Question 1

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

Accepted Answer

A)  total surplus after the tax. 
B)  total surplus before the tax. 
C)  deadweight loss from the tax. 
D)  tax revenue. 
A)  total surplus after the tax. 
B)  total surplus before the tax. 
C)  deadweight loss from the tax. 
D)  tax revenue.

Question 2

Suppose a tax of $1 per unit is imposed on a good.The more elastic the demand for the good,other things equal,

Accepted Answer

A)  the larger is the decrease in quantity demanded as a result of the tax. 
B)  the smaller is the tax burden on buyers relative to the tax burden on sellers. 
C)  the larger is the deadweight loss of the tax. 
D)  All of the above are correct. 
A)  the larger is the decrease in quantity demanded as a result of the tax. 
B)  the smaller is the tax burden on buyers relative to the tax burden on sellers. 
C)  the larger is the deadweight loss of the tax. 
D)  All of the above are correct.

Question 3

Figure 8-9
The vertical distance between points A and C represent a tax in the market.
  
-Refer to Figure 8-9.The amount of tax revenue received by the government is

Accepted Answer

A)  $4,000. 
B)  $6,000. 
C)  $10,000. 
D)  $24,000. 
A)  $4,000. 
B)  $6,000. 
C)  $10,000. 
D)  $24,000.

Question 4

To measure the gains and losses from a tax on a good,economists use the tools of

Accepted Answer

A)  macroeconomics. 
B)  welfare economics. 
C)  international-trade theory. 
D)  circular-flow analysis. 
A)  macroeconomics. 
B)  welfare economics. 
C)  international-trade theory. 
D)  circular-flow analysis.

Question 5

Suppose a tax of $5 per unit is imposed on a good,and the tax causes the equilibrium quantity of the good to decrease from 200 units to 100 units.The tax decreases consumer surplus by $450 and decreases producer surplus by $300.The deadweight loss from the tax is

Accepted Answer

A)  $250. 
B)  $500. 
C)  $750. 
D)  $1,000. 
A)  $250. 
B)  $500. 
C)  $750. 
D)  $1,000.

Question 6

Figure 8-1
  
-Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The consumer surplus after the tax is measured by the area

Accepted Answer

A)  J+K+I. 
B)  J. 
C)  M. 
D)  L+M+Y. 
A)  J+K+I. 
B)  J. 
C)  M. 
D)  L+M+Y.

Question 7

Relative to a situation in which gasoline is not taxed,the imposition of a tax on gasoline causes the quantity of gasoline demanded to

Accepted Answer

A)  decrease and the quantity of gasoline supplied to decrease. 
B)  decrease and the quantity of gasoline supplied to increase. 
C)  increase and the quantity of gasoline supplied to decrease. 
D)  increase and the quantity of gasoline supplied to increase. 
A)  decrease and the quantity of gasoline supplied to decrease. 
B)  decrease and the quantity of gasoline supplied to increase. 
C)  increase and the quantity of gasoline supplied to decrease. 
D)  increase and the quantity of gasoline supplied to increase.

Question 8

Figure 8-7
The vertical distance between points A and B represents a tax in the market.
  
-Refer to Figure 8-7.As a result of the tax,consumer surplus decreases by

Accepted Answer

A)  $65, producer surplus decreases by $85, tax revenue is $120, and deadweight loss is $30. 
B)  $75, producer surplus decreases by $75, tax revenue is $120, and deadweight loss is $30. 
C)  $80, producer surplus decreases by $80, tax revenue is $120, and deadweight loss is $40. 
D)  $120, producer surplus decreases by $120, tax revenue is $200, and deadweight loss is $40. 
A)  $65, producer surplus decreases by $85, tax revenue is $120, and deadweight loss is $30. 
B)  $75, producer surplus decreases by $75, tax revenue is $120, and deadweight loss is $30. 
C)  $80, producer surplus decreases by $80, tax revenue is $120, and deadweight loss is $40. 
D)  $120, producer surplus decreases by $120, tax revenue is $200, and deadweight loss is $40.

Question 9

Figure 8-6
The vertical distance between points A and B represents a tax in the market.
  
-Refer to Figure 8-6.What happens to total surplus in this market when the tax is imposed?

Accepted Answer

A)  Total surplus increases by $1,500. 
B)  Total surplus increases by $3,000. 
C)  Total surplus decreases by $1,500. 
D)  Total surplus decreases by $,3000. 
A)  Total surplus increases by $1,500. 
B)  Total surplus increases by $3,000. 
C)  Total surplus decreases by $1,500. 
D)  Total surplus decreases by $,3000.

Question 10

The view held by Arthur Laffer and Ronald Reagan that cuts in tax rates would encourage people to increase the quantity of labor they supplied became known as

Accepted Answer

A)  California economics. 
B)  welfare economics. 
C)  supply-side economics. 
D)  elasticity economics. 
A)  California economics. 
B)  welfare economics. 
C)  supply-side economics. 
D)  elasticity economics.

Question 11

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

Accepted Answer

A)  at the top of the Laffer curve. 
B)  on the positively sloped part of the Laffer curve. 
C)  on the negatively sloped part of the Laffer curve. 
D)  experiencing small deadweight losses. 
A)  at the top of the Laffer curve. 
B)  on the positively sloped part of the Laffer curve. 
C)  on the negatively sloped part of the Laffer curve. 
D)  experiencing small deadweight losses.

Question 12

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.For an economy that is currently at point D on the curve,a decrease in the tax rate would

Accepted Answer

A)  decrease consumer surplus. 
B)  decrease producer surplus. 
C)  increase tax revenue. 
D)  increase the deadweight loss of the tax. 
A)  decrease consumer surplus. 
B)  decrease producer surplus. 
C)  increase tax revenue. 
D)  increase the deadweight loss of the tax.

Question 13

Figure 8-6
The vertical distance between points A and B represents a tax in the market.
  
-Refer to Figure 8-6.The amount of the tax on each unit of the good is

Accepted Answer

A)  $6. 
B)  $8. 
C)  $10. 
D)  $12. 
A)  $6. 
B)  $8. 
C)  $10. 
D)  $12.

Question 14

The less freedom people are given to choose the date of their retirement,the

Accepted Answer

A)  more elastic is the supply of labor. 
B)  less elastic is the supply of labor. 
C)  flatter is the labor supply curve. 
D)  smaller is the decrease in employment that will result from a tax on labor. 
A)  more elastic is the supply of labor. 
B)  less elastic is the supply of labor. 
C)  flatter is the labor supply curve. 
D)  smaller is the decrease in employment that will result from a tax on labor.

Question 15

Taxes cause deadweight losses because they prevent buyers and sellers from realizing some of the gains from trade.

Accepted Answer

A) True 
 B)False

Question 16

Figure 8-5
Suppose that the government imposes a tax of P3 - P1.
  
-Refer to Figure 8-5.The price that buyers effectively pay after the tax is imposed is

Accepted Answer

A)  P1. 
B)  P2. 
C)  P3. 
D)  P4. 
A)  P1. 
B)  P2. 
C)  P3. 
D)  P4.

Question 17

Scenario 8-1
Erin would be willing to pay as much as $100 per week to have her house cleaned. Ernesto's opportunity cost of cleaning Erin's house is $70 per week.
-Refer to Scenario 8-1.Assume Erin is required to pay a tax of $40 when she hires someone to clean her house for a week.Which of the following is correct?

Accepted Answer

A)  Erin will now clean her own house. 
B)  Ernesto will continue to clean Erin's house, but his producer surplus will decline. 
C)  Total economic welfare (consumer surplus plus producer surplus plus tax revenue) will increase. 
D)  Erin will continue to hire Ernesto to clean her house, but her consumer surplus will decline. 
A)  Erin will now clean her own house. 
B)  Ernesto will continue to clean Erin's house, but his producer surplus will decline. 
C)  Total economic welfare (consumer surplus plus producer surplus plus tax revenue) will increase. 
D)  Erin will continue to hire Ernesto to clean her house, but her consumer surplus will decline.

Question 18

Sellers of a product will bear the larger part of the tax burden,and buyers 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 19

Taxes on labor encourage all of the following except

Accepted Answer

A)  older workers to take early retirement from the labor force. 
B)  mothers to stay at home rather than work in the labor force. 
C)  workers to work overtime. 
D)  people to be paid "under the table." 
A)  older workers to take early retirement from the labor force. 
B)  mothers to stay at home rather than work in the labor force. 
C)  workers to work overtime. 
D)  people to be paid "under the table."

Question 20

When a tax is levied on a good,the buyers and sellers of the good share the burden,

Accepted Answer

A)  provided the tax is levied on the sellers. 
B)  provided the tax is levied on the buyers. 
C)  provided a portion of the tax is levied on the buyers, with the remaining portion levied on the sellers. 
D)  regardless of how the tax is levied. 
A)  provided the tax is levied on the sellers. 
B)  provided the tax is levied on the buyers. 
C)  provided a portion of the tax is levied on the buyers, with the remaining portion levied on the sellers. 
D)  regardless of how the tax is levied.

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 J+K+L+M represents

Suppose a tax of $1 per unit is imposed on a good.The more elastic the demand for the good,other things equal,

Figure 8-9 The vertical distance between points A and C represent a tax in the market. -Refer to Figure 8-9.The amount of tax revenue received by the government is

To measure the gains and losses from a tax on a good,economists use the tools of

Suppose a tax of $5 per unit is imposed on a good,and the tax causes the equilibrium quantity of the good to decrease from 200 units to 100 units.The tax decreases consumer surplus by $450 and decreases producer surplus by $300.The deadweight loss from the tax is

Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The consumer surplus after the tax is measured by the area

Relative to a situation in which gasoline is not taxed,the imposition of a tax on gasoline causes the quantity of gasoline demanded to

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7.As a result of the tax,consumer surplus decreases by

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.What happens to total surplus in this market when the tax is imposed?

The view held by Arthur Laffer and Ronald Reagan that cuts in tax rates would encourage people to increase the quantity of labor they supplied became known as

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

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.For an economy that is currently at point D on the curve,a decrease in the tax rate would

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.The amount of the tax on each unit of the good is

The less freedom people are given to choose the date of their retirement,the

Taxes cause deadweight losses because they prevent buyers and sellers from realizing some of the gains from trade.

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The price that buyers effectively pay after the tax is imposed is

Sellers of a product will bear the larger part of the tax burden,and buyers will bear a smaller part of the tax burden,when the

Taxes on labor encourage all of the following except

When a tax is levied on a good,the buyers and sellers of the good share the burden,

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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