Question 1

Figure 8-3
The vertical distance between points A and C represents a tax in the market.  
-Refer to Figure 8-3. The per unit burden of the tax on buyers is

Accepted Answer

A) P3 - P1. 
B) P3 - P2. 
C) P2 - P1. 
D) P4 - P3. 
A) P3 - P1. 
B) P3 - P2. 
C) P2 - P1. 
D) P4 - P3.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Figure 8-7
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-7. 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 5

Suppose a tax of $0.50 per unit on a good creates a deadweight loss of $100. If the tax is increased to $2.50 per unit, the deadweight loss from the new tax would be

Accepted Answer

A) $200. 
B) $250. 
C) $500. 
D) $2,500. 
A) $200. 
B) $250. 
C) $500. 
D) $2,500.

Question 6

An increase in the size of a tax is most likely to increase tax revenue in a market with

Accepted Answer

A) elastic demand and elastic supply. 
B) elastic demand and inelastic supply. 
C) inelastic demand and elastic supply. 
D) inelastic demand and inelastic supply. 
A) elastic demand and elastic supply. 
B) elastic demand and inelastic supply. 
C) inelastic demand and elastic supply. 
D) inelastic demand and inelastic supply.

Question 7

Figure 8-9
The vertical distance between points A and C represent a tax in the market.  
-Refer to Figure 8-9. The per-unit burden of the tax on buyers is

Accepted Answer

A) $20. 
B) $200. 
C) $300. 
D) $500. 
A) $20. 
B) $200. 
C) $300. 
D) $500.

Question 8

When a tax is imposed on buyers, consumer surplus decreases but producer surplus increases.

Accepted Answer

A) True 
 B)False

Question 9

The amount of deadweight loss from a tax depends upon the

Accepted Answer

A) price elasticity of demand. 
B) price elasticity of supply. 
C) amount of the tax per unit. 
D) All of the above are correct. 
A) price elasticity of demand. 
B) price elasticity of supply. 
C) amount of the tax per unit. 
D) All of the above are correct.

Question 10

When the price of a good is measured in dollars, then the size of the deadweight loss that results from taxing that good is measured in

Accepted Answer

A) units of the good that is being taxed. 
B) units of a related good that is not being taxed. 
C) dollars. 
D) percentage change. 
A) units of the good that is being taxed. 
B) units of a related good that is not being taxed. 
C) dollars. 
D) percentage change.

Question 11

One result of a tax, regardless of whether the tax is placed on the buyers or the sellers, is that the

Accepted Answer

A) size of the market is unchanged. 
B) price the seller effectively receives is higher. 
C) supply curve for the good shifts upward by the amount of the tax. 
D) tax reduces the welfare of both buyers and sellers. 
A) size of the market is unchanged. 
B) price the seller effectively receives is higher. 
C) supply curve for the good shifts upward by the amount of the tax. 
D) tax reduces the welfare of both buyers and sellers.

Question 12

Figure 8-2
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-2. The loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is

Accepted Answer

A) $0. 
B) $1.50. 
C) $3. 
D) $4.50. 
A) $0. 
B) $1.50. 
C) $3. 
D) $4.50.

Question 13

For a good that is taxed, the area on the relevant supply-and-demand graph that represents government's tax revenue is

Accepted Answer

A) smaller than the area that represents the loss of consumer surplus and producer surplus caused by the tax. 
B) bounded by the supply curve, the demand curve, the effective price paid by buyers, and the effective price received by sellers. 
C) a right triangle. 
D) a triangle, but not necessarily a right triangle. 
A) smaller than the area that represents the loss of consumer surplus and producer surplus caused by the tax. 
B) bounded by the supply curve, the demand curve, the effective price paid by buyers, and the effective price received by sellers. 
C) a right triangle. 
D) a triangle, but not necessarily a right triangle.

Question 14

Figure 8-3
The vertical distance between points A and C represents a tax in the market.  
-Refer to Figure 8-3. The per-unit burden of the tax on sellers is

Accepted Answer

A) P3 - P1. 
B) P3 - P2. 
C) P2 - P1. 
D) P4 - P3. 
A) P3 - P1. 
B) P3 - P2. 
C) P2 - P1. 
D) P4 - P3.

Question 15

Total surplus in a market does not change when the government imposes a tax on that market because the loss of consumer surplus and producer surplus is equal to the gain of government revenue.

Accepted Answer

A) True 
 B)False

Question 16

Figure 8-6
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-6. What happens to total surplus in this market when the tax is imposed?

Accepted Answer

A) Total surplus increases by $1,500. 
B) Total surplus increases by $3,000. 
C) Total surplus decreases by $1,500. 
D) Total surplus decreases by $,3000. 
A) Total surplus increases by $1,500. 
B) Total surplus increases by $3,000. 
C) Total surplus decreases by $1,500. 
D) Total surplus decreases by $,3000.

Question 17

Figure 8-9
The vertical distance between points A and C represent a tax in the market.  
-Refer to Figure 8-9. The total surplus with the tax is

Accepted Answer

A) $2,000. 
B) $3,000. 
C) $15,000. 
D) $20,000. 
A) $2,000. 
B) $3,000. 
C) $15,000. 
D) $20,000.

Question 18

Tax revenues increase in direct proportion to increases in the size of the tax.

Accepted Answer

A) True 
 B)False

Question 19

Figure 8-9
The vertical distance between points A and C represent a tax in the market.  
-Refer to Figure 8-9. The producer surplus without the tax is

Accepted Answer

A) $3,000. 
B) $8,000. 
C) $12,000. 
D) $24,000. 
A) $3,000. 
B) $8,000. 
C) $12,000. 
D) $24,000.

Question 20

Figure 8-9
The vertical distance between points A and C represent a tax in the market.  
-Refer to Figure 8-9. The imposition of the tax causes the price paid by buyers to

Accepted Answer

A) increase from $600 to $800. 
B) increase from $300 to $800. 
C) decrease from $600 to $300. 
D) remain unchanged at $600. 
A) increase from $600 to $800. 
B) increase from $300 to $800. 
C) decrease from $600 to $300. 
D) remain unchanged at $600.

Exam 8: Application: The Costs of Taxation

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. The per unit burden of the tax on buyers is

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

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

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7. As a result of the tax,

Suppose a tax of $0.50 per unit on a good creates a deadweight loss of $100. If the tax is increased to $2.50 per unit, the deadweight loss from the new tax would be

An increase in the size of a tax is most likely to increase tax revenue in a market with

Figure 8-9 The vertical distance between points A and C represent a tax in the market. -Refer to Figure 8-9. The per-unit burden of the tax on buyers is

When a tax is imposed on buyers, consumer surplus decreases but producer surplus increases.

The amount of deadweight loss from a tax depends upon the

When the price of a good is measured in dollars, then the size of the deadweight loss that results from taxing that good is measured in

One result of a tax, regardless of whether the tax is placed on the buyers or the sellers, is that the

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2. The loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is

For a good that is taxed, the area on the relevant supply-and-demand graph that represents government's tax revenue is

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. The per-unit burden of the tax on sellers is

Total surplus in a market does not change when the government imposes a tax on that market because the loss of consumer surplus and producer surplus is equal to the gain of government revenue.

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. What happens to total surplus in this market when the tax is imposed?

Figure 8-9 The vertical distance between points A and C represent a tax in the market. -Refer to Figure 8-9. The total surplus with the tax is

Tax revenues increase in direct proportion to increases in the size of the tax.

Figure 8-9 The vertical distance between points A and C represent a tax in the market. -Refer to Figure 8-9. The producer surplus without the tax is

Figure 8-9 The vertical distance between points A and C represent a tax in the market. -Refer to Figure 8-9. The imposition of the tax causes the price paid by buyers to

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

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 Macroeconomic Models

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

Six Debates Over Macroeconomic Policy

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