Question 1

When a good is taxed,

Accepted Answer

A)  both buyers and sellers of the good are made worse off. 
B)  only buyers are made worse off, because they ultimately bear the burden of the tax. 
C)  only sellers are made worse off, because they ultimately bear the burden of the tax. 
D)  neither buyers nor sellers are made worse off, since tax revenue is used to provide goods and services that would otherwise not be provided in a market economy. 
A)  both buyers and sellers of the good are made worse off. 
B)  only buyers are made worse off, because they ultimately bear the burden of the tax. 
C)  only sellers are made worse off, because they ultimately bear the burden of the tax. 
D)  neither buyers nor sellers are made worse off, since tax revenue is used to provide goods and services that would otherwise not be provided in a market economy.

Question 2

To fully understand how taxes affect economic well-being,we must

Accepted Answer

A)  assume that economic well-being is not affected if all tax revenue is spent on goods and services for the people who are being taxed. 
B)  compare the taxes raised in the United States with those raised in other countries, especially France. 
C)  compare the reduced welfare of buyers and sellers to the amount of revenue the government raises. 
D)  take into account the fact that almost all taxes reduce the welfare of buyers, increase the welfare of sellers, and raise revenue for the government. 
A)  assume that economic well-being is not affected if all tax revenue is spent on goods and services for the people who are being taxed. 
B)  compare the taxes raised in the United States with those raised in other countries, especially France. 
C)  compare the reduced welfare of buyers and sellers to the amount of revenue the government raises. 
D)  take into account the fact that almost all taxes reduce the welfare of buyers, increase the welfare of sellers, and raise revenue for the government.

Question 3

Figure 8-6
The vertical distance between points A and B represents a tax in the market.
  
-Refer to Figure 8-6.When the government imposes the tax in this market,tax revenue is

Accepted Answer

A)  $600. 
B)  $900. 
C)  $1,500. 
D)  $3,000. 
A)  $600. 
B)  $900. 
C)  $1,500. 
D)  $3,000.

Question 4

Who once said that taxes are the price we pay for a civilized society?

Accepted Answer

A)  Milton Friedman 
B)  Theodore Roosevelt 
C)  Arthur Laffer 
D)  Oliver Wendell Holmes, Jr. 
A)  Milton Friedman 
B)  Theodore Roosevelt 
C)  Arthur Laffer 
D)  Oliver Wendell Holmes, Jr.

Question 5

Figure 8-6
The vertical distance between points A and B represents a tax in the market.
  
-Refer to Figure 8-6.Total surplus with the tax in place is

Accepted Answer

A)  $1,500. 
B)  $3,600. 
C)  $4,500. 
D)  $6,000. 
A)  $1,500. 
B)  $3,600. 
C)  $4,500. 
D)  $6,000.

Question 6

The supply curve for liquor is the typical upward-sloping straight line,and the demand curve for liquor is the typical downward-sloping straight line.When liquor is taxed,the area on the relevant supply-and-demand graph that represents the deadweight loss is

Accepted Answer

A)  larger than the area that represents consumer surplus in the absence of the tax. 
B)  larger than the area that represents government's tax revenue. 
C)  a triangle. 
D)  All of the above are correct. 
A)  larger than the area that represents consumer surplus in the absence of the tax. 
B)  larger than the area that represents government's tax revenue. 
C)  a triangle. 
D)  All of the above are correct.

Question 7

Suppose that instead of a supply-demand diagram,you are given the following information:
Qs = 100 + 3P
Qd = 400 - 2P
From this information compute equilibrium price and quantity.Now suppose that a tax is placed on buyers so that
Qd = 400 - 2(P + T).
If T = 15,solve for the new equilibrium price and quantity.(Note: P is the price received by sellers and P + T 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

Prior to the tax,the equilibrium price w

Question 8

Figure 8-9
The vertical distance between points A and C represent a tax in the market.
  
-Refer to Figure 8-9.The imposition of the tax causes the price received by sellers to

Accepted Answer

A)  increase from $600 to $800. 
B)  decrease from $800 to $300. 
C)  decrease from $600 to $300. 
D)  remain unchanged at $600. 
A)  increase from $600 to $800. 
B)  decrease from $800 to $300. 
C)  decrease from $600 to $300. 
D)  remain unchanged at $600.

Question 9

Figure 8-17
The vertical distance between points A and B represents the original tax.
  
-Refer to Figure 8-17.If the government changed the per-unit tax from $5.00 to $2.50,then the price paid by buyers would be $7.50,the price received by sellers would be $5,and the quantity sold in the market would be 1.5 units.Compared to the original tax rate,this lower tax rate would

Accepted Answer

A)  increase government revenue and increase the deadweight loss from the tax. 
B)  increase government revenue and decrease the deadweight loss from the tax. 
C)  decrease government revenue and increase the deadweight loss from the tax. 
D)  decrease government revenue and decrease the deadweight loss from the tax. 
A)  increase government revenue and increase the deadweight loss from the tax. 
B)  increase government revenue and decrease the deadweight loss from the tax. 
C)  decrease government revenue and increase the deadweight loss from the tax. 
D)  decrease government revenue and decrease the deadweight loss from the tax.

Question 10

As more people become self-employed,which allows them to determine how many hours they work per week,we would expect the deadweight loss from the Social Security tax to

Accepted Answer

A)  increase, and the revenue generated from the tax to increase. 
B)  increase, and the revenue generated from the tax to decrease. 
C)  decrease, and the revenue generated from the tax to increase. 
D)  decrease, and the revenue generated from the tax to decrease. 
A)  increase, and the revenue generated from the tax to increase. 
B)  increase, and the revenue generated from the tax to decrease. 
C)  decrease, and the revenue generated from the tax to increase. 
D)  decrease, and the revenue generated from the tax to decrease.

Question 11

Which of the following statements is true for markets in which the demand curve slopes downward and the supply curve slopes upward?

Accepted Answer

A)  As the size of the tax increases, tax revenue continually rises and deadweight loss continually falls. 
B)  As the size of the tax increases, tax revenue and deadweight loss rise initially, but both eventually begin to fall. 
C)  As the size of the tax increases, tax revenue rises initially, but it eventually begins to fall; deadweight loss continually rises. 
D)  As the size of the tax increases, tax revenue rises initially, but it eventually begins to fall; deadweight loss falls initially, but eventually it begins to rise. 
A)  As the size of the tax increases, tax revenue continually rises and deadweight loss continually falls. 
B)  As the size of the tax increases, tax revenue and deadweight loss rise initially, but both eventually begin to fall. 
C)  As the size of the tax increases, tax revenue rises initially, but it eventually begins to fall; deadweight loss continually rises. 
D)  As the size of the tax increases, tax revenue rises initially, but it eventually begins to fall; deadweight loss falls initially, but eventually it begins to rise.

Question 12

The benefit that government receives from a tax is measured by

Accepted Answer

A)  deadweight loss. 
B)  consumer surplus. 
C)  tax incidence. 
D)  tax revenue. 
A)  deadweight loss. 
B)  consumer surplus. 
C)  tax incidence. 
D)  tax revenue.

Question 13

Figure 8-19. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax.
  
-Refer to Figure 8-19.If the economy is at point B on the curve,then a small decrease in the tax rate will

Accepted Answer

A)  increase the deadweight loss of the tax and increase tax revenue. 
B)  increase the deadweight loss of the tax and decrease tax revenue. 
C)  decrease the deadweight loss of the tax and increase tax revenue. 
D)  decrease the deadweight loss of the tax and decrease tax revenue. 
A)  increase the deadweight loss of the tax and increase tax revenue. 
B)  increase the deadweight loss of the tax and decrease tax revenue. 
C)  decrease the deadweight loss of the tax and increase tax revenue. 
D)  decrease the deadweight loss of the tax and decrease tax revenue.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Tax revenue equals the size of the tax multiplied by the quantity sold in the market after the tax is levied.

Accepted Answer

A) True 
 B)False

Question 16

In a recent research paper published by the European Central Bank,two economists concluded that

Accepted Answer

A)  tax revenue would increase in Denmark and Sweden if tax rates on capital income were reduced in those countries. 
B)  tax revenue would increase in Denmark and Sweden if tax rates on labor income were reduced in those countries. 
C)  tax revenue would increase in the U.S. if tax rates on capital income were reduced in the U.S. 
D)  tax revenue would increase in the U.S. if tax rates on labor income were reduced in the U.S. 
A)  tax revenue would increase in Denmark and Sweden if tax rates on capital income were reduced in those countries. 
B)  tax revenue would increase in Denmark and Sweden if tax rates on labor income were reduced in those countries. 
C)  tax revenue would increase in the U.S. if tax rates on capital income were reduced in the U.S. 
D)  tax revenue would increase in the U.S. if tax rates on labor income were reduced in the U.S.

Question 17

Figure 8-9
The vertical distance between points A and C represent a tax in the market.
  
-Refer to Figure 8-9.The per-unit burden of the tax on sellers is

Accepted Answer

A)  $20. 
B)  $200. 
C)  $300. 
D)  $500. 
A)  $20. 
B)  $200. 
C)  $300. 
D)  $500.

Question 18

When the price of a good is measured in dollars,then the size of the deadweight loss that results from taxing that good is measured in

Accepted Answer

A)  units of the good that is being taxed. 
B)  units of a related good that is not being taxed. 
C)  dollars. 
D)  percentage change. 
A)  units of the good that is being taxed. 
B)  units of a related good that is not being taxed. 
C)  dollars. 
D)  percentage change.

Question 19

Figure 8-20. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax.
  
-Refer to Figure 8-20.Suppose the figure pertains to the labor tax,and suppose also that point B represents the position on the curve of the typical European country.Then,according to a recent research paper published by the European Central Bank,the position on the curve of the U.S.would most likely be point

Accepted Answer

A)  A. 
B)  C. 
C)  D. 
D)  F. 
A)  A. 
B)  C. 
C)  D. 
D)  F.

Question 20

Figure 8-19. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax.
  
-Refer to Figure 8-19.If the economy is at point B on the curve,then an increase in the tax rate will

Accepted Answer

A)  increase the deadweight loss of the tax and increase tax revenue. 
B)  increase the deadweight loss of the tax and decrease tax revenue. 
C)  decrease the deadweight loss of the tax and increase tax revenue. 
D)  decrease the deadweight loss of the tax and decrease tax revenue. 
A)  increase the deadweight loss of the tax and increase tax revenue. 
B)  increase the deadweight loss of the tax and decrease tax revenue. 
C)  decrease the deadweight loss of the tax and increase tax revenue. 
D)  decrease the deadweight loss of the tax and decrease tax revenue.

When a good is taxed,

To fully understand how taxes affect economic well-being,we must

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.When the government imposes the tax in this market,tax revenue is

Who once said that taxes are the price we pay for a civilized society?

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.Total surplus with the tax in place is

The supply curve for liquor is the typical upward-sloping straight line,and the demand curve for liquor is the typical downward-sloping straight line.When liquor is taxed,the area on the relevant supply-and-demand graph that represents the deadweight loss is

Figure 8-9 The vertical distance between points A and C represent a tax in the market. -Refer to Figure 8-9.The imposition of the tax causes the price received by sellers to

As more people become self-employed,which allows them to determine how many hours they work per week,we would expect the deadweight loss from the Social Security tax to

Which of the following statements is true for markets in which the demand curve slopes downward and the supply curve slopes upward?

The benefit that government receives from a tax is measured by

Figure 8-19. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-19.If the economy is at point B on the curve,then a small decrease in the tax rate will

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

Tax revenue equals the size of the tax multiplied by the quantity sold in the market after the tax is levied.

In a recent research paper published by the European Central Bank,two economists concluded that

Figure 8-9 The vertical distance between points A and C represent a tax in the market. -Refer to Figure 8-9.The per-unit burden of the tax on sellers is

When the price of a good is measured in dollars,then the size of the deadweight loss that results from taxing that good is measured in

Figure 8-19. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-19.If the economy is at point B on the curve,then an increase in the tax rate will

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 Market For the Factors of Production.

Earnings and Discrimination.

Income Inequality and Poverty.

The Theory of Consumer Choice.

Frontiers in Microeconomics.

Filters

Exam 8: Application: The Costs of Taxation.

When a good is taxed,

To fully understand how taxes affect economic well-being,we must

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.When the government imposes the tax in this market,tax revenue is

Who once said that taxes are the price we pay for a civilized society?

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.Total surplus with the tax in place is

The supply curve for liquor is the typical upward-sloping straight line,and the demand curve for liquor is the typical downward-sloping straight line.When liquor is taxed,the area on the relevant supply-and-demand graph that represents the deadweight loss is

Figure 8-9 The vertical distance between points A and C represent a tax in the market. -Refer to Figure 8-9.The imposition of the tax causes the price received by sellers to

As more people become self-employed,which allows them to determine how many hours they work per week,we would expect the deadweight loss from the Social Security tax to

Which of the following statements is true for markets in which the demand curve slopes downward and the supply curve slopes upward?

The benefit that government receives from a tax is measured by

Figure 8-19. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-19.If the economy is at point B on the curve,then a small decrease in the tax rate will

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

Tax revenue equals the size of the tax multiplied by the quantity sold in the market after the tax is levied.

In a recent research paper published by the European Central Bank,two economists concluded that

Figure 8-9 The vertical distance between points A and C represent a tax in the market. -Refer to Figure 8-9.The per-unit burden of the tax on sellers is

When the price of a good is measured in dollars,then the size of the deadweight loss that results from taxing that good is measured in

Figure 8-19. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-19.If the economy is at point B on the curve,then an increase in the tax rate will

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 Market For the Factors of Production.

Earnings and Discrimination.

Income Inequality and Poverty.

The Theory of Consumer Choice.

Frontiers in Microeconomics.

Filters