Question 1

Taxes affect market participants by increasing the price paid by the buyer and decreasing the price received by the seller.

Accepted Answer

A) True 
 B)False

Question 2

Taxes affect market participants by increasing the price paid by the buyer and received by the seller.

Accepted Answer

A) True 
 B)False

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 consumer surplus without the tax is

Accepted Answer

A)  $2,000. 
B)  $5,000. 
C)  $8,000. 
D)  $16,000. 
A)  $2,000. 
B)  $5,000. 
C)  $8,000. 
D)  $16,000.

Question 4

Figure 8-4
The vertical distance between points A and B represents a tax in the market.
  
-Refer to Figure 8-4.The equilibrium price before the tax is imposed is

Accepted Answer

A)  $12, and the equilibrium quantity is 70. 
B)  $8, and the equilibrium quantity is 100. 
C)  $5, and the equilibrium quantity is 70. 
D)  $5, and the equilibrium quantity is 100. 
A)  $12, and the equilibrium quantity is 70. 
B)  $8, and the equilibrium quantity is 100. 
C)  $5, and the equilibrium quantity is 70. 
D)  $5, and the equilibrium quantity is 100.

Question 5

Suppose Ashley needs a dog sitter so that she can travel to her sister's wedding.Ashley values dog sitting for the weekend at $200.Cami is willing to dog sit for Ashley so long as she receives at least $150.Ashley and Cami agree on a price of $175.Suppose the government imposes a tax of $10 on dog sitting.The tax has made Ashley and Cami worse off by a total of

Accepted Answer

A)  $50. 
B)  $40. 
C)  $20. 
D)  $10. 
A)  $50. 
B)  $40. 
C)  $20. 
D)  $10.

Question 6

It does not matter whether a tax is levied on the buyers or the sellers of a good because

Accepted Answer

A)  sellers always bear the full burden of the tax. 
B)  buyers always bear the full burden of the tax. 
C)  buyers and sellers will share the burden of the tax. 
D)  None of the above is correct; the incidence of the tax does depend on whether the buyers or the sellers are required to pay the tax. 
A)  sellers always bear the full burden of the tax. 
B)  buyers always bear the full burden of the tax. 
C)  buyers and sellers will share the burden of the tax. 
D)  None of the above is correct; the incidence of the tax does depend on whether the buyers or the sellers are required to pay the tax.

Question 7

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 consumer surplus that amounts to

Accepted Answer

A)  $120. 
B)  $340. 
C)  $450. 
D)  $510. 
A)  $120. 
B)  $340. 
C)  $450. 
D)  $510.

Question 8

Anger over British taxes played a significant role in bringing about the

Accepted Answer

A)  election of John Adams as the second American president. 
B)  American Revolution. 
C)  War of 1812. 
D)  "no new taxes" clause in the U.S. Constitution. 
A)  election of John Adams as the second American president. 
B)  American Revolution. 
C)  War of 1812. 
D)  "no new taxes" clause in the U.S. Constitution.

Question 9

When a tax is levied on a good,

Accepted Answer

A)  government revenues exceed the loss in total welfare. 
B)  there is a decrease in the quantity of the good bought and sold in the market. 
C)  the price that sellers receive exceeds the price that buyers pay. 
D)  All of the above are correct. 
A)  government revenues exceed the loss in total welfare. 
B)  there is a decrease in the quantity of the good bought and sold in the market. 
C)  the price that sellers receive exceeds the price that buyers pay. 
D)  All of the above are correct.

Question 10

Figure 8-7
The vertical distance between points A and B represents a tax in the market.
  
-Refer to Figure 8-7.Which of the following statements is correct?

Accepted Answer

A)  The loss of producer surplus that is associated with some sellers dropping out of the market as a result of the tax is $30. 
B)  The loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is $60. 
C)  The loss of consumer surplus caused by this tax exceeds the loss of producer surplus caused by this tax. 
D)  This tax produces $200 in tax revenue for the government. 
A)  The loss of producer surplus that is associated with some sellers dropping out of the market as a result of the tax is $30. 
B)  The loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is $60. 
C)  The loss of consumer surplus caused by this tax exceeds the loss of producer surplus caused by this tax. 
D)  This tax produces $200 in tax revenue for the government.

Question 11

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.Without the tax,the producer surplus is

Accepted Answer

A)  (P5-0) x Q5. 
B)    x (P5-0) x Q5. 
C)  (P8-0) x Q2. 
D)    x (P8-0) x Q2. 
A)  (P5-0) x Q5. 
B)    x (P5-0) x Q5. 
C)  (P8-0) x Q2. 
D)    x (P8-0) x Q2.

Question 12

When a tax is levied on a good,

Accepted Answer

A)  government collects revenues which might justify the loss in total welfare. 
B)  there is a decrease in the quantity of the good bought and sold in the market. 
C)  a wedge is placed between the price buyers pay and the price sellers effectively receive. 
D)  All of the above are correct. 
A)  government collects revenues which might justify the loss in total welfare. 
B)  there is a decrease in the quantity of the good bought and sold in the market. 
C)  a wedge is placed between the price buyers pay and the price sellers effectively receive. 
D)  All of the above are correct.

Question 13

Figure 8-8
Suppose the government imposes a $10 per unit tax on a good.
  
-Refer to Figure 8-8.After the tax goes into effect,producer surplus is the area

Accepted Answer

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

Question 14

Figure 8-7
The vertical distance between points A and B represents a tax in the market.
  
-Refer to Figure 8-7.Which of the following statements is correct?

Accepted Answer

A)  Total surplus before the tax is imposed is $45. 
B)  After the tax is imposed, consumer surplus is 25 percent of its pre-tax value. 
C)  After the tax is imposed, producer surplus is 36 percent of its pre-tax value. 
D)  All of the above are correct. 
A)  Total surplus before the tax is imposed is $45. 
B)  After the tax is imposed, consumer surplus is 25 percent of its pre-tax value. 
C)  After the tax is imposed, producer surplus is 36 percent of its pre-tax value. 
D)  All of the above are correct.

Question 15

As the size of a tax increases,the government's tax revenue rises,then falls.

Accepted Answer

A) True 
 B)False

Question 16

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.If Erin pays Ernesto $80 to clean her house,Erin's consumer surplus is

Accepted Answer

A)  $80. 
B)  $30. 
C)  $20. 
D)  $10. 
A)  $80. 
B)  $30. 
C)  $20. 
D)  $10.

Question 17

The result of the large tax cuts in the first Reagan Administration demonstrated very convincingly that Arthur Laffer was correct when he asserted that cuts in tax rates would increase tax revenue.

Accepted Answer

A) True 
 B)False

Question 18

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 tax revenue received by the government is equal to

Accepted Answer

A)  $350. 
B)  $490. 
C)  $700. 
D)  $840. 
A)  $350. 
B)  $490. 
C)  $700. 
D)  $840.

Question 19

Figure 8-1
  
-Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The area measured by L+M+Y 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 20

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 largest in the market represented by

Accepted Answer

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

Exam 8: Application: The Costs of Taxation.

Taxes affect market participants by increasing the price paid by the buyer and decreasing the price received by the seller.

Taxes affect market participants by increasing the price paid by the buyer and received by the seller.

Figure 8-9 The vertical distance between points A and C represent a tax in the market. -Refer to Figure 8-9.The consumer surplus without the tax is

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4.The equilibrium price before the tax is imposed is

It does not matter whether a tax is levied on the buyers or the sellers of a good because

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 consumer surplus that amounts to

Anger over British taxes played a significant role in bringing about the

When a tax is levied on a good,

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7.Which of the following statements is correct?

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.Without the tax,the producer surplus is

When a tax is levied on a good,

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8.After the tax goes into effect,producer surplus is the area

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7.Which of the following statements is correct?

As the size of a tax increases,the government's tax revenue rises,then falls.

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.If Erin pays Ernesto $80 to clean her house,Erin's consumer surplus is

The result of the large tax cuts in the first Reagan Administration demonstrated very convincingly that Arthur Laffer was correct when he asserted that cuts in tax rates would increase tax revenue.

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 tax revenue received by the government is equal to

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

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 largest in the market represented by

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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