Question 1

The deadweight loss from a tax of $8 per unit will be smallest 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 2

In the early 1980s, which of the following countries had a marginal tax rate of about 80 percent?

Accepted Answer

A) United States 
B) Canada 
C) Japan 
D) Sweden 
A) United States 
B) Canada 
C) Japan 
D) Sweden

Question 3

Figure 8-4
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-4. The amount of the tax on each unit of the good is

Accepted Answer

A) $5. 
B) $7. 
C) $8. 
D) $12. 
A) $5. 
B) $7. 
C) $8. 
D) $12.

Question 4

Labor taxes may distort labor markets greatly if

Accepted Answer

A) labor supply is highly inelastic. 
B) many workers choose to work 40 hours per week regardless of their earnings. 
C) the number of hours many part-time workers want to work is very sensitive to the wage rate. 
D) "underground" workers do not respond to changes in the wages of legal jobs because they prefer not to pay taxes. 
A) labor supply is highly inelastic. 
B) many workers choose to work 40 hours per week regardless of their earnings. 
C) the number of hours many part-time workers want to work is very sensitive to the wage rate. 
D) "underground" workers do not respond to changes in the wages of legal jobs because they prefer not to pay taxes.

Question 5

Figure 8-7
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-7. Before the tax is imposed, the equilibrium price is

Accepted Answer

A) $16, and the equilibrium quantity is 15. 
B) $12, and the equilibrium quantity is 15. 
C) $12, and the equilibrium quantity is 25. 
D) $8, and the equilibrium quantity is 15. 
A) $16, and the equilibrium quantity is 15. 
B) $12, and the equilibrium quantity is 15. 
C) $12, and the equilibrium quantity is 25. 
D) $8, and the equilibrium quantity is 15.

Question 6

Figure 8-7
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-7. The deadweight loss associated with this tax amounts to

Accepted Answer

A) $60, and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses. 
B) $60, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers. 
C) $40, and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses. 
D) $40, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers. 
A) $60, and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses. 
B) $60, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers. 
C) $40, and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses. 
D) $40, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers.

Question 7

As the tax on a good increases from $1 per unit to $2 per unit to $3 per unit and so on, the

Accepted Answer

A) tax revenue increases at first, but it eventually peaks and then decreases. 
B) deadweight loss increases at first, but it eventually peaks and then decreases. 
C) tax revenue always increases, and the deadweight loss always increases. 
D) tax revenue always decreases, and the deadweight loss always increases. 
A) tax revenue increases at first, but it eventually peaks and then decreases. 
B) deadweight loss increases at first, but it eventually peaks and then decreases. 
C) tax revenue always increases, and the deadweight loss always increases. 
D) tax revenue always decreases, and the deadweight loss always increases.

Question 8

The view held by Arthur Laffer and Ronald Reagan that cuts in tax rates would encourage people to increase the quantity of labor they supplied became known as

Accepted Answer

A) California economics. 
B) welfare economics. 
C) supply-side economics. 
D) elasticity economics. 
A) California economics. 
B) welfare economics. 
C) supply-side economics. 
D) elasticity economics.

Question 9

Consider a good to which a per-unit tax applies. The greater the price elasticities of demand and supply for the good, the

Accepted Answer

A) smaller the deadweight loss from the tax. 
B) greater the deadweight loss from the tax. 
C) more efficient is the tax. 
D) more equitable is the distribution of the tax burden between buyers and sellers. 
A) smaller the deadweight loss from the tax. 
B) greater the deadweight loss from the tax. 
C) more efficient is the tax. 
D) more equitable is the distribution of the tax burden between buyers and sellers.

Question 10

When a tax is imposed on a good, the

Accepted Answer

A) supply curve for the good always shifts. 
B) demand curve for the good always shifts. 
C) amount of the good that buyers are willing to buy at each price always remains unchanged. 
D) equilibrium quantity of the good always decreases. 
A) supply curve for the good always shifts. 
B) demand curve for the good always shifts. 
C) amount of the good that buyers are willing to buy at each price always remains unchanged. 
D) equilibrium quantity of the good always decreases.

Question 11

Figure 8-7
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-7. Suppose a 22nd unit of the good were sold by a seller to a buyer. Which of the following statements is correct?

Accepted Answer

A) For the 22nd unit, the difference between the buyer's value and the seller's cost is less than the tax per unit. 
B) For the 22nd unit, the difference between the buyer's value and the seller's cost is greater than the tax per unit. 
C) For the 22nd unit, the difference between the buyer's value and the seller's cost is equal to the tax per unit. 
D) It makes sense for the buyer to buy and for the seller to sell the 22nd unit, with or without the tax in place. 
A) For the 22nd unit, the difference between the buyer's value and the seller's cost is less than the tax per unit. 
B) For the 22nd unit, the difference between the buyer's value and the seller's cost is greater than the tax per unit. 
C) For the 22nd unit, the difference between the buyer's value and the seller's cost is equal to the tax per unit. 
D) It makes sense for the buyer to buy and for the seller to sell the 22nd unit, with or without the tax in place.

Question 12

Suppose Ashley needs a dog sitter so that she can travel to her sister's wedding. Ashley values dog sitting for the weekend at $200. Cami is willing to dog sit for Ashley so long as she receives at least $175. Ashley and Cami agree on a price of $185. Suppose the government imposes a tax of $30 on dog sitting. The tax has made Ashley and Cami worse off by a total of

Accepted Answer

A) $30. 
B) $25. 
C) $10. 
D) $5. 
A) $30. 
B) $25. 
C) $10. 
D) $5.

Question 13

Figure 8-19. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax.  
-Refer to Figure 8-19. According to a recent research paper published by the European Central Bank, which two countries are at a point such as point B if the tax in question is the tax on capital income?

Accepted Answer

A) the U.S. and the U.K. 
B) France and Germany 
C) Italy and Spain 
D) Denmark and Sweden 
A) the U.S. and the U.K. 
B) France and Germany 
C) Italy and Spain 
D) Denmark and Sweden

Question 14

Figure 8-13  
-Refer to Figure 8-13. Panel (a) and Panel (b) each illustrate a $4 tax placed on a market. In comparison to Panel (b), Panel (a) illustrates which of the following statements?

Accepted Answer

A) When demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic. 
B) When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic. 
C) When supply is relatively inelastic, the deadweight loss of a tax is smaller than when supply is relatively elastic. 
D) When supply is relatively elastic, the deadweight loss of a tax is larger than when supply is relatively inelastic. 
A) When demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic. 
B) When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic. 
C) When supply is relatively inelastic, the deadweight loss of a tax is smaller than when supply is relatively elastic. 
D) When supply is relatively elastic, the deadweight loss of a tax is larger than when supply is relatively inelastic.

Question 15

Figure 8-2
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-2. The amount of tax revenue received by the government is

Accepted Answer

A) $2.50. 
B) $4. 
C) $5. 
D) $9. 
A) $2.50. 
B) $4. 
C) $5. 
D) $9.

Question 16

Supply-side economics is a term associated with the views of

Accepted Answer

A) Ronald Reagan and Arthur Laffer. 
B) Karl Marx. 
C) Bill Clinton and Greg Mankiw. 
D) Milton Friedman. 
A) Ronald Reagan and Arthur Laffer. 
B) Karl Marx. 
C) Bill Clinton and Greg Mankiw. 
D) Milton Friedman.

Question 17

If the government imposes a $3 tax in a market, the buyers and sellers will share an equal burden of the tax.

Accepted Answer

A) True 
 B)False

Question 18

Diana is a personal trainer whose client Charles pays $80 per hour-long session. Charles values this service at $100 per hour, while the opportunity cost of Diana's time is $75 per hour. The government places a tax of $10 per hour on personal trainers. Before the tax, what is the total surplus?

Accepted Answer

A) $25 
B) $20 
C) $5 
D) $0 
A) $25 
B) $20 
C) $5 
D) $0

Question 19

Diana is a personal trainer whose client Charles pays $80 per hour-long session. Charles values this service at $100 per hour, while the opportunity cost of Diana's time is $75 per hour. The government places a tax of $10 per hour on personal trainers. After the tax, what is likely to happen in the market for personal training?

Accepted Answer

A) Diana and Charles will agree to a new price somewhere between $85 and $100. 
B) Diana and Charles will agree to a new price somewhere between $70 and $110. 
C) Diana will no longer offer personal training services to Charles because she must charge more than $100 in order to cover her opportunity costs and pay the tax. 
D) The price will remain at $80, and Diana will pay the $10 tax. 
A) Diana and Charles will agree to a new price somewhere between $85 and $100. 
B) Diana and Charles will agree to a new price somewhere between $70 and $110. 
C) Diana will no longer offer personal training services to Charles because she must charge more than $100 in order to cover her opportunity costs and pay the tax. 
D) The price will remain at $80, and Diana will pay the $10 tax.

Question 20

The benefit that government receives from a tax is measured by

Accepted Answer

A) deadweight loss. 
B) consumer surplus. 
C) tax incidence. 
D) tax revenue. 
A) deadweight loss. 
B) consumer surplus. 
C) tax incidence. 
D) tax revenue.

The deadweight loss from a tax of $8 per unit will be smallest in a market with

In the early 1980s, which of the following countries had a marginal tax rate of about 80 percent?

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4. The amount of the tax on each unit of the good is

Labor taxes may distort labor markets greatly if

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7. Before the tax is imposed, the equilibrium price is

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7. The deadweight loss associated with this tax amounts to

As the tax on a good increases from $1 per unit to $2 per unit to $3 per unit and so on, the

The view held by Arthur Laffer and Ronald Reagan that cuts in tax rates would encourage people to increase the quantity of labor they supplied became known as

Consider a good to which a per-unit tax applies. The greater the price elasticities of demand and supply for the good, the

When a tax is imposed on a good, the

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7. Suppose a 22nd unit of the good were sold by a seller to a buyer. Which of the following statements is correct?

Figure 8-13 -Refer to Figure 8-13. Panel (a) and Panel (b) each illustrate a $4 tax placed on a market. In comparison to Panel (b), Panel (a) illustrates which of the following statements?

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2. The amount of tax revenue received by the government is

Supply-side economics is a term associated with the views of

If the government imposes a $3 tax in a market, the buyers and sellers will share an equal burden of the tax.

Diana is a personal trainer whose client Charles pays $80 per hour-long session. Charles values this service at $100 per hour, while the opportunity cost of Diana's time is $75 per hour. The government places a tax of $10 per hour on personal trainers. Before the tax, what is the total surplus?

The benefit that government receives from a tax is measured by

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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Exam 8: Application: The Costs of Taxation

The deadweight loss from a tax of $8 per unit will be smallest in a market with

In the early 1980s, which of the following countries had a marginal tax rate of about 80 percent?

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4. The amount of the tax on each unit of the good is

Labor taxes may distort labor markets greatly if

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7. Before the tax is imposed, the equilibrium price is

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7. The deadweight loss associated with this tax amounts to

As the tax on a good increases from $1 per unit to $2 per unit to $3 per unit and so on, the

The view held by Arthur Laffer and Ronald Reagan that cuts in tax rates would encourage people to increase the quantity of labor they supplied became known as

Consider a good to which a per-unit tax applies. The greater the price elasticities of demand and supply for the good, the

When a tax is imposed on a good, the

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7. Suppose a 22nd unit of the good were sold by a seller to a buyer. Which of the following statements is correct?

Figure 8-13 -Refer to Figure 8-13. Panel (a) and Panel (b) each illustrate a $4 tax placed on a market. In comparison to Panel (b), Panel (a) illustrates which of the following statements?

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2. The amount of tax revenue received by the government is

Supply-side economics is a term associated with the views of

If the government imposes a $3 tax in a market, the buyers and sellers will share an equal burden of the tax.

Diana is a personal trainer whose client Charles pays $80 per hour-long session. Charles values this service at $100 per hour, while the opportunity cost of Diana's time is $75 per hour. The government places a tax of $10 per hour on personal trainers. Before the tax, what is the total surplus?

The benefit that government receives from a tax is measured by

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

Filters