Question 1

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

Accepted Answer

A)  deadweight loss due to the tax. 
B)  loss in consumer surplus due to the tax. 
C)  loss in producer surplus due to the tax. 
D)  total surplus before the tax. 
A)  deadweight loss due to the tax. 
B)  loss in consumer surplus due to the tax. 
C)  loss in producer surplus due to the tax. 
D)  total surplus before the tax.

Question 2

Figure 8-3
The vertical distance between points A and C represents a tax in the market.
  
-Refer to Figure 8-3.The equilibrium price before the tax is imposed is

Accepted Answer

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

Question 3

A tax raises the price received by sellers and lowers the price paid by buyers.

Accepted Answer

A) True 
 B)False

Question 4

Figure 8-7
The vertical distance between points A and B represents a tax in the market.
  
-Refer to Figure 8-7.Suppose a 22nd unit of the good were sold by a seller to a buyer.Which of the following statements is correct?

Accepted Answer

A)  For the 22nd unit, the difference between the buyer's value and the seller's cost is less than the tax per unit. 
B)  For the 22nd unit, the difference between the buyer's value and the seller's cost is greater than the tax per unit. 
C)  For the 22nd unit, the difference between the buyer's value and the seller's cost is equal to the tax per unit. 
D)  It makes sense for the buyer to buy and for the seller to sell the 22nd unit, with or without the tax in place. 
A)  For the 22nd unit, the difference between the buyer's value and the seller's cost is less than the tax per unit. 
B)  For the 22nd unit, the difference between the buyer's value and the seller's cost is greater than the tax per unit. 
C)  For the 22nd unit, the difference between the buyer's value and the seller's cost is equal to the tax per unit. 
D)  It makes sense for the buyer to buy and for the seller to sell the 22nd unit, with or without the tax in place.

Question 5

Andre walks Julia's dog once a day for $50 per week.Julia values this service at $60 per week,while the opportunity cost of Andre's time is $30 per week.The government places a tax of $35 per week on dog walkers.Before the tax,what is the total surplus?

Accepted Answer

A)  $60 
B)  $50 
C)  $30 
D)  $25 
A)  $60 
B)  $50 
C)  $30 
D)  $25

Question 6

The Laffer curve is the curve showing how tax revenue varies as the size of the tax varies.

Accepted Answer

A) True 
 B)False

Question 7

When a good is taxed,the deadweight loss is larger the more elastic are demand and supply.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is a tax on labor?

Accepted Answer

A)  Medicare tax 
B)  Social Security tax 
C)  federal income tax 
D)  All of the above are labor taxes. 
A)  Medicare tax 
B)  Social Security tax 
C)  federal income tax 
D)  All of the above are labor taxes.

Question 9

In 1776,the American Revolution was sparked by anger over

Accepted Answer

A)  the extravagant lifestyle of British royalty. 
B)  the crimes of British soldiers stationed in the American colonies. 
C)  British taxes imposed on the American colonies. 
D)  the failure of the British to protect American colonists from attack by hostile Native Americans. 
A)  the extravagant lifestyle of British royalty. 
B)  the crimes of British soldiers stationed in the American colonies. 
C)  British taxes imposed on the American colonies. 
D)  the failure of the British to protect American colonists from attack by hostile Native Americans.

Question 10

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 $175.Ashley and Cami agree on a price of $185.Suppose the government imposes a tax of $30 on dog sitting.The tax has made Ashley and Cami worse off by a total of

Accepted Answer

A)  $30. 
B)  $25. 
C)  $10. 
D)  $5. 
A)  $30. 
B)  $25. 
C)  $10. 
D)  $5.

Question 11

The Laffer curve illustrates how taxes in markets with greater elasticities of demand compare to taxes in markets with smaller elasticities of supply.

Accepted Answer

A) True 
 B)False

Question 12

Figure 8-14

-Refer to Figure 8-14.Panel (a)and Panel (b)each illustrate a $2 tax placed on a market.In comparison to Panel (a),Panel (b)illustrates which of the following statements?

Accepted Answer

A)  When demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic. 
B)  When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic. 
C)  When supply is relatively inelastic, the deadweight loss of a tax is smaller than when supply is relatively elastic. 
D)  When supply is relatively elastic, the deadweight loss of a tax is larger than when supply is relatively inelastic. 
A)  When demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic. 
B)  When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic. 
C)  When supply is relatively inelastic, the deadweight loss of a tax is smaller than when supply is relatively elastic. 
D)  When supply is relatively elastic, the deadweight loss of a tax is larger than when supply is relatively inelastic.

Question 13

Figure 8-4
The vertical distance between points A and B represents a tax in the market.
  
-Refer to Figure 8-4.The per-unit burden of the tax on buyers is

Accepted Answer

A)  $3. 
B)  $4. 
C)  $5. 
D)  $8. 
A)  $3. 
B)  $4. 
C)  $5. 
D)  $8.

Question 14

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,buyers effectively pay what amount of the $10 tax?

Accepted Answer

A)  $0 
B)  $4 
C)  $6 
D)  $10 
A)  $0 
B)  $4 
C)  $6 
D)  $10

Question 15

Scenario 8-2
Tom mows Stephanie's lawn for $25. Tom's opportunity cost of mowing Stephanie's lawn is $20, and Stephanie's willingness to pay Tom to mow her lawn is $28.
-Refer to Scenario 8-2.If Stephanie hires Tom to mow her lawn,Tom's producer surplus is

Accepted Answer

A)  $2. 
B)  $3. 
C)  $5. 
D)  $25. 
A)  $2. 
B)  $3. 
C)  $5. 
D)  $25.

Question 16

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

Accepted Answer

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

Question 17

The Laffer curve relates

Accepted Answer

A)  the tax rate to tax revenue raised by the tax. 
B)  the tax rate to the deadweight loss of the tax. 
C)  the price elasticity of supply to the deadweight loss of the tax. 
D)  government welfare payments to the birth rate. 
A)  the tax rate to tax revenue raised by the tax. 
B)  the tax rate to the deadweight loss of the tax. 
C)  the price elasticity of supply to the deadweight loss of the tax. 
D)  government welfare payments to the birth rate.

Question 18

Figure 8-3
The vertical distance between points A and C represents a tax in the market.
  
-Refer to Figure 8-3.The price that sellers effectively receive 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 19

Figure 8-2
The vertical distance between points A and B represents a tax in the market.
  
-Refer to Figure 8-2.The amount of deadweight loss as a result of the tax is

Accepted Answer

A)  $2.50. 
B)  $5. 
C)  $7.50. 
D)  $10. 
A)  $2.50. 
B)  $5. 
C)  $7.50. 
D)  $10.

Question 20

Which of the following statements is correct regarding the imposition of a tax on gasoline?

Accepted Answer

A)  The incidence of the tax depends upon whether the buyers or the sellers are required to remit tax payments to the government. 
B)  The incidence of the tax depends upon the price elasticities of demand and supply. 
C)  The amount of tax revenue raised by the tax depends upon whether the buyers or the sellers are required to remit tax payments to the government. 
D)  The amount of tax revenue raised by the tax does not depend upon the amount of the tax per unit. 
A)  The incidence of the tax depends upon whether the buyers or the sellers are required to remit tax payments to the government. 
B)  The incidence of the tax depends upon the price elasticities of demand and supply. 
C)  The amount of tax revenue raised by the tax depends upon whether the buyers or the sellers are required to remit tax payments to the government. 
D)  The amount of tax revenue raised by the tax does not depend upon the amount of the tax per unit.

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 I+Y represents the

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3.The equilibrium price before the tax is imposed is

A tax raises the price received by sellers and lowers the price paid by buyers.

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7.Suppose a 22nd unit of the good were sold by a seller to a buyer.Which of the following statements is correct?

Andre walks Julia's dog once a day for $50 per week.Julia values this service at $60 per week,while the opportunity cost of Andre's time is $30 per week.The government places a tax of $35 per week on dog walkers.Before the tax,what is the total surplus?

The Laffer curve is the curve showing how tax revenue varies as the size of the tax varies.

When a good is taxed,the deadweight loss is larger the more elastic are demand and supply.

Which of the following is a tax on labor?

In 1776,the American Revolution was sparked by anger over

The Laffer curve illustrates how taxes in markets with greater elasticities of demand compare to taxes in markets with smaller elasticities of supply.

Figure 8-14 -Refer to Figure 8-14.Panel (a)and Panel (b)each illustrate a $2 tax placed on a market.In comparison to Panel (a),Panel (b)illustrates which of the following statements?

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4.The per-unit burden of the tax on buyers 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,buyers effectively pay what amount of the $10 tax?

Scenario 8-2 Tom mows Stephanie's lawn for $25. Tom's opportunity cost of mowing Stephanie's lawn is $20, and Stephanie's willingness to pay Tom to mow her lawn is $28. -Refer to Scenario 8-2.If Stephanie hires Tom to mow her lawn,Tom's producer surplus is

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

The Laffer curve relates

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3.The price that sellers effectively receive after the tax is imposed is

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2.The amount of deadweight loss as a result of the tax is

Which of the following statements is correct regarding the imposition of a tax on gasoline?

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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