Question 1

Figure 8-1
  
-Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The area measured by K+L represents

Accepted Answer

A)  tax revenue. 
B)  consumer surplus before the tax. 
C)  producer surplus after the tax. 
D)  total surplus before the tax. 
A)  tax revenue. 
B)  consumer surplus before the tax. 
C)  producer surplus after the tax. 
D)  total surplus before the tax.

Question 2

When a tax is imposed on a good,consumer surplus decreases and producer surplus remains unchanged.

Accepted Answer

A) True 
 B)False

Question 3

Figure 8-4
The vertical distance between points A and B represents a tax in the market.
  
-Refer to Figure 8-4.The amount of deadweight loss as a result of the tax is

Accepted Answer

A)  $105. 
B)  $210. 
C)  $490. 
D)  $600. 
A)  $105. 
B)  $210. 
C)  $490. 
D)  $600.

Question 4

Figure 8-6
The vertical distance between points A and B represents a tax in the market.
  
-Refer to Figure 8-6.When the tax is imposed in this market,the price sellers effectively receive is

Accepted Answer

A)  $4. 
B)  $6. 
C)  $10. 
D)  $16. 
A)  $4. 
B)  $6. 
C)  $10. 
D)  $16.

Question 5

When a tax is imposed on buyers,consumer surplus and producer surplus both decrease.

Accepted Answer

A) True 
 B)False

Question 6

The amount of deadweight loss from a tax depends upon the

Accepted Answer

A)  price elasticity of demand. 
B)  price elasticity of supply. 
C)  amount of the tax per unit. 
D)  All of the above are correct. 
A)  price elasticity of demand. 
B)  price elasticity of supply. 
C)  amount of the tax per unit. 
D)  All of the above are correct.

Question 7

Figure 8-2
The vertical distance between points A and B represents a tax in the market.
  
-Refer to Figure 8-2.The loss of consumer surplus associated with some buyers dropping out of the market as a result of the tax is

Accepted Answer

A)  $0. 
B)  $1.50. 
C)  $3. 
D)  $4.50. 
A)  $0. 
B)  $1.50. 
C)  $3. 
D)  $4.50.

Question 8

Figure 8-5
Suppose that the government imposes a tax of P3 - P1.
  
-Refer to Figure 8-5.After the tax is levied,consumer surplus is represented by area

Accepted Answer

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

Question 9

Figure 8-6
The vertical distance between points A and B represents a tax in the market.
  
-Refer to Figure 8-6.When the tax is placed on this good,the quantity sold

Accepted Answer

A)  is 600, and buyers effectively pay $10. 
B)  is 300, and buyers effectively pay $10. 
C)  is 600, and buyers effectively pay $16. 
D)  is 300, and buyers effectively pay $16. 
A)  is 600, and buyers effectively pay $10. 
B)  is 300, and buyers effectively pay $10. 
C)  is 600, and buyers effectively pay $16. 
D)  is 300, and buyers effectively pay $16.

Question 10

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

Accepted Answer

A)  benefit to buyers with the loss to sellers. 
B)  price paid by buyers to the price received by sellers. 
C)  profits earned by firms to the losses incurred by consumers. 
D)  decrease in total surplus to the increase in revenue raised by the government. 
A)  benefit to buyers with the loss to sellers. 
B)  price paid by buyers to the price received by sellers. 
C)  profits earned by firms to the losses incurred by consumers. 
D)  decrease in total surplus to the increase in revenue raised by the government.

Question 11

When a tax on a good is enacted,

Accepted Answer

A)  buyers and sellers share the burden of the tax regardless of whether the tax is levied on buyers or on sellers. 
B)  buyers always bear the full burden of the tax. 
C)  sellers always bear the full burden of the tax. 
D)  sellers bear the full burden of the tax if the tax is levied on them; buyers bear the full burden of the tax if the tax is levied on them. 
A)  buyers and sellers share the burden of the tax regardless of whether the tax is levied on buyers or on sellers. 
B)  buyers always bear the full burden of the tax. 
C)  sellers always bear the full burden of the tax. 
D)  sellers bear the full burden of the tax if the tax is levied on them; buyers bear the full burden of the tax if the tax is levied on them.

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 imposition of the tax causes the price paid by buyers to

Accepted Answer

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

Question 13

Buyers of a product will bear the larger part of the tax burden,and sellers will bear a smaller part of the tax burden,when the

Accepted Answer

A)  tax is placed on the sellers of the product. 
B)  tax is placed on the buyers of the product. 
C)  supply of the product is more elastic than the demand for the product. 
D)  demand for the product is more elastic than the supply of the product. 
A)  tax is placed on the sellers of the product. 
B)  tax is placed on the buyers of the product. 
C)  supply of the product is more elastic than the demand for the product. 
D)  demand for the product is more elastic than the supply of the product.

Question 14

Suppose a tax of $4 per unit is imposed on a good,and the tax causes the equilibrium quantity of the good to decrease from 2,000 units to 1,700 units.The tax decreases consumer surplus by $3,000 and decreases producer surplus by $4,400.The deadweight loss of the tax is

Accepted Answer

A)  $200. 
B)  $400. 
C)  $600. 
D)  $1,200. 
A)  $200. 
B)  $400. 
C)  $600. 
D)  $1,200.

Question 15

The idea that tax cuts would increase the quantity of labor supplied,thus increasing tax revenue,became know as supply-side economics.

Accepted Answer

A) True 
 B)False

Question 16

Figure 8-11
  
-Refer to Figure 8-11.The deadweight loss of the tax is represented by the

Accepted Answer

A)  length of the line segment connecting points A and B. 
B)  length of the line segment connecting points A and C. 
C)  length of the line segment connecting points B and C. 
D)  area of the triangle bounded by the points A, B, and C. 
A)  length of the line segment connecting points A and B. 
B)  length of the line segment connecting points A and C. 
C)  length of the line segment connecting points B and C. 
D)  area of the triangle bounded by the points A, B, and C.

Question 17

Which of the following ideas is the most plausible?

Accepted Answer

A)  Tax revenue is more likely to increase when a low tax rate is increased than when a high tax rate is increased. 
B)  Tax revenue is less likely to increase when a low tax rate is increased than when a high tax rate is increased. 
C)  Tax revenue is likely to increase by the same amount when a low tax rate is increased and when a high tax rate is increased. 
D)  Decreasing a tax rate can never increase tax revenue. 
A)  Tax revenue is more likely to increase when a low tax rate is increased than when a high tax rate is increased. 
B)  Tax revenue is less likely to increase when a low tax rate is increased than when a high tax rate is increased. 
C)  Tax revenue is likely to increase by the same amount when a low tax rate is increased and when a high tax rate is increased. 
D)  Decreasing a tax rate can never increase tax revenue.

Question 18

The demand for potted plants is more elastic than the demand for wallpaper.Suppose the government levies an equivalent tax on potted plants and wallpaper.The deadweight loss would be larger in the market for

Accepted Answer

A)  potted plants than in the market for wallpaper because the quantity of potted plants would fall by more than the quantity of wallpaper. 
B)  potted plants than in the market for wallpaper because the quantity of wallpaper would fall by more than the quantity of potted plants. 
C)  wallpaper than in the market for potted plants because the quantity of potted plants would fall by more than the quantity of wallpaper. 
D)  wallpaper than in the market for potted plants because the quantity of wallpaper would fall by more than the quantity of potted plants. 
A)  potted plants than in the market for wallpaper because the quantity of potted plants would fall by more than the quantity of wallpaper. 
B)  potted plants than in the market for wallpaper because the quantity of wallpaper would fall by more than the quantity of potted plants. 
C)  wallpaper than in the market for potted plants because the quantity of potted plants would fall by more than the quantity of wallpaper. 
D)  wallpaper than in the market for potted plants because the quantity of wallpaper would fall by more than the quantity of potted plants.

Question 19

Figure 8-16
  
-Refer to Figure 8-16.Suppose the government imposes a $1 tax in each of the four markets represented by supply curves S1,S2,S3,and S4.The deadweight will be the smallest in the market represented by

Accepted Answer

A)  S1. 
B)  S2. 
C)  S3. 
D)  S4. 
A)  S1. 
B)  S2. 
C)  S3. 
D)  S4.

Question 20

If the size of a tax increases,tax revenue

Accepted Answer

A)  increases. 
B)  decreases. 
C)  remains the same. 
D)  may increase, decrease, or remain the same. 
A)  increases. 
B)  decreases. 
C)  remains the same. 
D)  may increase, decrease, or remain the same.

Exam 8: Application: The Costs of Taxation.

Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The area measured by K+L represents

When a tax is imposed on a good,consumer surplus decreases and producer surplus remains unchanged.

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4.The amount of deadweight loss as a result of the tax is

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.When the tax is imposed in this market,the price sellers effectively receive is

When a tax is imposed on buyers,consumer surplus and producer surplus both decrease.

The amount of deadweight loss from a tax depends upon the

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2.The loss of consumer surplus associated with some buyers dropping out of the market as a result of the tax is

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.After the tax is levied,consumer surplus is represented by area

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.When the tax is placed on this good,the quantity sold

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

When a tax on a good is enacted,

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 paid by buyers to

Buyers of a product will bear the larger part of the tax burden,and sellers will bear a smaller part of the tax burden,when the

Suppose a tax of $4 per unit is imposed on a good,and the tax causes the equilibrium quantity of the good to decrease from 2,000 units to 1,700 units.The tax decreases consumer surplus by $3,000 and decreases producer surplus by $4,400.The deadweight loss of the tax is

The idea that tax cuts would increase the quantity of labor supplied,thus increasing tax revenue,became know as supply-side economics.

Figure 8-11 -Refer to Figure 8-11.The deadweight loss of the tax is represented by the

Which of the following ideas is the most plausible?

The demand for potted plants is more elastic than the demand for wallpaper.Suppose the government levies an equivalent tax on potted plants and wallpaper.The deadweight loss would be larger in the market for

Figure 8-16 -Refer to Figure 8-16.Suppose the government imposes a $1 tax in each of the four markets represented by supply curves S1,S2,S3,and S4.The deadweight will be the smallest in the market represented by

If the size of a tax increases,tax revenue

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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