Question 1

When cigarettes are taxed and sellers of cigarettes are required to pay the tax to the government,

Accepted Answer

A) the size of the cigarette market is reduced. 
B) the price paid by buyers of cigarettes decreases. 
C) the demand for cigarettes decreases. 
D) there is a movement downward and to the right along the demand curve for cigarettes. 
A) the size of the cigarette market is reduced. 
B) the price paid by buyers of cigarettes decreases. 
C) the demand for cigarettes decreases. 
D) there is a movement downward and to the right along the demand curve for cigarettes.

Question 2

If T represents the size of the tax on a good and Q represents the quantity of the good that is sold,total tax revenue received by government can be expressed as

Accepted Answer

A) T/Q. 
B) T + Q. 
C) T x Q. 
D) (T x Q)/Q. 
A) T/Q. 
B) T + Q. 
C) T x Q. 
D) (T x Q)/Q.

Question 3

Deadweight loss measures the

Accepted Answer

A) loss in a market to buyers and sellers that is not offset by an increase in government revenue. 
B) loss in revenue to the government when buyers choose to buy less of the product because of the tax. 
C) loss of equity in a market due to government intervention. 
D) loss of total revenue to business firms due to the price wedge caused by the tax. 
A) loss in a market to buyers and sellers that is not offset by an increase in government revenue. 
B) loss in revenue to the government when buyers choose to buy less of the product because of the tax. 
C) loss of equity in a market due to government intervention. 
D) loss of total revenue to business firms due to the price wedge caused by the tax.

Question 4

Suppose a tax of $3 per unit is imposed on a good.The supply curve and the demand curve are straight lines.The tax decreases consumer surplus by $3,900 and it decreases producer surplus by $3,000.The tax generates tax revenue of $6,000.From this information it follows that the tax decreased the equilibrium quantity of the good

Accepted Answer

A) from 2,000 to 1,500. 
B) from 2,400 to 2,000. 
C) from 2,600 to 2,000. 
D) from 3,000 to 2,400. 
A) from 2,000 to 1,500. 
B) from 2,400 to 2,000. 
C) from 2,600 to 2,000. 
D) from 3,000 to 2,400.

Question 5

Buyers of a product will bear the larger part of the tax burden,and sellers will bear a smaller part of the tax burden,when

Accepted Answer

A) the tax is placed on the sellers of the product. 
B) the tax is placed on the buyers of the product. 
C) the supply of the product is more elastic than the demand for the product. 
D) the demand for the product is more elastic than the supply of the product. 
A) the tax is placed on the sellers of the product. 
B) the tax is placed on the buyers of the product. 
C) the supply of the product is more elastic than the demand for the product. 
D) the demand for the product is more elastic than the supply of the product.

Question 6

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,producer surplus is the area

Accepted Answer

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

Question 7

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 government collects tax revenue that is represented by the area

Accepted Answer

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

Question 8

A $2.00 tax placed on the sellers of potting soil,for every bag of potting soil they sell,will shift the supply curve

Accepted Answer

A) downward by exactly $2.00. 
B) downward by less than $2.00. 
C) upward by exactly $2.00. 
D) upward by less than $2.00. 
A) downward by exactly $2.00. 
B) downward by less than $2.00. 
C) upward by exactly $2.00. 
D) upward by less than $2.00.

Question 9

The benefit that government receives from a tax is measured by

Accepted Answer

A) the change in the equilibrium quantity of the good. 
B) the change in the equilibrium price of the good. 
C) tax revenue. 
D) total surplus. 
A) the change in the equilibrium quantity of the good. 
B) the change in the equilibrium price of the good. 
C) tax revenue. 
D) total surplus.

Question 10

When a tax is imposed,the loss of consumer surplus and producer surplus as a result of the tax exceeds the tax revenue collected by the government.

Accepted Answer

A) True 
 B)False

Question 11

For the purpose of analyzing the gains and losses from a tax on a good,we use tax revenue as a direct measure of

Accepted Answer

A) government's benefit from the tax. 
B) government's loss from the tax. 
C) the deadweight loss of the tax. 
D) the overall net gain to society of the tax. 
A) government's benefit from the tax. 
B) government's loss from the tax. 
C) the deadweight loss of the tax. 
D) the overall net gain to society of the tax.

Question 12

When the government imposes taxes on buyers and sellers of a good,society loses some of the benefits of market efficiency.

Accepted Answer

A) True 
 B)False

Question 13

Figure 8-3
  
-Refer to Figure 8-3.The price that sellers effectively receive after the tax is imposed is

Accepted Answer

A) $24. 
B) $14. 
C) $10. 
D) $8. 
A) $24. 
B) $14. 
C) $10. 
D) $8.

Question 14

If the size of a tax increases,tax revenue

Accepted Answer

A) definitely increases. 
B) definitely decreases. 
C) definitely remains the same. 
D) may increase, decrease, or remain the same. 
A) definitely increases. 
B) definitely decreases. 
C) definitely remains the same. 
D) may increase, decrease, or remain the same.

Question 15

The more inelastic are demand and supply,the greater is the deadweight loss of a tax.

Accepted Answer

A) True 
 B)False

Question 16

Figure 8-2
  
-Refer to Figure 8-2.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 17

Figure 8-3
  
-Refer to Figure 8-3.The amount of the tax on each unit of the good is

Accepted Answer

A) $16. 
B) $14. 
C) $8. 
D) $6. 
A) $16. 
B) $14. 
C) $8. 
D) $6.

Question 18

A tax on a good causes the size of the market to increase.

Accepted Answer

A) True 
 B)False

Question 19

Quantitatively,which of the following taxes are the most important taxes in the U.S.economy?

Accepted Answer

A) taxes on investment 
B) taxes on labor 
C) sales taxes 
D) property taxes 
A) taxes on investment 
B) taxes on labor 
C) sales taxes 
D) property taxes

Question 20

When a good is taxed,the tax revenue collected by the government equals the decrease in the welfare of buyers and sellers caused by the tax.

Accepted Answer

A) True 
 B)False

Exam 8: Application: the Costs of Taxation

When cigarettes are taxed and sellers of cigarettes are required to pay the tax to the government,

If T represents the size of the tax on a good and Q represents the quantity of the good that is sold,total tax revenue received by government can be expressed as

Deadweight loss measures the

Buyers of a product will bear the larger part of the tax burden,and sellers will bear a smaller part of the tax burden,when

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,producer surplus is the area

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 government collects tax revenue that is represented by the area

A $2.00 tax placed on the sellers of potting soil,for every bag of potting soil they sell,will shift the supply curve

The benefit that government receives from a tax is measured by

When a tax is imposed,the loss of consumer surplus and producer surplus as a result of the tax exceeds the tax revenue collected by the government.

For the purpose of analyzing the gains and losses from a tax on a good,we use tax revenue as a direct measure of

When the government imposes taxes on buyers and sellers of a good,society loses some of the benefits of market efficiency.

Figure 8-3 -Refer to Figure 8-3.The price that sellers effectively receive after the tax is imposed is

If the size of a tax increases,tax revenue

The more inelastic are demand and supply,the greater is the deadweight loss of a tax.

Figure 8-2 -Refer to Figure 8-2.The price that buyers effectively pay after the tax is imposed is

Figure 8-3 -Refer to Figure 8-3.The amount of the tax on each unit of the good is

A tax on a good causes the size of the market to increase.

Quantitatively,which of the following taxes are the most important taxes in the U.S.economy?

When a good is taxed,the tax revenue collected by the government equals the decrease in the welfare of buyers and sellers caused by the tax.

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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