Question 1

Figure 8-2
  
-Refer to Figure 8-2.Which of the following equations is valid for the loss in consumer surplus caused by the tax?

Accepted Answer

A) Loss of consumer surplus = (1/2)(P₃ - P₂)(Q₁ - Q₂). 
B) Loss of consumer surplus = (1/2)(P₃ - P₂)(Q₁ + Q₂). 
C) Loss of consumer surplus = (1/2)(P₃ + P₂)(Q₁ - Q₂). 
D) Loss of consumer surplus = (1/2)(P₃ + P₂)(Q₁ + Q₂). 
A) Loss of consumer surplus = (1/2)(P₃ - P₂)(Q₁ - Q₂). 
B) Loss of consumer surplus = (1/2)(P₃ - P₂)(Q₁ + Q₂). 
C) Loss of consumer surplus = (1/2)(P₃ + P₂)(Q₁ - Q₂). 
D) Loss of consumer surplus = (1/2)(P₃ + P₂)(Q₁ + Q₂).

Question 2

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.Tom's producer surplus as a result of mowing Stephanie's lawn is

Accepted Answer

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

Question 3

Concerning the labor market and taxes on labor,economists disagree about

Accepted Answer

A) the size of the tax on labor. 
B) the size of the deadweight loss of the tax on labor. 
C) whether or not a tax on labor places a wedge between the wage that firms pay and the wage that workers receive. 
D) All of the above are correct. 
A) the size of the tax on labor. 
B) the size of the deadweight loss of the tax on labor. 
C) whether or not a tax on labor places a wedge between the wage that firms pay and the wage that workers receive. 
D) All of the above are correct.

Question 4

When a tax is levied on buyers of a good,

Accepted Answer

A) government collects too little revenue to justify the tax if the equilibrium quantity of the good decreases as a result of the tax. 
B) there is an increase in the quantity of the good supplied. 
C) a wedge is placed between the price buyers pay and the price sellers effectively receive. 
D) the effective price to buyers decreases because the demand curve shifts leftward. 
A) government collects too little revenue to justify the tax if the equilibrium quantity of the good decreases as a result of the tax. 
B) there is an increase in the quantity of the good supplied. 
C) a wedge is placed between the price buyers pay and the price sellers effectively receive. 
D) the effective price to buyers decreases because the demand curve shifts leftward.

Question 5

Which of the following would likely have the smallest deadweight loss relative to the tax revenue?

Accepted Answer

A) a head tax (that is, a tax everyone must pay regardless of what one does or buys) 
B) an income tax 
C) a tax on compact discs 
D) a tax on caviar 
A) a head tax (that is, a tax everyone must pay regardless of what one does or buys) 
B) an income tax 
C) a tax on compact discs 
D) a tax on caviar

Question 6

The more mothers are pressured by society to be housekeepers and stay out of the labor force,the

Accepted Answer

A) more elastic the supply of labor will be. 
B) less elastic the supply of labor will be. 
C) flatter the labor supply curve will be. 
D) greater is the decrease in employment that will result from a tax on labor. 
A) more elastic the supply of labor will be. 
B) less elastic the supply of labor will be. 
C) flatter the labor supply curve will be. 
D) greater is the decrease in employment that will result from a tax on labor.

Question 7

Suppose that policymakers are considering placing a tax on either of two markets.In Market A,the tax will have a significant effect on the price consumers pay,but it will not affect equilibrium quantity very much.In Market B,the same tax will have only a small effect on the price consumers pay,but it will have a large effect on the equilibrium quantity.Other factors are held constant.In which market will the tax have a larger deadweight loss?

Accepted Answer

A) Market A 
B) Market B 
C) The deadweight loss will be the same in both markets. 
D) There is not enough information to answer the question. 
A) Market A 
B) Market B 
C) The deadweight loss will be the same in both markets. 
D) There is not enough information to answer the question.

Question 8

The marginal tax rate on labor income for many workers in the United States is almost

Accepted Answer

A) 30 percent. 
B) 40 percent. 
C) 50 percent. 
D) 65 percent. 
A) 30 percent. 
B) 40 percent. 
C) 50 percent. 
D) 65 percent.

Question 9

Figure 8-5
  
-Refer to Figure 8-5.What happens to consumer surplus when a tax is imposed in this market?

Accepted Answer

A) It falls by $3,600. 
B) It falls by $2,700. 
C) It falls by $1,800. 
D) It falls by $900. 
A) It falls by $3,600. 
B) It falls by $2,700. 
C) It falls by $1,800. 
D) It falls by $900.

Question 10

The benefit to sellers of participating in a market is measured by

Accepted Answer

A) the amount of taxes collected on sales of the good. 
B) producer surplus. 
C) the amount sellers receive for their product. 
D) the sellers' willingness to sell. 
A) the amount of taxes collected on sales of the good. 
B) producer surplus. 
C) the amount sellers receive for their product. 
D) the sellers' willingness to sell.

Question 11

The argument that cutting income tax rates will increase tax revenues

Accepted Answer

A) clearly has merit for the United States but not for most other countries. 
B) clearly has merit for all countries that have income taxes. 
C) may not have merit for the United States but it has merit for most other countries. 
D) is most likely to have merit for a country that has very high marginal tax rates. 
A) clearly has merit for the United States but not for most other countries. 
B) clearly has merit for all countries that have income taxes. 
C) may not have merit for the United States but it has merit for most other countries. 
D) is most likely to have merit for a country that has very high marginal tax rates.

Question 12

A tax placed on a good

Accepted Answer

A) causes the effective price to sellers to increase. 
B) affects the welfare of buyers of the good, but not the welfare of sellers. 
C) causes the size of the market for the good to shrink. 
D) creates a burden that is usually borne entirely by the sellers of the good. 
A) causes the effective price to sellers to increase. 
B) affects the welfare of buyers of the good, but not the welfare of sellers. 
C) causes the size of the market for the good to shrink. 
D) creates a burden that is usually borne entirely by the sellers of the good.

Question 13

Figure 8-4
  
-Refer to Figure 8-4.The loss in total welfare that results from the tax is represented by area

Accepted Answer

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

Question 14

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.

Question 15

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.If Ryan pays Tammy $80 to clean his house,Ryan's consumer surplus is

Accepted Answer

A) $100. 
B) $80. 
C) $70. 
D) $20. 
A) $100. 
B) $80. 
C) $70. 
D) $20.

Question 16

It does not matter whether a tax is levied on the buyers or the sellers of a good because

Accepted Answer

A) sellers always bear the full burden of the tax. 
B) buyers always bear the full burden of the tax. 
C) buyers and sellers will share the burden of the tax. 
D) None of the above is correct; the incidence of the tax does depend on whether the buyers or the sellers are required to pay the tax. 
A) sellers always bear the full burden of the tax. 
B) buyers always bear the full burden of the tax. 
C) buyers and sellers will share the burden of the tax. 
D) None of the above is correct; the incidence of the tax does depend on whether the buyers or the sellers are required to pay the tax.

Question 17

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 $250. 
B) After the tax is imposed, consumer surplus amounts to 36 percent of its pre-tax value. 
C) After the tax is imposed, producer 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 $250. 
B) After the tax is imposed, consumer surplus amounts to 36 percent of its pre-tax value. 
C) After the tax is imposed, producer surplus amounts to 36 percent of its pre-tax value. 
D) All of the above are correct.

Question 18

Unlike the supply of raw land,the supply of improvements

Accepted Answer

A) is perfectly inelastic. 
B) has an elasticity that is greater than zero. 
C) cannot be taxed, even if an attempt were made to tax it. 
D) is exempt from taxation under current law. 
A) is perfectly inelastic. 
B) has an elasticity that is greater than zero. 
C) cannot be taxed, even if an attempt were made to tax it. 
D) is exempt from taxation under current law.

Question 19

The benefit to buyers of participating in a market is measured by

Accepted Answer

A) the price elasticity of demand. 
B) consumer surplus. 
C) the amount buyers are willing to pay for the good. 
D) the equilibrium price. 
A) the price elasticity of demand. 
B) consumer surplus. 
C) the amount buyers are willing to pay for the good. 
D) the equilibrium price.

Question 20

Which of the following events is consistent with an increase in the deadweight loss of the gasoline tax from $30 million to $120 million?

Accepted Answer

A) The tax on gasoline increases from $0.30 per gallon to $0.45 per gallon. 
B) The tax on gasoline increases from $0.30 per gallon to $0.60 per gallon. 
C) The tax on gasoline increases from $0.25 per gallon to $0.45 per gallon. 
D) The tax on gasoline increases from $0.25 per gallon to $1.00 per gallon. 
A) The tax on gasoline increases from $0.30 per gallon to $0.45 per gallon. 
B) The tax on gasoline increases from $0.30 per gallon to $0.60 per gallon. 
C) The tax on gasoline increases from $0.25 per gallon to $0.45 per gallon. 
D) The tax on gasoline increases from $0.25 per gallon to $1.00 per gallon.

Exam 8: Application: the Costs of Taxation

Figure 8-2 -Refer to Figure 8-2.Which of the following equations is valid for the loss in consumer surplus caused by the 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.Tom's producer surplus as a result of mowing Stephanie's lawn is

Concerning the labor market and taxes on labor,economists disagree about

When a tax is levied on buyers of a good,

Which of the following would likely have the smallest deadweight loss relative to the tax revenue?

The more mothers are pressured by society to be housekeepers and stay out of the labor force,the

The marginal tax rate on labor income for many workers in the United States is almost

Figure 8-5 -Refer to Figure 8-5.What happens to consumer surplus when a tax is imposed in this market?

The benefit to sellers of participating in a market is measured by

The argument that cutting income tax rates will increase tax revenues

A tax placed on a good

Figure 8-4 -Refer to Figure 8-4.The loss in total welfare that results from the tax is represented by area

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

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.If Ryan pays Tammy $80 to clean his house,Ryan's consumer surplus is

It does not matter whether a tax is levied on the buyers or the sellers of a good because

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

Unlike the supply of raw land,the supply of improvements

The benefit to buyers of participating in a market is measured by

Which of the following events is consistent with an increase in the deadweight loss of the gasoline tax from $30 million to $120 million?

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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