Question 1

When a tax is levied on a good,

Accepted Answer

A)  neither buyers nor sellers are made worse off. 
B)  only sellers are made worse off. 
C)  only buyers are made worse off. 
D)  both buyers and sellers are made worse off. 
A)  neither buyers nor sellers are made worse off. 
B)  only sellers are made worse off. 
C)  only buyers are made worse off. 
D)  both buyers and sellers are made worse off.

Question 2

Total surplus is always equal to the sum of consumer surplus and producer surplus.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following statements correctly describes the relationship between the size of the deadweight loss and the amount of tax revenue as the size of a tax increases from a small tax to a medium tax and finally to a large tax?

Accepted Answer

A)  Both the size of the deadweight loss and tax revenue increase. 
B)  The size of the deadweight loss increases, but the tax revenue decreases. 
C)  The size of the deadweight loss increases, but the tax revenue first increases, then decreases. 
D)  Both the size of the deadweight loss and tax revenue decrease. 
A)  Both the size of the deadweight loss and tax revenue increase. 
B)  The size of the deadweight loss increases, but the tax revenue decreases. 
C)  The size of the deadweight loss increases, but the tax revenue first increases, then decreases. 
D)  Both the size of the deadweight loss and tax revenue decrease.

Question 4

Supply-side economics is a term associated with the views of

Accepted Answer

A)  Ronald Reagan and Arthur Laffer. 
B)  Karl Marx. 
C)  Bill Clinton and Greg Mankiw. 
D)  Milton Friedman. 
A)  Ronald Reagan and Arthur Laffer. 
B)  Karl Marx. 
C)  Bill Clinton and Greg Mankiw. 
D)  Milton Friedman.

Question 5

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

Accepted Answer

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

Question 6

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 deadweight loss associated with the tax is equal to

Accepted Answer

A)  P3ACP1. 
B)  ABC. 
C)  P2ADP3. 
D)  P1DCP2. 
A)  P3ACP1. 
B)  ABC. 
C)  P2ADP3. 
D)  P1DCP2.

Question 7

Figure 8-12
  
-Refer to Figure 8-12.Which of the following statements is correct?

Accepted Answer

A)  Supply 1 is more elastic than supply 2. 
B)  Demand 2 is more elastic than demand 1. 
C)  Demand 1 is more elastic than supply 1. 
D)  All of the above are correct. 
A)  Supply 1 is more elastic than supply 2. 
B)  Demand 2 is more elastic than demand 1. 
C)  Demand 1 is more elastic than supply 1. 
D)  All of the above are correct.

Question 8

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 tax revenue received by the government is

Accepted Answer

A)  $2.50. 
B)  $4. 
C)  $5. 
D)  $9. 
A)  $2.50. 
B)  $4. 
C)  $5. 
D)  $9.

Question 9

As the tax on a good increases from $1 per unit to $2 per unit to $3 per unit and so on,the

Accepted Answer

A)  tax revenue increases at first, but it eventually peaks and then decreases. 
B)  deadweight loss increases at first, but it eventually peaks and then decreases. 
C)  tax revenue always increases, and the deadweight loss always increases. 
D)  tax revenue always decreases, and the deadweight loss always increases. 
A)  tax revenue increases at first, but it eventually peaks and then decreases. 
B)  deadweight loss increases at first, but it eventually peaks and then decreases. 
C)  tax revenue always increases, and the deadweight loss always increases. 
D)  tax revenue always decreases, and the deadweight loss always increases.

Question 10

Economists disagree on whether labor taxes have a small or large deadweight loss.

Accepted Answer

A) True 
 B)False

Question 11

Assume that for good X the supply curve for a good is a typical,upward-sloping straight line,and the demand curve is a typical downward-sloping straight line.If the good is taxed,and the tax is doubled,the

Accepted Answer

A)  base of the triangle that represents the deadweight loss quadruples. 
B)  height of the triangle that represents the deadweight loss doubles. 
C)  deadweight loss of the tax doubles. 
D)  All of the above are correct. 
A)  base of the triangle that represents the deadweight loss quadruples. 
B)  height of the triangle that represents the deadweight loss doubles. 
C)  deadweight loss of the tax doubles. 
D)  All of the above are correct.

Question 12

If the size of a tax doubles,the deadweight loss doubles.

Accepted Answer

A) True 
 B)False

Question 13

Figure 8-12
  
-Refer to Figure 8-12.Which of the following combinations will maximize the deadweight loss from a tax?

Accepted Answer

A)  supply 1 and demand 1 
B)  supply 2 and demand 2 
C)  supply 1 and demand 2 
D)  supply 2 and demand 1 
A)  supply 1 and demand 1 
B)  supply 2 and demand 2 
C)  supply 1 and demand 2 
D)  supply 2 and demand 1

Question 14

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,consumer 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 15

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,the equilibrium price and quantity are

Accepted Answer

A)  $16 and 300. 
B)  $10 and 600. 
C)  $10 and 300. 
D)  $6 and 300. 
A)  $16 and 300. 
B)  $10 and 600. 
C)  $10 and 300. 
D)  $6 and 300.

Question 16

The Laffer curve illustrates that

Accepted Answer

A)  deadweight loss rises by the square of the increase in a tax. 
B)  deadweight loss rises exponentially as a tax increases. 
C)  tax revenue first rises, then falls as a tax increases. 
D)  Both a) and b) are correct. 
A)  deadweight loss rises by the square of the increase in a tax. 
B)  deadweight loss rises exponentially as a tax increases. 
C)  tax revenue first rises, then falls as a tax increases. 
D)  Both a) and b) are correct.

Question 17

In a recent research paper published by the European Central Bank,two economists concluded that U.S.tax revenues would

Accepted Answer

A)  increase if labor taxes were increased or if capital income taxes were increased. 
B)  increase if labor taxes were increased, but tax revenues would decrease if capital income taxes were increased. 
C)  decrease if labor taxes were increased, but tax revenues would increase if capital income taxes were increased. 
D)  decrease if labor taxes were increased or if capital income taxes were increased. 
A)  increase if labor taxes were increased or if capital income taxes were increased. 
B)  increase if labor taxes were increased, but tax revenues would decrease if capital income taxes were increased. 
C)  decrease if labor taxes were increased, but tax revenues would increase if capital income taxes were increased. 
D)  decrease if labor taxes were increased or if capital income taxes were increased.

Question 18

In the market for widgets,the supply curve is the typical upward-sloping straight line,and the demand curve is the typical downward-sloping straight line.The equilibrium quantity in the market for widgets is 250 per month when there is no tax.Then a tax of $6 per widget is imposed.As a result,the government is able to raise $750 per month in tax revenue.We can conclude that the after-tax quantity of widgets is

Accepted Answer

A)  75 per month. 
B)  100 per month. 
C)  125 per month. 
D)  150 per month. 
A)  75 per month. 
B)  100 per month. 
C)  125 per month. 
D)  150 per month.

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 loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is

Accepted Answer

A)  $0. 
B)  $1.50. 
C)  $3. 
D)  $4.50. 
A)  $0. 
B)  $1.50. 
C)  $3. 
D)  $4.50.

Question 20

Assume that for good X the supply curve for a good is a typical,upward-sloping straight line,and the demand curve is a typical downward-sloping straight line.If the good is taxed,and the tax is doubled,the

Accepted Answer

A)  base of the triangle that represents the deadweight loss doubles. 
B)  height of the triangle that represents the deadweight loss doubles. 
C)  deadweight loss of the tax quadruples. 
D)  All of the above are correct. 
A)  base of the triangle that represents the deadweight loss doubles. 
B)  height of the triangle that represents the deadweight loss doubles. 
C)  deadweight loss of the tax quadruples. 
D)  All of the above are correct.

Exam 8: Application: The Costs of Taxation.

When a tax is levied on a good,

Total surplus is always equal to the sum of consumer surplus and producer surplus.

Which of the following statements correctly describes the relationship between the size of the deadweight loss and the amount of tax revenue as the size of a tax increases from a small tax to a medium tax and finally to a large tax?

Supply-side economics is a term associated with the views of

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

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 deadweight loss associated with the tax is equal to

Figure 8-12 -Refer to Figure 8-12.Which of the following statements is correct?

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 tax revenue received by the government is

As the tax on a good increases from $1 per unit to $2 per unit to $3 per unit and so on,the

Economists disagree on whether labor taxes have a small or large deadweight loss.

Assume that for good X the supply curve for a good is a typical,upward-sloping straight line,and the demand curve is a typical downward-sloping straight line.If the good is taxed,and the tax is doubled,the

If the size of a tax doubles,the deadweight loss doubles.

Figure 8-12 -Refer to Figure 8-12.Which of the following combinations will maximize the deadweight loss from a tax?

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,consumer surplus in this market is

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,the equilibrium price and quantity are

The Laffer curve illustrates that

In a recent research paper published by the European Central Bank,two economists concluded that U.S.tax revenues would

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 for those buyers of the good who continue to buy it after the tax is imposed is

Assume that for good X the supply curve for a good is a typical,upward-sloping straight line,and the demand curve is a typical downward-sloping straight line.If the good is taxed,and the tax is doubled,the

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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