Question 1

Economists use the government's tax revenue to measure the public benefit from a tax.

Accepted Answer

A) True 
 B)False

Question 2

Figure 8-12
  
-Refer to Figure 8-12.Which of the following statements is not correct?

Accepted Answer

A)  Supply 2 is more elastic than supply 1. 
B)  Demand 2 is more elastic than demand 1. 
C)  Supply 1 is more inelastic than supply 2. 
D)  Demand 2 is more inelastic than supply 2. 
A)  Supply 2 is more elastic than supply 1. 
B)  Demand 2 is more elastic than demand 1. 
C)  Supply 1 is more inelastic than supply 2. 
D)  Demand 2 is more inelastic than supply 2.

Question 3

The elasticities of the supply and demand curves in the market for cigarettes affect how much a tax distorts that market.

Accepted Answer

A) True 
 B)False

Question 4

Because taxes distort incentives,they cause markets to allocate resources inefficiently.

Accepted Answer

A) True 
 B)False

Question 5

A tax affects

Accepted Answer

A)  buyers only. 
B)  sellers only. 
C)  buyers and sellers only. 
D)  buyers, sellers, and the government. 
A)  buyers only. 
B)  sellers only. 
C)  buyers and sellers only. 
D)  buyers, sellers, and the government.

Question 6

Suppose the government increases the size of a tax by 40 percent.The deadweight loss from that tax

Accepted Answer

A)  increases by 40 percent. 
B)  increases by more than 40 percent. 
C)  increases but by less than 40 percent. 
D)  decreases by 40 percent. 
A)  increases by 40 percent. 
B)  increases by more than 40 percent. 
C)  increases but by less than 40 percent. 
D)  decreases by 40 percent.

Question 7

If the tax on a good is increased from $1 per unit to $3 per unit,the deadweight loss from the tax increases by a factor of

Accepted Answer

A)  2. 
B)  3. 
C)  9. 
D)  18. 
A)  2. 
B)  3. 
C)  9. 
D)  18.

Question 8

The deadweight loss from a tax of $5 per unit will be smallest in a market with

Accepted Answer

A)  inelastic supply and elastic demand. 
B)  inelastic supply and inelastic demand. 
C)  elastic supply and elastic demand. 
D)  elastic supply and inelastic demand. 
A)  inelastic supply and elastic demand. 
B)  inelastic supply and inelastic demand. 
C)  elastic supply and elastic demand. 
D)  elastic supply and inelastic demand.

Question 9

The benefit to buyers of participating in a market is measured by

Accepted Answer

A)  the price elasticity of demand. 
B)  consumer surplus. 
C)  the maximum amount that buyers are willing to pay for the good. 
D)  the equilibrium price. 
A)  the price elasticity of demand. 
B)  consumer surplus. 
C)  the maximum amount that buyers are willing to pay for the good. 
D)  the equilibrium price.

Question 10

Figure 8-5
Suppose that the government imposes a tax of P3 - P1.
  
-Refer to Figure 8-5.The tax is levied on

Accepted Answer

A)  buyers only. 
B)  sellers only. 
C)  both buyers and sellers. 
D)  This is impossible to determine from the figure. 
A)  buyers only. 
B)  sellers only. 
C)  both buyers and sellers. 
D)  This is impossible to determine from the figure.

Question 11

Figure 8-11
  
-Refer to Figure 8-11.Suppose Q₁ = 4; Q₂ = 7; P₁ = $6; P₂ = $8; and P₃ = $10.Then,when the tax is imposed,

Accepted Answer

A)  consumer surplus decreases by $11. 
B)  producer surplus decreases by $11. 
C)  the deadweight loss amounts to $6. 
D)  All of the above are correct. 
A)  consumer surplus decreases by $11. 
B)  producer surplus decreases by $11. 
C)  the deadweight loss amounts to $6. 
D)  All of the above are correct.

Question 12

Figure 8-9
The vertical distance between points A and C represent a tax in the market.
  
-Refer to Figure 8-9.The total surplus with the tax is

Accepted Answer

A)  $2,000. 
B)  $3,000. 
C)  $15,000. 
D)  $20,000. 
A)  $2,000. 
B)  $3,000. 
C)  $15,000. 
D)  $20,000.

Question 13

If the tax on a good is doubled,the deadweight loss of the tax

Accepted Answer

A)  increases by 50 percent. 
B)  doubles. 
C)  triples. 
D)  quadruples. 
A)  increases by 50 percent. 
B)  doubles. 
C)  triples. 
D)  quadruples.

Question 14

Taxes on labor tend to increase the number of hours that people choose to work.

Accepted Answer

A) True 
 B)False

Question 15

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 quantity sold to

Accepted Answer

A)  increase by 20 units. 
B)  increase by 500 units. 
C)  decrease by 20 units. 
D)  decrease by 500 units. 
A)  increase by 20 units. 
B)  increase by 500 units. 
C)  decrease by 20 units. 
D)  decrease by 500 units.

Question 16

Economists generally agree that the most important tax in the U.S.economy is the

Accepted Answer

A)  investment tax. 
B)  sales tax. 
C)  property tax. 
D)  labor tax. 
A)  investment tax. 
B)  sales tax. 
C)  property tax. 
D)  labor tax.

Question 17

Figure 8-2
The vertical distance between points A and B represents a tax in the market.
  
-Refer to Figure 8-2.The imposition of the tax causes the price paid by buyers to

Accepted Answer

A)  decrease by $2. 
B)  increase by $3. 
C)  decrease by $4. 
D)  increase by $5. 
A)  decrease by $2. 
B)  increase by $3. 
C)  decrease by $4. 
D)  increase by $5.

Question 18

A decrease in the size of a tax is most likely to increase tax revenue in a market with

Accepted Answer

A)  elastic demand and elastic supply. 
B)  elastic demand and inelastic supply. 
C)  inelastic demand and elastic supply. 
D)  inelastic demand and inelastic supply. 
A)  elastic demand and elastic supply. 
B)  elastic demand and inelastic supply. 
C)  inelastic demand and elastic supply. 
D)  inelastic demand and inelastic supply.

Question 19

Figure 8-5
Suppose that the government imposes a tax of P3 - P1.
  
-Refer to Figure 8-5.The total surplus with the tax is represented by area

Accepted Answer

A)  C+H. 
B)  A+B+C. 
C)  D+H+F. 
D)  A+B+D+F. 
A)  C+H. 
B)  A+B+C. 
C)  D+H+F. 
D)  A+B+D+F.

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 8: Application: The Costs of Taxation.

Economists use the government's tax revenue to measure the public benefit from a tax.

Figure 8-12 -Refer to Figure 8-12.Which of the following statements is not correct?

The elasticities of the supply and demand curves in the market for cigarettes affect how much a tax distorts that market.

Because taxes distort incentives,they cause markets to allocate resources inefficiently.

A tax affects

Suppose the government increases the size of a tax by 40 percent.The deadweight loss from that tax

If the tax on a good is increased from $1 per unit to $3 per unit,the deadweight loss from the tax increases by a factor of

The deadweight loss from a tax of $5 per unit will be smallest in a market with

The benefit to buyers of participating in a market is measured by

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The tax is levied on

Figure 8-11 -Refer to Figure 8-11.Suppose Q₁ = 4; Q₂ = 7; P₁ = $6; P₂ = $8; and P₃ = $10.Then,when the tax is imposed,

Figure 8-9 The vertical distance between points A and C represent a tax in the market. -Refer to Figure 8-9.The total surplus with the tax is

If the tax on a good is doubled,the deadweight loss of the tax

Taxes on labor tend to increase the number of hours that people choose to work.

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 quantity sold to

Economists generally agree that the most important tax in the U.S.economy is the

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2.The imposition of the tax causes the price paid by buyers to

A decrease in the size of a tax is most likely to increase tax revenue in a market with

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The total surplus with the tax is represented by area

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

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.

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