if income tax rates are at some intermediate level between very low and very high 
D) all of the above are correct

Question 8

The more inelastic the supply and demand curves in a market, the more taxes in that market distort behaviour, and the more likely it is that a tax cut will raise tax revenue.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

\(\begin{array}{|l|c|c|l|}
\hline & \tex

Question 10

When a tax on a good is enacted:

Accepted Answer

A) buyers always bear the full burden of the tax 
B) sellers always bear the full burden of the tax 
C) buyers and sellers share the burden of the tax regardless of whom it is levied on 
D) sellers bear the full burden if the tax is levied on them, but buyers bear the full burden if the tax is levied on them 
A) buyers always bear the full burden of the tax 
B) sellers always bear the full burden of the tax 
C) buyers and sellers share the burden of the tax regardless of whom it is levied on 
D) sellers bear the full burden if the tax is levied on them, but buyers bear the full burden if the tax is levied on them

Question 11

When a tax is levied on a good:

Accepted Answer

A) the market price falls because demand declines 
B) the market price falls because supply falls 
C) a wedge is placed between the price buyers pay and the price sellers receive 
D) the market price rises because demand falls 
A) the market price falls because demand declines 
B) the market price falls because supply falls 
C) a wedge is placed between the price buyers pay and the price sellers receive 
D) the market price rises because demand falls

Question 12

Graph 8-3   
-According to Graph 8-3, the reduction in producer 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 13

A tax levied on the supplier of a product shifts the:

Accepted Answer

A) supply curve upwards or to the left 
B) supply curve downwards or to the right 
C) demand curve upwards or to the right 
D) demand curve downwards or to the left 
A) supply curve upwards or to the left 
B) supply curve downwards or to the right 
C) demand curve upwards or to the right 
D) demand curve downwards or to the left

Question 14

Graph 8-2   This graph shows supply and demand in a free market.
-According to Graph 8-2, total economic surplus would be represented by area:

Accepted Answer

A) A + B 
B) B + C 
C) C + D 
D) A + D 
A) A + B 
B) B + C 
C) C + D 
D) A + D

Question 15

If the size of a tax doubles, the deadweight loss rises by a factor of six.

Accepted Answer

A) True 
 B)False

Exam 8: Application: the Costs of Taxation

Graph 8-3 -According to Graph 8-3, the equilibrium market price before the tax is imposed is:

A tax on insulin is likely to cause a tremendous deadweight loss to society.

The deadweight loss of a tax increases as demand and supply curves become more inelastic.

A tax on land:

Suppose supply is perfectly inelastic, while demand is relatively elastic.A tax of $1.00 is levied on the purchasers of the good.Which of the following statements is correct?

The 'underground' economy includes:

The Laffer curve indicates that income tax collections:

The more inelastic the supply and demand curves in a market, the more taxes in that market distort behaviour, and the more likely it is that a tax cut will raise tax revenue.

Use the graph below to fill in the table. WITHOUT TAX WITH TAX CHANGE Consumer surplus Producer surplus Tax revenue Tatal surplus

When a tax on a good is enacted:

When a tax is levied on a good:

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

A tax levied on the supplier of a product shifts the:

Graph 8-2 This graph shows supply and demand in a free market. -According to Graph 8-2, total economic surplus would be represented by area:

If the size of a tax doubles, the deadweight loss rises by a factor of six.

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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