Question 1

Illustrate on three demand-and-supply graphs how the size of a tax (small,medium and large)can alter total revenue and deadweight loss.

Accepted Answer

The answer of Illustrate on three demand-and-supply graphs how the...

Question 2

According to the economist Milton Friedman,the "least bad" tax is a tax on

Accepted Answer

A) income received from profits and interest. 
B) labor income. 
C) the unimproved value of land. 
D) the value of land including the improvements to the land. 
A) income received from profits and interest. 
B) labor income. 
C) the unimproved value of land. 
D) the value of land including the improvements to the land.

Question 3

Figure 8-3
  
-Refer to Figure 8-3.The amount of tax revenue received by the government is equal to

Accepted Answer

A) $210. 
B) $420. 
C) $560. 
D) $980. 
A) $210. 
B) $420. 
C) $560. 
D) $980.

Question 4

Figure 8-4
  
-Refer to Figure 8-4.Producer surplus before the tax was levied is represented by area

Accepted Answer

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

Question 5

Figure 8-4
  
-Refer to Figure 8-4.The total surplus (consumer,producer,and government)with the tax is represented by area

Accepted Answer

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

Question 6

Suppose that instead of a supply-demand diagram,you are given the following information:
Qs = 100 + 3P
Qd = 400 - 2P
From this information compute equilibrium price and quantity.Now suppose that a tax is placed on buyers so that
Qd = 400 - (2P + T).
If T = 15,solve for the new equilibrium price and quantity.(Note: P is the price received by sellers and P + T is the price paid by buyers.)Compare these answers for equilibrium price and quantity with your first answers.What does this show you?

Accepted Answer

Prior to the tax,the equilibrium price w

Question 7

The decrease in total surplus that results from a market distortion,such as a tax,is called a

Accepted Answer

A) wedge loss. 
B) revenue loss. 
C) deadweight loss. 
D) shrinkage of consumer surplus. 
A) wedge loss. 
B) revenue loss. 
C) deadweight loss. 
D) shrinkage of consumer surplus.

Question 8

Figure 8-2
  
-Refer to Figure 8-2.The per unit burden of the tax on buyers is

Accepted Answer

A) P₃ - P₁. 
B) P₃ - P₂. 
C) P₂ - P₁. 
D) Q₂ - Q₁. 
A) P₃ - P₁. 
B) P₃ - P₂. 
C) P₂ - P₁. 
D) Q₂ - Q₁.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) a. 
B) B. 
C) C. 
D) D. 
A) a. 
B) B. 
C) C. 
D) D.

Question 11

When a country is on the downward-sloping side of the Laffer curves,a cut in the tax rate will

Accepted Answer

A) decrease tax revenue and decrease the deadweight loss. 
B) decrease tax revenue and increase the deadweight loss. 
C) increase tax revenue and decrease the deadweight loss. 
D) increase tax revenue and increase the deadweight loss. 
A) decrease tax revenue and decrease the deadweight loss. 
B) decrease tax revenue and increase the deadweight loss. 
C) increase tax revenue and decrease the deadweight loss. 
D) increase tax revenue and increase the deadweight loss.

Question 12

Figure 8-4
  
-Refer to Figure 8-4.The tax causes a reduction in consumer 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 13

Figure 8-6
  
-Refer to Figure 8-6.The deadweight loss associated with this tax amounts to

Accepted Answer

A) $60, and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses. 
B) $60, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers. 
C) $40, and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses. 
D) $40, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers. 
A) $60, and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses. 
B) $60, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers. 
C) $40, and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses. 
D) $40, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers.

Question 14

Which of the following statements is correct regarding a tax on a good and the resulting deadweight loss?

Accepted Answer

A) The greater are the price elasticities of supply and demand, the greater is the deadweight loss. 
B) The greater is the price elasticity of supply and the smaller is the price elasticity of demand, the greater is the deadweight loss. 
C) The smaller are the decreases in quantity demanded and quantity supplied, the greater the deadweight loss. 
D) The smaller is the wedge between the effective price to sellers and the effective price to buyers, the greater is the deadweight loss. 
A) The greater are the price elasticities of supply and demand, the greater is the deadweight loss. 
B) The greater is the price elasticity of supply and the smaller is the price elasticity of demand, the greater is the deadweight loss. 
C) The smaller are the decreases in quantity demanded and quantity supplied, the greater the deadweight loss. 
D) The smaller is the wedge between the effective price to sellers and the effective price to buyers, the greater is the deadweight loss.

Question 15

Suppose a tax is levied on the buyers of a good;

Accepted Answer

A) then the supply curve shifts upward by the amount of the tax. 
B) then the quantity supplied decreases for all conceivable prices of the good. 
C) this means that the buyers of the good will send tax payments to the government. 
D) this means that the buyers of the good will pay a higher effective price for the good, not that they will send tax payments to the government. 
A) then the supply curve shifts upward by the amount of the tax. 
B) then the quantity supplied decreases for all conceivable prices of the good. 
C) this means that the buyers of the good will send tax payments to the government. 
D) this means that the buyers of the good will pay a higher effective price for the good, not that they will send tax payments to the government.

Question 16

Taxes cause deadweight losses because they

Accepted Answer

A) lead to losses in surplus for consumers and for producers that, when taken together, exceed tax revenue collected by the government. 
B) distort incentives to both buyers and sellers. 
C) prevent buyers and sellers from realizing some of the gains from trade. 
D) All of the above are correct. 
A) lead to losses in surplus for consumers and for producers that, when taken together, exceed tax revenue collected by the government. 
B) distort incentives to both buyers and sellers. 
C) prevent buyers and sellers from realizing some of the gains from trade. 
D) All of the above are correct.

Question 17

Relative to a situation in which liquor is not taxed,the imposition of a tax on liquor causes

Accepted Answer

A) the equilibrium quantity of liquor demanded to decrease and the equilibrium quantity of liquor supplied to decrease. 
B) the equilibrium quantity of liquor demanded to decrease and the equilibrium quantity of liquor supplied to increase. 
C) the equilibrium quantity of liquor demanded to increase and the equilibrium quantity of liquor supplied to decrease. 
D) the equilibrium quantity of liquor demanded to increase and the equilibrium quantity of liquor supplied to increase. 
A) the equilibrium quantity of liquor demanded to decrease and the equilibrium quantity of liquor supplied to decrease. 
B) the equilibrium quantity of liquor demanded to decrease and the equilibrium quantity of liquor supplied to increase. 
C) the equilibrium quantity of liquor demanded to increase and the equilibrium quantity of liquor supplied to decrease. 
D) the equilibrium quantity of liquor demanded to increase and the equilibrium quantity of liquor supplied to increase.

Question 18

Who once said that taxes are the price we pay for a civilized society?

Accepted Answer

A) Aristotle 
B) George Washington 
C) Oliver Wendell Holmes 
D) Ronald Reagan 
A) Aristotle 
B) George Washington 
C) Oliver Wendell Holmes 
D) Ronald Reagan

Question 19

Normally,both buyers and sellers of a good become worse off when the good is taxed.

Accepted Answer

A) True 
 B)False

Question 20

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 decrease in consumer and producer surpluses that is not offset by tax revenue is the area

Accepted Answer

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

Exam 8: Application: the Costs of Taxation

Illustrate on three demand-and-supply graphs how the size of a tax (small,medium and large)can alter total revenue and deadweight loss.

According to the economist Milton Friedman,the "least bad" tax is a tax on

Figure 8-3 -Refer to Figure 8-3.The amount of tax revenue received by the government is equal to

Figure 8-4 -Refer to Figure 8-4.Producer surplus before the tax was levied is represented by area

Figure 8-4 -Refer to Figure 8-4.The total surplus (consumer,producer,and government)with the tax is represented by area

The decrease in total surplus that results from a market distortion,such as a tax,is called a

Figure 8-2 -Refer to Figure 8-2.The per unit burden of the tax on buyers is

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

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

When a country is on the downward-sloping side of the Laffer curves,a cut in the tax rate will

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

Figure 8-6 -Refer to Figure 8-6.The deadweight loss associated with this tax amounts to

Which of the following statements is correct regarding a tax on a good and the resulting deadweight loss?

Suppose a tax is levied on the buyers of a good;

Taxes cause deadweight losses because they

Relative to a situation in which liquor is not taxed,the imposition of a tax on liquor causes

Who once said that taxes are the price we pay for a civilized society?

Normally,both buyers and sellers of a good become worse off when the good is taxed.

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 decrease in consumer and producer surpluses that is not offset by tax revenue is the area

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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