Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Figure 8-4
  
-Refer to Figure 8-4.The price that buyers effectively pay after the tax is imposed is

Accepted Answer

A) P₁. 
B) P₂. 
C) P₃. 
D) impossible to determine from the figure. 
A) P₁. 
B) P₂. 
C) P₃. 
D) impossible to determine from the figure.

Question 3

Figure 8-3
  
-Refer to Figure 8-3.The tax results in a loss of producer surplus that amounts to

Accepted Answer

A) $210. 
B) $510. 
C) $600. 
D) $660. 
A) $210. 
B) $510. 
C) $600. 
D) $660.

Question 4

Using the graph shown,determine the value of each of the following:
a.equilibrium price before the tax
b.consumer surplus before the tax
c.producer surplus before the tax
d.total surplus before the tax
e.consumer surplus after the tax
f.producer surplus after the tax
g.total tax revenue to the government
h.total surplus (consumer surplus + producer surplus + tax revenue) after the tax
i.deadweight loss

Accepted Answer

a. $10
b. $3600
c. $

Question 5

A tax on unimproved land falls entirely on landowners,because the supply of land is perfectly inelastic.

Accepted Answer

A) True 
 B)False

Question 6

Figure 8-6
  
-Refer to Figure 8-6.Which of the following statements is correct?

Accepted Answer

A) Total surplus before the tax was imposed amounted to $225. 
B) After the tax is imposed, consumer surplus amounts to 25 percent of its pre-tax value. 
C) After the tax is imposed, the sum of producer surplus and consumer surplus amounts to 36 percent of its pre-tax value. 
D) All of the above are correct. 
A) Total surplus before the tax was imposed amounted to $225. 
B) After the tax is imposed, consumer surplus amounts to 25 percent of its pre-tax value. 
C) After the tax is imposed, the sum of producer surplus and consumer surplus amounts to 36 percent of its pre-tax value. 
D) All of the above are correct.

Question 7

Because the supply of land is perfectly elastic,the deadweight loss of a tax on land is enormous.

Accepted Answer

A) True 
 B)False

Question 8

The larger the deadweight loss from taxation,the larger the cost of government programs.

Accepted Answer

A) True 
 B)False

Question 9

When a tax is imposed on a good for which demand is elastic and supply is elastic,

Accepted Answer

A) sellers effectively pay the majority of the tax. 
B) buyers effectively pay the majority of the tax. 
C) the tax burden is equally divided between buyers and sellers. 
D) None of the above is correct; further information would be required to determine how the burden of the tax is distributed between buyers and sellers. 
A) sellers effectively pay the majority of the tax. 
B) buyers effectively pay the majority of the tax. 
C) the tax burden is equally divided between buyers and sellers. 
D) None of the above is correct; further information would be required to determine how the burden of the tax is distributed between buyers and sellers.

Question 10

To measure the gains and losses from a tax on a good,economists use the tools of

Accepted Answer

A) macroeconomics. 
B) welfare economics. 
C) international-trade theory. 
D) circular-flow analysis. 
A) macroeconomics. 
B) welfare economics. 
C) international-trade theory. 
D) circular-flow analysis.

Question 11

When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic,

Accepted Answer

A) buyers of the good will bear most of the burden of the tax. 
B) sellers of the good will bear most of the burden of the tax. 
C) the effective price paid by buyers of the good will decrease. 
D) the size of the market for the good will expand. 
A) buyers of the good will bear most of the burden of the tax. 
B) sellers of the good will bear most of the burden of the tax. 
C) the effective price paid by buyers of the good will decrease. 
D) the size of the market for the good will expand.

Question 12

Nobel Prize-winning economist Milton Friedman said that,"In my opinion,the least bad tax is the property tax on the unimproved value of land." Why?

Accepted Answer

A) Land owners can afford the tax better than other people. 
B) A tax on unimproved land would be sufficient to fund government, so all other taxes could be abolished. 
C) Such a tax could generate more government revenue than any tax on labor or capital. 
D) A tax on unimproved land would have no deadweight loss. 
A) Land owners can afford the tax better than other people. 
B) A tax on unimproved land would be sufficient to fund government, so all other taxes could be abolished. 
C) Such a tax could generate more government revenue than any tax on labor or capital. 
D) A tax on unimproved land would have no deadweight loss.

Question 13

Henry George argued that the government should raise

Accepted Answer

A) all of its revenue from a tax on land. 
B) all of its revenue from taxes on labor. 
C) most of its revenue from consumption taxes. 
D) tax revenue from multiple and diverse taxes. 
A) all of its revenue from a tax on land. 
B) all of its revenue from taxes on labor. 
C) most of its revenue from consumption taxes. 
D) tax revenue from multiple and diverse taxes.

Question 14

Today's property tax

Accepted Answer

A) taxes only raw land. 
B) is exactly the same as Henry George's single-tax proposal. 
C) taxes land and the improvements to land. 
D) has no deadweight loss since the amount of revenue going to the government equals the reduction in the landowners' surplus. 
A) taxes only raw land. 
B) is exactly the same as Henry George's single-tax proposal. 
C) taxes land and the improvements to land. 
D) has no deadweight loss since the amount of revenue going to the government equals the reduction in the landowners' surplus.

Question 15

The higher a country's tax rates,the more likely that country will be

Accepted Answer

A) at the top of the Laffer curve. 
B) on the positively sloped part of the Laffer curve. 
C) on the negatively sloped part of the Laffer curve. 
D) experiencing small deadweight losses. 
A) at the top of the Laffer curve. 
B) on the positively sloped part of the Laffer curve. 
C) on the negatively sloped part of the Laffer curve. 
D) experiencing small deadweight losses.

Question 16

A tax places a wedge between the price buyers pay and the price sellers receive.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following taxes is,at least in large part,a tax on labor?

Accepted Answer

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

Question 18

Figure 8-6
  
-Refer to Figure 8-6.As a result of the tax,

Accepted Answer

A) consumer surplus decreases from $150 to $60. 
B) producer surplus decreases from $125 to $45. 
C) the market experiences a deadweight loss of $45. 
D) All of the above are correct. 
A) consumer surplus decreases from $150 to $60. 
B) producer surplus decreases from $125 to $45. 
C) the market experiences a deadweight loss of $45. 
D) All of the above are correct.

Question 19

Scenario 8-1
Ryan would be willing to pay as much as $100 per week to have his house cleaned. Tammy's opportunity cost of cleaning Ryan's house is $70 per week.
-Refer to Scenario 8-1.Assume Ryan is required to pay a tax of $40 when he hires someone to clean his house for a week.Which of the following is correct?

Accepted Answer

A) Ryan will now clean his own house. 
B) Tammy will continue to clean Ryan's house but her producer surplus will decline. 
C) Total economic welfare (consumer surplus plus producer surplus plus tax revenue) will increase. 
D) Ryan will continue to hire Tammy to clean his house but his consumer surplus will decline. 
A) Ryan will now clean his own house. 
B) Tammy will continue to clean Ryan's house but her producer surplus will decline. 
C) Total economic welfare (consumer surplus plus producer surplus plus tax revenue) will increase. 
D) Ryan will continue to hire Tammy to clean his house but his consumer surplus will decline.

Question 20

Using demand and supply diagrams,show the difference in deadweight loss between (a)a market with inelastic demand and supply and (b)a market with elastic demand and supply.

Accepted Answer

The answer of Using demand and supply diagrams,show the difference...

Exam 8: Application: the Costs of Taxation

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

Figure 8-4 -Refer to Figure 8-4.The price that buyers effectively pay after the tax is imposed is

Figure 8-3 -Refer to Figure 8-3.The tax results in a loss of producer surplus that amounts to

A tax on unimproved land falls entirely on landowners,because the supply of land is perfectly inelastic.

Figure 8-6 -Refer to Figure 8-6.Which of the following statements is correct?

Because the supply of land is perfectly elastic,the deadweight loss of a tax on land is enormous.

The larger the deadweight loss from taxation,the larger the cost of government programs.

When a tax is imposed on a good for which demand is elastic and supply is elastic,

To measure the gains and losses from a tax on a good,economists use the tools of

When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic,

Nobel Prize-winning economist Milton Friedman said that,"In my opinion,the least bad tax is the property tax on the unimproved value of land." Why?

Henry George argued that the government should raise

Today's property tax

The higher a country's tax rates,the more likely that country will be

A tax places a wedge between the price buyers pay and the price sellers receive.

Which of the following taxes is,at least in large part,a tax on labor?

Figure 8-6 -Refer to Figure 8-6.As a result of the tax,

Using demand and supply diagrams,show the difference in deadweight loss between (a)a market with inelastic demand and supply and (b)a market with elastic demand and supply.

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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