Question 1

Ronald Reagan believed that reducing income tax rates would

Accepted Answer

A) do little, if anything, to encourage hard work. 
B) result in large increases in deadweight losses. 
C) raise economic well-being and perhaps even tax revenue. 
D) lower economic well-being, even though tax revenue could possibly increase. 
A) do little, if anything, to encourage hard work. 
B) result in large increases in deadweight losses. 
C) raise economic well-being and perhaps even tax revenue. 
D) lower economic well-being, even though tax revenue could possibly increase. C

Question 2

Figure 8-7 The graph below represents a $10 per unit tax on a good. On the graph, Q represents quantity and P represents price.
  
-Refer to Figure 8-7.The tax causes consumer surplus to decrease by the area

Accepted Answer

A) a. 
B) B + C. 
C) A + B + C. 
D) A + B + C+ D + F. 
A) a. 
B) B + C. 
C) A + B + C. 
D) A + B + C+ D + F. B

Question 3

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

Accepted Answer

A) True 
 B)False  True

Question 4

The demand for bread is less elastic than the demand for donuts;hence,a tax on bread will create a larger deadweight loss than will the same tax on donuts,other things equal.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements is correct?

Accepted Answer

A) In 2005, the combined Social Security-Medicare tax amounted to 15.3 percent of a worker's income. 
B) The White House budget office has asserted that Social Security and Medicare have promised to pay out $18 trillion more in benefits than they will receive in revenue in coming decades. 
C) If payroll taxes are increased to maintain current levels of Social Security and Medicare benefits, an expected result would be fewer hours worked per week by the average American worker. 
D) All of the above are correct. 
A) In 2005, the combined Social Security-Medicare tax amounted to 15.3 percent of a worker's income. 
B) The White House budget office has asserted that Social Security and Medicare have promised to pay out $18 trillion more in benefits than they will receive in revenue in coming decades. 
C) If payroll taxes are increased to maintain current levels of Social Security and Medicare benefits, an expected result would be fewer hours worked per week by the average American worker. 
D) All of the above are correct.

Question 6

When a tax is levied on buyers,

Accepted Answer

A) the supply curves shifts upward by the amount of the tax. 
B) the tax creates a wedge between the price buyers effectively pay and the price sellers receive. 
C) the tax has no effect on the well-being of sellers. 
D) All of the above are correct. 
A) the supply curves shifts upward by the amount of the tax. 
B) the tax creates a wedge between the price buyers effectively pay and the price sellers receive. 
C) the tax has no effect on the well-being of sellers. 
D) All of the above are correct.

Question 7

Figure 8-5
  
-Refer to Figure 8-5.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 8

Figure 8-6
  
-Refer to Figure 8-6.Suppose a 20th unit of the good were sold by a seller to a buyer.Which of the following statements is correct?

Accepted Answer

A) On the 20th unit, the difference between the buyer's value and the seller's cost is less than the tax per unit. 
B) On the 20th unit, the difference between the buyer's value and the seller's cost is greater than the tax per unit. 
C) On the 20th 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 20th unit with or without the tax in place. 
A) On the 20th unit, the difference between the buyer's value and the seller's cost is less than the tax per unit. 
B) On the 20th unit, the difference between the buyer's value and the seller's cost is greater than the tax per unit. 
C) On the 20th 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 20th unit with or without the tax in place.

Question 9

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

Accepted Answer

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

Question 10

Figure 8-1
  
-Refer to Figure 8-1.When the market is in equilibrium,total surplus is represented by area

Accepted Answer

A) A + B. 
B) B + C. 
C) C + D. 
D) A + D. 
A) A + B. 
B) B + C. 
C) C + D. 
D) A + D.

Question 11

Figure 8-4
  
-Refer to Figure 8-4.The tax causes a reduction in producer surplus that is represented by area

Accepted Answer

A) a. 
B) B + C. 
C) D + E. 
D) F. 
A) a. 
B) B + C. 
C) D + E. 
D) F.

Question 12

Figure 8-5
  
-Refer to Figure 8-5.When a 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 13

The supply curve and the demand curve for a good are straight lines.When the good is taxed,the area on the relevant supply-and-demand graph that represents

Accepted Answer

A) government's tax revenue is a rectangle. 
B) the deadweight loss of the tax is a triangle. 
C) the loss of consumer surplus caused by the tax is neither a rectangle nor a triangle. 
D) All of the above are correct. 
A) government's tax revenue is a rectangle. 
B) the deadweight loss of the tax is a triangle. 
C) the loss of consumer surplus caused by the tax is neither a rectangle nor a triangle. 
D) All of the above are correct.

Question 14

Figure 8-7 The graph below represents a $10 per unit tax on a good. On the graph, Q represents quantity and P represents price.
  
-Refer to Figure 8-7.After the tax goes into effect,consumer surplus is the area

Accepted Answer

A) a. 
B) B + C. 
C) A + B + C. 
D) A + B + D + J + K. 
A) a. 
B) B + C. 
C) A + B + C. 
D) A + B + D + J + K.

Question 15

Taxes

Accepted Answer

A) distort incentives and this distortion causes markets to allocate resources inefficiently. 
B) distort incentives and this distortion results in an inequitable allocation of resources. 
C) do not distort incentives, but they do cause markets to allocate resources inefficiently. 
D) do not distort incentives, but they do result in an inequitable allocation of resources. 
A) distort incentives and this distortion causes markets to allocate resources inefficiently. 
B) distort incentives and this distortion results in an inequitable allocation of resources. 
C) do not distort incentives, but they do cause markets to allocate resources inefficiently. 
D) do not distort incentives, but they do result in an inequitable allocation of resources.

Question 16

Suppose the tax on gasoline is raised from $0.50 per gallon to $2.50 per gallon.As a result,

Accepted Answer

A) tax revenue necessarily increases. 
B) the deadweight loss of the tax necessarily increases. 
C) the supply curve for gasoline necessarily becomes steeper. 
D) All of the above are correct. 
A) tax revenue necessarily increases. 
B) the deadweight loss of the tax necessarily increases. 
C) the supply curve for gasoline necessarily becomes steeper. 
D) All of the above are correct.

Question 17

A tax levied on the sellers of a good shifts the

Accepted Answer

A) supply curve upward (or to the left). 
B) supply curve downward (or to the right). 
C) demand curve upward (or to the right). 
D) demand curve downward (or to the left). 
A) supply curve upward (or to the left). 
B) supply curve downward (or to the right). 
C) demand curve upward (or to the right). 
D) demand curve downward (or to the left).

Question 18

Suppose a tax of $1 per unit is imposed on a good.The more elastic the demand for the good,other things equal,

Accepted Answer

A) the larger is the decrease in quantity demanded as a result of the tax. 
B) the smaller is the tax burden on buyers relative to the tax burden on sellers. 
C) the larger is the deadweight loss of the tax. 
D) All of the above are correct. 
A) the larger is the decrease in quantity demanded as a result of the tax. 
B) the smaller is the tax burden on buyers relative to the tax burden on sellers. 
C) the larger is the deadweight loss of the tax. 
D) All of the above are correct.

Question 19

Figure 8-5
  
-Refer to Figure 8-5.When a tax is imposed in this market,the price buyers effectively pay is

Accepted Answer

A) $10. 
B) $16. 
C) $22. 
D) between $10 and $16. 
A) $10. 
B) $16. 
C) $22. 
D) between $10 and $16.

Question 20

When Ronald Reagan ran for the presidency in 1980,he pledged to bring about

Accepted Answer

A) large cuts in personal income taxes. 
B) large cuts in payroll taxes. 
C) large increases in personal income taxes. 
D) large increases in payroll taxes. 
A) large cuts in personal income taxes. 
B) large cuts in payroll taxes. 
C) large increases in personal income taxes. 
D) large increases in payroll taxes.

Exam 8: Application: the Costs of Taxation

Ronald Reagan believed that reducing income tax rates would

Figure 8-7 The graph below represents a $10 per unit tax on a good. On the graph, Q represents quantity and P represents price. -Refer to Figure 8-7.The tax causes consumer surplus to decrease by the area

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

The demand for bread is less elastic than the demand for donuts;hence,a tax on bread will create a larger deadweight loss than will the same tax on donuts,other things equal.

Which of the following statements is correct?

When a tax is levied on buyers,

Figure 8-5 -Refer to Figure 8-5.Without a tax,consumer surplus in this market is

Figure 8-6 -Refer to Figure 8-6.Suppose a 20th unit of the good were sold by a seller to a buyer.Which of the following statements is correct?

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

Figure 8-1 -Refer to Figure 8-1.When the market is in equilibrium,total surplus is represented by area

Figure 8-4 -Refer to Figure 8-4.The tax causes a reduction in producer surplus that is represented by area

Figure 8-5 -Refer to Figure 8-5.When a tax is imposed in this market,consumer surplus is

The supply curve and the demand curve for a good are straight lines.When the good is taxed,the area on the relevant supply-and-demand graph that represents

Figure 8-7 The graph below represents a $10 per unit tax on a good. On the graph, Q represents quantity and P represents price. -Refer to Figure 8-7.After the tax goes into effect,consumer surplus is the area

Taxes

Suppose the tax on gasoline is raised from $0.50 per gallon to $2.50 per gallon.As a result,

A tax levied on the sellers of a good shifts the

Suppose a tax of $1 per unit is imposed on a good.The more elastic the demand for the good,other things equal,

Figure 8-5 -Refer to Figure 8-5.When a tax is imposed in this market,the price buyers effectively pay is

When Ronald Reagan ran for the presidency in 1980,he pledged to bring about

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Applications

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

Oligopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short Run Trade Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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