Question 1

Suppose the federal government doubles the gasoline tax.The deadweight loss associated with the tax

Accepted Answer

A)  also doubles. 
B)  triples. 
C)  quadruples. 
D)  rises by a factor of 8. 
A)  also doubles. 
B)  triples. 
C)  quadruples. 
D)  rises by a factor of 8.

Question 2

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 without the tax is

Accepted Answer

A)  $8,000. 
B)  $12,000. 
C)  $20,000. 
D)  $40,000. 
A)  $8,000. 
B)  $12,000. 
C)  $20,000. 
D)  $40,000.

Question 3

If the tax on a good is increased from $0.15 per unit to $0.60 per unit,the deadweight loss from the tax

Accepted Answer

A)  remains constant. 
B)  increases by a factor of 4. 
C)  increases by a factor of 9. 
D)  increases by a factor of 16. 
A)  remains constant. 
B)  increases by a factor of 4. 
C)  increases by a factor of 9. 
D)  increases by a factor of 16.

Question 4

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

Accepted Answer

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

Question 5

Consider a good to which a per-unit tax applies.The greater the price elasticities of demand and supply for the good,the

Accepted Answer

A)  smaller the deadweight loss from the tax. 
B)  greater the deadweight loss from the tax. 
C)  more efficient is the tax. 
D)  more equitable is the distribution of the tax burden between buyers and sellers. 
A)  smaller the deadweight loss from the tax. 
B)  greater the deadweight loss from the tax. 
C)  more efficient is the tax. 
D)  more equitable is the distribution of the tax burden between buyers and sellers.

Question 6

Figure 8-7
The vertical distance between points A and B represents a tax in the market.
  
-Refer to Figure 8-7.Before the tax is imposed,the equilibrium price is

Accepted Answer

A)  $16, and the equilibrium quantity is 15. 
B)  $12, and the equilibrium quantity is 15. 
C)  $12, and the equilibrium quantity is 25. 
D)  $8, and the equilibrium quantity is 15. 
A)  $16, and the equilibrium quantity is 15. 
B)  $12, and the equilibrium quantity is 15. 
C)  $12, and the equilibrium quantity is 25. 
D)  $8, and the equilibrium quantity is 15.

Question 7

When demand is relatively elastic,the deadweight loss of a tax is larger than when demand is relatively inelastic.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following quantities decrease in response to a tax on a good?

Accepted Answer

A)  the equilibrium quantity in the market for the good, the effective price of the good paid by buyers, and consumer surplus 
B)  the equilibrium quantity in the market for the good, producer surplus, and the well-being of buyers of the good 
C)  the effective price received by sellers of the good, the wedge between the effective price paid by buyers and the effective price received by sellers, and consumer surplus 
D)  None of the above is necessarily correct unless we know whether the tax is levied on buyers or on sellers. 
A)  the equilibrium quantity in the market for the good, the effective price of the good paid by buyers, and consumer surplus 
B)  the equilibrium quantity in the market for the good, producer surplus, and the well-being of buyers of the good 
C)  the effective price received by sellers of the good, the wedge between the effective price paid by buyers and the effective price received by sellers, and consumer surplus 
D)  None of the above is necessarily correct unless we know whether the tax is levied on buyers or on sellers.

Question 9

Taxes are of interest to

Accepted Answer

A)  microeconomists because they consider how to balance equality and efficiency. 
B)  microeconomists because they consider how best to design a tax system. 
C)  macroeconomists because they consider how policymakers can use the tax system to stabilize economic activity. 
D)  All of the above are correct. 
A)  microeconomists because they consider how to balance equality and efficiency. 
B)  microeconomists because they consider how best to design a tax system. 
C)  macroeconomists because they consider how policymakers can use the tax system to stabilize economic activity. 
D)  All of the above are correct.

Question 10

When a tax is levied on the buyers of a good,the

Accepted Answer

A)  supply curve shifts upward by the amount of the tax. 
B)  quantity supplied increases for all conceivable prices of the good. 
C)  buyers of the good will send tax payments to the government. 
D)  demand curve shifts to the right by the horizontal distance of the tax. 
A)  supply curve shifts upward by the amount of the tax. 
B)  quantity supplied increases for all conceivable prices of the good. 
C)  buyers of the good will send tax payments to the government. 
D)  demand curve shifts to the right by the horizontal distance of the tax.

Question 11

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 A on the curve,then a 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 12

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

Accepted Answer

A)  Aristotle 
B)  George Washington 
C)  Oliver Wendell Holmes, Jr. 
D)  Ronald Reagan 
A)  Aristotle 
B)  George Washington 
C)  Oliver Wendell Holmes, Jr. 
D)  Ronald Reagan

Question 13

Figure 8-10
  
-Refer to Figure 8-10.Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2.The price that sellers receive is

Accepted Answer

A)  P0. 
B)  P2. 
C)  P5. 
D)  P8. 
A)  P0. 
B)  P2. 
C)  P5. 
D)  P8.

Question 14

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 amount of deadweight loss as a result of the tax is

Accepted Answer

A)  $4,000. 
B)  $5,000. 
C)  $6,000. 
D)  $10,000. 
A)  $4,000. 
B)  $5,000. 
C)  $6,000. 
D)  $10,000.

Question 15

Which of the following events always would increase the size of the deadweight loss that arises from the tax on gasoline?

Accepted Answer

A)  The demand for gasoline becomes more inelastic. 
B)  The slope of the supply curve for gasoline becomes steeper. 
C)  The amount of the tax per gallon of gasoline increases. 
D)  All of the above are correct. 
A)  The demand for gasoline becomes more inelastic. 
B)  The slope of the supply curve for gasoline becomes steeper. 
C)  The amount of the tax per gallon of gasoline increases. 
D)  All of the above are correct.

Question 16

Figure 8-6
The vertical distance between points A and B represents a tax in the market.
  
-Refer to Figure 8-6.Without a tax,producer surplus in this market is

Accepted Answer

A)  $1,500. 
B)  $2,400. 
C)  $3,000. 
D)  $3,600. 
A)  $1,500. 
B)  $2,400. 
C)  $3,000. 
D)  $3,600.

Question 17

Figure 8-15
  
-Refer to Figure 8-15.Suppose the government imposes a $1 tax in each of the four markets represented by demand curves D1,D2,D3,and D4.The deadweight will be the smallest in the market represented by

Accepted Answer

A)  D1. 
B)  D2. 
C)  D3. 
D)  D4. 
A)  D1. 
B)  D2. 
C)  D3. 
D)  D4.

Question 18

Assume the price of gasoline is $2.40 per gallon,and the equilibrium quantity of gasoline is 12 million gallons per day with no tax on gasoline.Starting from this initial situation,which of the following scenarios would result in the largest deadweight loss?

Accepted Answer

A)  A 10 percent increase in the price of gasoline reduces the quantity of gasoline demanded by 2 percent and it increases the quantity of gasoline supplied by 5 percent; and the tax on gasoline amounts to $0.40 per gallon. 
B)  A 10 percent increase in the price of gasoline reduces the quantity of gasoline demanded by 2 percent and it increases the quantity of gasoline supplied by 7 percent; and the tax on gasoline amounts to $0.40 per gallon. 
C)  A 10 percent increase in the price of gasoline reduces the quantity of gasoline demanded by 1 percent and it increases the quantity of gasoline supplied by 8 percent; and the tax on gasoline amounts to $0.35 per gallon. 
D)  There is insufficient information to make this determination. 
A)  A 10 percent increase in the price of gasoline reduces the quantity of gasoline demanded by 2 percent and it increases the quantity of gasoline supplied by 5 percent; and the tax on gasoline amounts to $0.40 per gallon. 
B)  A 10 percent increase in the price of gasoline reduces the quantity of gasoline demanded by 2 percent and it increases the quantity of gasoline supplied by 7 percent; and the tax on gasoline amounts to $0.40 per gallon. 
C)  A 10 percent increase in the price of gasoline reduces the quantity of gasoline demanded by 1 percent and it increases the quantity of gasoline supplied by 8 percent; and the tax on gasoline amounts to $0.35 per gallon. 
D)  There is insufficient information to make this determination.

Question 19

Figure 8-3
The vertical distance between points A and C represents a tax in the market.
  
-Refer to Figure 8-3.Which of the following equations is valid for the deadweight loss of the tax?

Accepted Answer

A)  Deadweight loss = (1/2)(P2 - P1)(Q2 + Q1) 
B)  Deadweight loss = (1/2)(P3 - P1)(Q2 + Q1) 
C)  Deadweight loss = (1/2)(P3 - P2)(Q2 - Q1) 
D)  Deadweight loss = (1/2)(P3 - P1)(Q2 - Q1) 
A)  Deadweight loss = (1/2)(P2 - P1)(Q2 + Q1) 
B)  Deadweight loss = (1/2)(P3 - P1)(Q2 + Q1) 
C)  Deadweight loss = (1/2)(P3 - P2)(Q2 - Q1) 
D)  Deadweight loss = (1/2)(P3 - P1)(Q2 - Q1)

Question 20

In which of the following instances would the deadweight loss of the tax on cartons of cigarettes increase by a factor of 9?

Accepted Answer

A)  The tax on cartons of cigarettes increases from $10 to $11.11. 
B)  The tax on cartons of cigarettes increases from $10 to $20. 
C)  The tax on cartons of cigarettes increases from $10 to $30. 
D)  The tax on cartons of cigarettes increases from $10 to $90. 
A)  The tax on cartons of cigarettes increases from $10 to $11.11. 
B)  The tax on cartons of cigarettes increases from $10 to $20. 
C)  The tax on cartons of cigarettes increases from $10 to $30. 
D)  The tax on cartons of cigarettes increases from $10 to $90.

Exam 8: Application: The Costs of Taxation.

Suppose the federal government doubles the gasoline tax.The deadweight loss associated with the tax

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 without the tax is

If the tax on a good is increased from $0.15 per unit to $0.60 per unit,the deadweight loss from the tax

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

Consider a good to which a per-unit tax applies.The greater the price elasticities of demand and supply for the good,the

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7.Before the tax is imposed,the equilibrium price is

When demand is relatively elastic,the deadweight loss of a tax is larger than when demand is relatively inelastic.

Which of the following quantities decrease in response to a tax on a good?

Taxes are of interest to

When a tax is levied on the buyers of a good,the

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 A on the curve,then a decrease in the tax rate will

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

Figure 8-10 -Refer to Figure 8-10.Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2.The price that sellers receive is

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 amount of deadweight loss as a result of the tax is

Which of the following events always would increase the size of the deadweight loss that arises from the tax on gasoline?

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.Without a tax,producer surplus in this market is

Figure 8-15 -Refer to Figure 8-15.Suppose the government imposes a $1 tax in each of the four markets represented by demand curves D1,D2,D3,and D4.The deadweight will be the smallest in the market represented by

Assume the price of gasoline is $2.40 per gallon,and the equilibrium quantity of gasoline is 12 million gallons per day with no tax on gasoline.Starting from this initial situation,which of the following scenarios would result in the largest deadweight loss?

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3.Which of the following equations is valid for the deadweight loss of the tax?

In which of the following instances would the deadweight loss of the tax on cartons of cigarettes increase by a factor of 9?

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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