Question 1

Which statement best summarizes the idea of cutting income tax rates increase tax revenue

Accepted Answer

A) This argument is only valid for the United States but not for most other countries. 
B) This argument is valid for all countries that have income taxes. 
C) This argument is valid for most other countries but not the United States. 
D) The argument is valid for any country that has very high marginal tax rates. 
A) This argument is only valid for the United States but not for most other countries. 
B) This argument is valid for all countries that have income taxes. 
C) This argument is valid for most other countries but not the United States. 
D) The argument is valid for any country that has very high marginal tax rates.

Question 2

What does deadweight loss represent

Accepted Answer

A) the reduction in total surplus that results from a tax 
B) the loss of profit to businesses when a tax is imposed 
C) the reduction in producer surplus when a tax is placed on buyers 
D) the decline in government revenue when taxes are reduced in a market 
A) the reduction in total surplus that results from a tax 
B) the loss of profit to businesses when a tax is imposed 
C) the reduction in producer surplus when a tax is placed on buyers 
D) the decline in government revenue when taxes are reduced in a market

Question 3

Figure 8-5
  
-Refer to Figure 8-5.What would be the deadweight loss in this market as a result of the tax

Accepted Answer

A) $600 
B) $900 
C) $1500 
D) $1800 
A) $600 
B) $900 
C) $1500 
D) $1800

Question 4

Figure 8-3
  
-Refer to Figure 8-3.What is the amount of the tax imposed

Accepted Answer

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

Question 5

Assume that the supply of gasoline is relatively inelastic and the supply of wheat is relatively elastic.If a tax is levied on both goods,what happens to the quantity of gasoline produced as compared to the quantity of wheat produced

Accepted Answer

A) The quantity of gasoline produced declines more than the wheat. 
B) The quantity of gasoline produced declines less than the wheat. 
C) The quantity of gasoline produced increases more than the wheat. 
D) The quantity of gasoline produced increases less than the wheat. 
A) The quantity of gasoline produced declines more than the wheat. 
B) The quantity of gasoline produced declines less than the wheat. 
C) The quantity of gasoline produced increases more than the wheat. 
D) The quantity of gasoline produced increases less than the wheat.

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

Which outcome will occur as a result of a tax,whether the tax is placed on the buyer or the seller

Accepted Answer

A) size of the market is reduced 
B) price the seller receives is higher 
C) supply curve will shift upward 
D) demand curve will shift upward 
A) size of the market is reduced 
B) price the seller receives is higher 
C) supply curve will shift upward 
D) demand curve will shift upward

Question 8

Figure 8-4
  
-Refer to Figure 8-4.Which area represents producer surplus after the tax is levied on the consumer

Accepted Answer

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

Question 9

When will buyers of a product pay the majority of a tax placed on a product

Accepted Answer

A) when the tax is placed on the seller of the product 
B) when demand is more elastic than supply 
C) when supply is more elastic than demand 
D) when the tax is placed on the buyer of the product 
A) when the tax is placed on the seller of the product 
B) when demand is more elastic than supply 
C) when supply is more elastic than demand 
D) when the tax is placed on the buyer of the product

Question 10

Normally,both buyers and sellers are worse off when a good is taxed.

Accepted Answer

A) True 
 B)False

Question 11

What effect does a tax placed on kite buyers have

Accepted Answer

A) It shifts demand upward, causing both the price received by sellers and the equilibrium quantity to fall. 
B) It shifts demand downward, causing both the price received by sellers and the equilibrium quantity to fall. 
C) It shifts supply downward, causing the price received by sellers to fall and equilibrium quantity to rise. 
D) It shifts supply upward, causing the price received by sellers to rise and equilibrium quantity to fall. 
A) It shifts demand upward, causing both the price received by sellers and the equilibrium quantity to fall. 
B) It shifts demand downward, causing both the price received by sellers and the equilibrium quantity to fall. 
C) It shifts supply downward, causing the price received by sellers to fall and equilibrium quantity to rise. 
D) It shifts supply upward, causing the price received by sellers to rise and equilibrium quantity to fall.

Question 12

Use the following graph shown to fill in the table that follows.

Accepted Answer

The answer of Use the following graph shown to fill...

Question 13

What effect does a tax levied on the supplier of a product have

Accepted Answer

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

Question 14

Assuming that the demand for diamonds is more elastic than the demand for gasoline,what happens to the quantity of diamonds purchased relative to the quantity of gasoline purchased if the same percentage tax is levied on both products

Accepted Answer

A) The decrease in the quantity of diamonds is greater than the decrease in gasoline. 
B) The decrease in the quantity of diamonds is less than the decrease in gasoline. 
C) The increase in the quantity of diamonds is greater than the decrease in gasoline. 
D) The increase in the quantity of diamonds is less than the decrease in gasoline. 
A) The decrease in the quantity of diamonds is greater than the decrease in gasoline. 
B) The decrease in the quantity of diamonds is less than the decrease in gasoline. 
C) The increase in the quantity of diamonds is greater than the decrease in gasoline. 
D) The increase in the quantity of diamonds is less than the decrease in gasoline.

Question 15

Using the graph shown,determine 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 after the tax
i.deadweight loss

Accepted Answer

a. $10
b. $3600
c. $

Question 16

Figure 8-6
  
-Refer to Figure 8-6.What is the equilibrium market price before the tax is imposed

Accepted Answer

A) $4 
B) $8 
C) $12 
D) $16 
A) $4 
B) $8 
C) $12 
D) $16

Question 17

Taxes cause deadweight losses because they prevent buyers and sellers from realizing some of the gains from trade.

Accepted Answer

A) True 
 B)False

Question 18

Figure 8-6
  
-Refer to Figure 8-6.What would the total surplus before the tax be

Accepted Answer

A) $200 
B) $250 
C) $300 
D) $350 
A) $200 
B) $250 
C) $300 
D) $350

Question 19

If income tax rates in Sweden had been reduced,what do studies indicate would have happened to income tax revenue

Accepted Answer

A) They would have fallen. 
B) They would have risen. 
C) They would have fallen first then risen. 
D) They would have risen first then fallen. 
A) They would have fallen. 
B) They would have risen. 
C) They would have fallen first then risen. 
D) They would have risen first then fallen.

Question 20

Figure 8-4
  
-Refer to Figure 8-4.Assume the tax was levied on the producer.Which area represents the reduction in producer surplus

Accepted Answer

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

Which statement best summarizes the idea of cutting income tax rates increase tax revenue

What does deadweight loss represent

Figure 8-5 -Refer to Figure 8-5.What would be the deadweight loss in this market as a result of the tax

Figure 8-3 -Refer to Figure 8-3.What is the amount of the tax imposed

Assume that the supply of gasoline is relatively inelastic and the supply of wheat is relatively elastic.If a tax is levied on both goods,what happens to the quantity of gasoline produced as compared to the quantity of wheat produced

Which outcome will occur as a result of a tax,whether the tax is placed on the buyer or the seller

Figure 8-4 -Refer to Figure 8-4.Which area represents producer surplus after the tax is levied on the consumer

When will buyers of a product pay the majority of a tax placed on a product

Normally,both buyers and sellers are worse off when a good is taxed.

What effect does a tax placed on kite buyers have

Use the following graph shown to fill in the table that follows.

What effect does a tax levied on the supplier of a product have

Assuming that the demand for diamonds is more elastic than the demand for gasoline,what happens to the quantity of diamonds purchased relative to the quantity of gasoline purchased if the same percentage tax is levied on both products

Figure 8-6 -Refer to Figure 8-6.What is the equilibrium market price before the tax is imposed

Taxes cause deadweight losses because they prevent buyers and sellers from realizing some of the gains from trade.

Figure 8-6 -Refer to Figure 8-6.What would the total surplus before the tax be

If income tax rates in Sweden had been reduced,what do studies indicate would have happened to income tax revenue

Figure 8-4 -Refer to Figure 8-4.Assume the tax was levied on the producer.Which area represents the reduction in producer surplus

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

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

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Filters

Exam 8: Application: the Costs of Taxation

Which statement best summarizes the idea of cutting income tax rates increase tax revenue

What does deadweight loss represent

Figure 8-5 -Refer to Figure 8-5.What would be the deadweight loss in this market as a result of the tax

Figure 8-3 -Refer to Figure 8-3.What is the amount of the tax imposed

Assume that the supply of gasoline is relatively inelastic and the supply of wheat is relatively elastic.If a tax is levied on both goods,what happens to the quantity of gasoline produced as compared to the quantity of wheat produced

Which outcome will occur as a result of a tax,whether the tax is placed on the buyer or the seller

Figure 8-4 -Refer to Figure 8-4.Which area represents producer surplus after the tax is levied on the consumer

When will buyers of a product pay the majority of a tax placed on a product

Normally,both buyers and sellers are worse off when a good is taxed.

What effect does a tax placed on kite buyers have

Use the following graph shown to fill in the table that follows.

What effect does a tax levied on the supplier of a product have

Assuming that the demand for diamonds is more elastic than the demand for gasoline,what happens to the quantity of diamonds purchased relative to the quantity of gasoline purchased if the same percentage tax is levied on both products

Figure 8-6 -Refer to Figure 8-6.What is the equilibrium market price before the tax is imposed

Taxes cause deadweight losses because they prevent buyers and sellers from realizing some of the gains from trade.

Figure 8-6 -Refer to Figure 8-6.What would the total surplus before the tax be

If income tax rates in Sweden had been reduced,what do studies indicate would have happened to income tax revenue

Figure 8-4 -Refer to Figure 8-4.Assume the tax was levied on the producer.Which area represents the reduction in producer surplus

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

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

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Filters