Question 1

The amount of deadweight loss that results from a tax of a given size is determined by

Accepted Answer

A)  whether the tax is levied on buyers or sellers. 
B)  the number of buyers in the market relative to the number of sellers. 
C)  the price elasticities of demand and supply. 
D)  the ratio of the tax per unit to the effective price received by sellers. 
A)  whether the tax is levied on buyers or sellers. 
B)  the number of buyers in the market relative to the number of sellers. 
C)  the price elasticities of demand and supply. 
D)  the ratio of the tax per unit to the effective price received by sellers.

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 amount of the tax on each unit of the good is

Accepted Answer

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

Question 3

Diana is a personal trainer whose client Charles pays $80 per hour-long session.Charles values this service at $100 per hour,while the opportunity cost of Diana's time is $75 per hour.The government places a tax of $10 per hour on personal trainers.Before the tax,what is the total surplus?

Accepted Answer

A)  $25 
B)  $20 
C)  $5 
D)  $0 
A)  $25 
B)  $20 
C)  $5 
D)  $0

Question 4

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,total surplus in this market is

Accepted Answer

A)  $3,000. 
B)  $4,800. 
C)  $6,000. 
D)  $7,200. 
A)  $3,000. 
B)  $4,800. 
C)  $6,000. 
D)  $7,200.

Question 5

A tax of $0.25 is imposed on each bag of potato chips that is sold.The tax decreases producer surplus by $600 per day,generates tax revenue of $1,220 per day,and decreases the equilibrium quantity of potato chips by 120 bags per day.The tax

Accepted Answer

A)  decreases consumer surplus by $645 per day. 
B)  decreases the equilibrium quantity from 6,000 bags per day to 5,880 bags per day. 
C)  decreases total surplus from $3,000 to $1,800 per day. 
D)  creates a deadweight loss of $15 per day. 
A)  decreases consumer surplus by $645 per day. 
B)  decreases the equilibrium quantity from 6,000 bags per day to 5,880 bags per day. 
C)  decreases total surplus from $3,000 to $1,800 per day. 
D)  creates a deadweight loss of $15 per day.

Question 6

Taxes create deadweight losses.

Accepted Answer

A) True 
 B)False

Question 7

A tax placed on buyers of airline tickets shifts the

Accepted Answer

A)  demand curve for airline tickets downward, decreasing the price received by sellers of airline tickets and causing the quantity of airline tickets to increase. 
B)  demand curve for airline tickets downward, decreasing the price received by sellers of airline tickets and causing the quantity of airline tickets to decrease. 
C)  supply curve for airline tickets upward, decreasing the effective price paid by buyers of airline tickets and causing the quantity of airline tickets to increase. 
D)  supply curve for airline tickets upward, increasing the effective price paid by buyers of airline tickets and causing the quantity of airline tickets to decrease. 
A)  demand curve for airline tickets downward, decreasing the price received by sellers of airline tickets and causing the quantity of airline tickets to increase. 
B)  demand curve for airline tickets downward, decreasing the price received by sellers of airline tickets and causing the quantity of airline tickets to decrease. 
C)  supply curve for airline tickets upward, decreasing the effective price paid by buyers of airline tickets and causing the quantity of airline tickets to increase. 
D)  supply curve for airline tickets upward, increasing the effective price paid by buyers of airline tickets and causing the quantity of airline tickets to decrease.

Question 8

The graph that represents the amount of deadweight loss (measured on the vertical axis)as a function of the size of the tax (measured on the horizontal axis)looks like

Accepted Answer

A)  a U. 
B)  an upside-down U. 
C)  a horizontal straight line. 
D)  an upward-sloping curve. 
A)  a U. 
B)  an upside-down U. 
C)  a horizontal straight line. 
D)  an upward-sloping curve.

Question 9

Figure 8-3
The vertical distance between points A and C represents a tax in the market.
  
-Refer to Figure 8-3.The amount of tax revenue received by the government is equal to the area

Accepted Answer

A)  P3ACP1. 
B)  ABC. 
C)  P2DAP3. 
D)  P1CDP2. 
A)  P3ACP1. 
B)  ABC. 
C)  P2DAP3. 
D)  P1CDP2.

Question 10

Suppose the government levies a tax of the vertical distance from point A to point B.Using the graph shown,determine the value of each of the following:
a.equilibrium price before the tax
b.consumer surplus before the tax
c.producer surplus before the tax
d.total surplus before the tax
e.consumer surplus after the tax
f.producer surplus after the tax
g.total tax revenue to the government
h.total surplus (consumer surplus+producer surplus+tax revenue)after the tax
i.deadweight loss

Accepted Answer

a.$10
b.$3,600
c.$2,

Question 11

Which of the following is a tax on labor?

Accepted Answer

A)  Medicare tax 
B)  inheritance tax 
C)  sales tax 
D)  All of the above are labor taxes. 
A)  Medicare tax 
B)  inheritance tax 
C)  sales tax 
D)  All of the above are labor taxes.

Question 12

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 as a result of the tax is

Accepted Answer

A)  $1.50. 
B)  $3. 
C)  $4.50. 
D)  $6. 
A)  $1.50. 
B)  $3. 
C)  $4.50. 
D)  $6.

Question 13

Deadweight loss is the

Accepted Answer

A)  decline in total surplus that results from a tax. 
B)  decline in government revenue when taxes are reduced in a market. 
C)  decline in consumer surplus when a tax is placed on buyers. 
D)  loss of profits to business firms when a tax is imposed. 
A)  decline in total surplus that results from a tax. 
B)  decline in government revenue when taxes are reduced in a market. 
C)  decline in consumer surplus when a tax is placed on buyers. 
D)  loss of profits to business firms when a tax is imposed.

Question 14

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 buyers pay is

Accepted Answer

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

Question 15

The more elastic are supply and demand in a market,the greater are the distortions caused by a tax on that market,and the more likely it is that a tax cut in that market will raise tax revenue.

Accepted Answer

A) True 
 B)False

Question 16

One result of a tax,regardless of whether the tax is placed on the buyers or the sellers,is that the

Accepted Answer

A)  size of the market is unchanged. 
B)  price the seller effectively receives is higher. 
C)  supply curve for the good shifts upward by the amount of the tax. 
D)  tax reduces the welfare of both buyers and sellers. 
A)  size of the market is unchanged. 
B)  price the seller effectively receives is higher. 
C)  supply curve for the good shifts upward by the amount of the tax. 
D)  tax reduces the welfare of both buyers and sellers.

Question 17

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,consumer surplus is

Accepted Answer

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

Question 18

Which of the following is not correct?

Accepted Answer

A)  Economists who argue that labor taxes are highly distorting believe that labor supply is fairly elastic. 
B)  Economists who argue that labor taxes are not highly distorting believe that labor supply is fairly inelastic. 
C)  Economists who argue that labor supply is fairly inelastic cite elderly workers who adjust the date they retire as an example. 
D)  Economists who argue that labor supply is fairly elastic cite workers who adjust the hours of overtime that they work as an example. 
A)  Economists who argue that labor taxes are highly distorting believe that labor supply is fairly elastic. 
B)  Economists who argue that labor taxes are not highly distorting believe that labor supply is fairly inelastic. 
C)  Economists who argue that labor supply is fairly inelastic cite elderly workers who adjust the date they retire as an example. 
D)  Economists who argue that labor supply is fairly elastic cite workers who adjust the hours of overtime that they work as an example.

Question 19

Figure 8-11
  
-Refer to Figure 8-11.The size 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 20

Figure 8-4
The vertical distance between points A and B represents a tax in the market.
  
-Refer to Figure 8-4.The tax results in a loss of producer surplus that amounts to

Accepted Answer

A)  $45. 
B)  $90. 
C)  $210. 
D)  $255. 
A)  $45. 
B)  $90. 
C)  $210. 
D)  $255.

Exam 8: Application: The Costs of Taxation.

The amount of deadweight loss that results from a tax of a given size is determined by

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 the tax on each unit of the good is

Diana is a personal trainer whose client Charles pays $80 per hour-long session.Charles values this service at $100 per hour,while the opportunity cost of Diana's time is $75 per hour.The government places a tax of $10 per hour on personal trainers.Before the tax,what is the total surplus?

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,total surplus in this market is

A tax of $0.25 is imposed on each bag of potato chips that is sold.The tax decreases producer surplus by $600 per day,generates tax revenue of $1,220 per day,and decreases the equilibrium quantity of potato chips by 120 bags per day.The tax

Taxes create deadweight losses.

A tax placed on buyers of airline tickets shifts the

The graph that represents the amount of deadweight loss (measured on the vertical axis)as a function of the size of the tax (measured on the horizontal axis)looks like

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3.The amount of tax revenue received by the government is equal to the area

Which of the following is a tax on labor?

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 as a result of the tax is

Deadweight loss is the

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 buyers pay is

The more elastic are supply and demand in a market,the greater are the distortions caused by a tax on that market,and the more likely it is that a tax cut in that market will raise tax revenue.

One result of a tax,regardless of whether the tax is placed on the buyers or the sellers,is that the

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,consumer surplus is

Which of the following is not correct?

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

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4.The tax results in a loss of producer surplus that amounts to

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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