Question 1

When a tax is levied on the sellers of a good,how does the supply curve shift

Accepted Answer

A) up by the amount of the tax 
B) down by the amount of the tax 
C) up by less than the tax 
D) down by less than the tax 
A) up by the amount of the tax 
B) down by the amount of the tax 
C) up by less than the tax 
D) down by less than the tax

Question 2

Figure 8-6
  
-Refer to Figure 8-6.What would producer surplus be after the tax is levied

Accepted Answer

A) $45 
B) $75 
C) $125 
D) $150 
A) $45 
B) $75 
C) $125 
D) $150

Question 3

Figure 8-5
  
-Refer to Figure 8-5.Without the tax,what would thetotal surplus be in this market

Accepted Answer

A) $2400 
B) $3000 
C) $3600 
D) $6000 
A) $2400 
B) $3000 
C) $3600 
D) $6000

Question 4

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

Accepted Answer

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

Question 5

On which factor does the amount of deadweight loss from taxes depend

Accepted Answer

A) the price elasticity of demand and supply 
B) how much of the tax revenue the government plans to spend 
C) the product the government is planning to tax 
D) market price before the tax was levied 
A) the price elasticity of demand and supply 
B) how much of the tax revenue the government plans to spend 
C) the product the government is planning to tax 
D) market price before the tax was levied

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

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

Question 8

Figure 8-2
  
-Refer to Figure 8-2.What is the amount of the tax imposed

Accepted Answer

A) P₃ - P₁ 
B) P₃ 
C) P₂ - P₁ 
D) P₁ 
A) P₃ - P₁ 
B) P₃ 
C) P₂ - P₁ 
D) P₁

Question 9

When a country is on the downward-sloping side of the Laffer curve,what will cutting tax rates do

Accepted Answer

A) lower tax revenues and increase deadweight loss 
B) lower both tax revenues and deadweight loss 
C) increase tax revenues and decrease deadweight loss 
D) increase both tax revenues and deadweight loss 
A) lower tax revenues and increase deadweight loss 
B) lower both tax revenues and deadweight loss 
C) increase tax revenues and decrease deadweight loss 
D) increase both tax revenues and deadweight loss

Question 10

Figure 8-5
  
-Refer to Figure 8-5.What is the amount of the tax placed on this product

Accepted Answer

A) $4 
B) $6 
C) $8 
D) $10 
A) $4 
B) $6 
C) $8 
D) $10

Question 11

Why does a tax have a deadweight loss

Accepted Answer

A) because it induces the government to run a deficit 
B) because it induces buyers to consume less and sellers to produce less 
C) because it causes a disequilibrium in the market 
D) because the loss to buyers is greater than the loss to sellers 
A) because it induces the government to run a deficit 
B) because it induces buyers to consume less and sellers to produce less 
C) because it causes a disequilibrium in the market 
D) because the loss to buyers is greater than the loss to sellers

Question 12

How is tax burden related to the elasticity of the market

Accepted Answer

A) A tax burden falls most heavily on the side of the market that is elastic. 
B) A tax burden falls most heavily on the side of the market that is inelastic. 
C) A tax burden falls most heavily on the side of the market that is closer to unit elastic. 
D) A tax burden is not influenced by the relative elasticities of supply and demand. 
A) A tax burden falls most heavily on the side of the market that is elastic. 
B) A tax burden falls most heavily on the side of the market that is inelastic. 
C) A tax burden falls most heavily on the side of the market that is closer to unit elastic. 
D) A tax burden is not influenced by the relative elasticities of supply and demand.

Question 13

Figure 8-5
  
-Refer to Figure 8-5.What would happen to producer surplus if the tax were imposed in this market

Accepted Answer

A) It would fall by $600. 
B) It would fall by $900. 
C) It would fall by $1800. 
D) It would fall by $2400. 
A) It would fall by $600. 
B) It would fall by $900. 
C) It would fall by $1800. 
D) It would fall by $2400.

Question 14

A tax is imposed on a market with an inelastic demand and an elastic supply.How is the burden of the tax divided

Accepted Answer

A) sellers pay the majority of the tax 
B) buyers pay the majority of the tax 
C) the tax burden is equally divided between buyers and sellers 
D) the tax burden is divided, but it cannot be determined how 
A) sellers pay the majority of the tax 
B) buyers pay the majority of the tax 
C) the tax burden is equally divided between buyers and sellers 
D) the tax burden is divided, but it cannot be determined how

Question 15

What does the deadweight loss of taxation measure

Accepted Answer

A) the loss in benefit to buyers and sellers in a market due to the tax 
B) the loss in revenue to the government when buyers choose to buy less of the product 
C) the loss of efficiency in a market as a result of government intervention 
D) the lost revenue to businesses because of higher prices to consumers from the tax 
A) the loss in benefit to buyers and sellers in a market due to the tax 
B) the loss in revenue to the government when buyers choose to buy less of the product 
C) the loss of efficiency in a market as a result of government intervention 
D) the lost revenue to businesses because of higher prices to consumers from the tax

Question 16

How is the amount of deadweight loss that will result from a tax determined

Accepted Answer

A) by the price elasticity of demand and supply 
B) by the number of buyers of the product in the market 
C) by the number of suppliers of the product in the market 
D) by the percentage of the purchase price that the tax represents 
A) by the price elasticity of demand and supply 
B) by the number of buyers of the product in the market 
C) by the number of suppliers of the product in the market 
D) by the percentage of the purchase price that the tax represents

Question 17

Figure 8-2
  
-Refer to Figure 8-2.What area represents the amount of deadweight loss associated with the tax

Accepted Answer

A) P₃ACP₁ 
B) ABC 
C) P₂DAP₃ 
D) P₁CDP₂ 
A) P₃ACP₁ 
B) ABC 
C) P₂DAP₃ 
D) P₁CDP₂

Question 18

Scenario 8-1
Assume that Kierra cleans Cate's house weekly for $100.Cate would be willing to pay as much as $125 weekly to have her house cleaned.Kierra's opportunity cost is $80.
-Refer to Scenario 8-1.What would happen if Cate is required to pay a tax of $40 when she hires someone to clean her house

Accepted Answer

A) Cate will now clean her own house. 
B) Kierra will continue to clean Cate's house but the producer surplus will decline. 
C) Total economic welfare (consumer surplus plus producer surplus plus tax revenue) will increase. 
D) Kierra will continue to clean Cate's house, but the consumer surplus will decline. 
A) Cate will now clean her own house. 
B) Kierra will continue to clean Cate's house but the producer surplus will decline. 
C) Total economic welfare (consumer surplus plus producer surplus plus tax revenue) will increase. 
D) Kierra will continue to clean Cate's house, but the consumer surplus will decline.

Question 19

Figure 8-5
  
-Refer to Figure 8-5.If the tax is imposed on the seller,what would total surplus in this market be

Accepted Answer

A) $1500 
B) $3600 
C) $4500 
D) $6000 
A) $1500 
B) $3600 
C) $4500 
D) $6000

Question 20

Because taxes distort incentives,they cause markets to allocate resources inefficiently.

Accepted Answer

A) True 
 B)False

Exam 8: Application: the Costs of Taxation

When a tax is levied on the sellers of a good,how does the supply curve shift

Figure 8-6 -Refer to Figure 8-6.What would producer surplus be after the tax is levied

Figure 8-5 -Refer to Figure 8-5.Without the tax,what would thetotal surplus be in this market

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

On which factor does the amount of deadweight loss from taxes depend

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

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

Figure 8-2 -Refer to Figure 8-2.What is the amount of the tax imposed

When a country is on the downward-sloping side of the Laffer curve,what will cutting tax rates do

Figure 8-5 -Refer to Figure 8-5.What is the amount of the tax placed on this product

Why does a tax have a deadweight loss

How is tax burden related to the elasticity of the market

Figure 8-5 -Refer to Figure 8-5.What would happen to producer surplus if the tax were imposed in this market

A tax is imposed on a market with an inelastic demand and an elastic supply.How is the burden of the tax divided

What does the deadweight loss of taxation measure

How is the amount of deadweight loss that will result from a tax determined

Figure 8-2 -Refer to Figure 8-2.What area represents the amount of deadweight loss associated with the tax

Figure 8-5 -Refer to Figure 8-5.If the tax is imposed on the seller,what would total surplus in this market be

Because taxes distort incentives,they cause markets to allocate resources inefficiently.

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

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