Question 1

Taxes on labor tend to encourage the elderly to retire early.

Accepted Answer

A) True 
 B)False

Question 2

A tax affects

Accepted Answer

A) buyers only. 
B) sellers only. 
C) buyers and sellers only. 
D) buyers, sellers, and the government. 
A) buyers only. 
B) sellers only. 
C) buyers and sellers only. 
D) buyers, sellers, and the government.

Question 3

Suppose the tax on liquor is increased so that the tax goes from being a "medium" tax to being a "large" tax. As a result, it is likely that

Accepted Answer

A) tax revenue increases, and the deadweight loss increases. 
B) tax revenue increases, and the deadweight loss decreases. 
C) tax revenue decreases, and the deadweight loss increases. 
D) tax revenue decreases, and the deadweight loss decreases. 
A) tax revenue increases, and the deadweight loss increases. 
B) tax revenue increases, and the deadweight loss decreases. 
C) tax revenue decreases, and the deadweight loss increases. 
D) tax revenue decreases, and the deadweight loss decreases.

Question 4

Figure 8-8
Suppose the government imposes a $10 per unit tax on a good.  
-Refer to Figure 8-8. One effect of the tax is to

Accepted Answer

A) reduce consumer surplus from $180 to $72. 
B) reduce producer surplus from $96 to $24. 
C) create a deadweight loss of $72. 
D) All of the above are correct. 
A) reduce consumer surplus from $180 to $72. 
B) reduce producer surplus from $96 to $24. 
C) create a deadweight loss of $72. 
D) All of the above are correct.

Question 5

The amount of deadweight loss that results from a tax of a given size is determined by

Accepted Answer

A) whether the tax is levied on buyers or sellers. 
B) the number of buyers in the market relative to the number of sellers. 
C) the price elasticities of demand and supply. 
D) the ratio of the tax per unit to the effective price received by sellers. 
A) whether the tax is levied on buyers or sellers. 
B) the number of buyers in the market relative to the number of sellers. 
C) the price elasticities of demand and supply. 
D) the ratio of the tax per unit to the effective price received by sellers.

Question 6

Taxes affect market participants by increasing the price paid by the buyer and received by the seller.

Accepted Answer

A) True 
 B)False

Question 7

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 consumer surplus when the tax is imposed in this market?

Accepted Answer

A) Consumer surplus falls by $3,600. 
B) Consumer surplus falls by $2,700. 
C) Consumer surplus falls by $1,800. 
D) Consumer surplus falls by $900. 
A) Consumer surplus falls by $3,600. 
B) Consumer surplus falls by $2,700. 
C) Consumer surplus falls by $1,800. 
D) Consumer surplus falls by $900.

Question 8

The Social Security tax, and to a large extent, the federal income tax, are labor taxes.

Accepted Answer

A) True 
 B)False

Question 9

The supply curve for liquor is the typical upward-sloping straight line, and the demand curve for liquor is the typical downward-sloping straight line. When liquor is taxed, the area on the relevant supply-and-demand graph that represents the deadweight loss is

Accepted Answer

A) larger than the area that represents consumer surplus in the absence of the tax. 
B) larger than the area that represents government's tax revenue. 
C) a triangle. 
D) All of the above are correct. 
A) larger than the area that represents consumer surplus in the absence of the tax. 
B) larger than the area that represents government's tax revenue. 
C) a triangle. 
D) All of the above are correct.

Question 10

Figure 8-11  
-Refer to Figure 8-11. Neither a shift of the demand curve nor a shift of the supply curve is shown on the figure. However, we know that, when the tax is imposed,

Accepted Answer

A) the demand curve will shift. 
B) the supply curve will shift. 
C) either the demand curve or the supply curve will shift. 
D) None of the above are correct; the tax causes neither the demand curve nor the supply curve to shift. 
A) the demand curve will shift. 
B) the supply curve will shift. 
C) either the demand curve or the supply curve will shift. 
D) None of the above are correct; the tax causes neither the demand curve nor the supply curve to shift.

Question 11

The idea that tax cuts would increase the quantity of labor supplied, thus increasing tax revenue, became know as supply-side economics.

Accepted Answer

A) True 
 B)False

Question 12

Figure 8-1  
-Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by J represents

Accepted Answer

A) consumer surplus after the tax. 
B) consumer surplus before the tax. 
C) producer surplus after the tax. 
D) producer surplus before the tax. 
A) consumer surplus after the tax. 
B) consumer surplus before the tax. 
C) producer surplus after the tax. 
D) producer surplus before the tax.

Question 13

Economists generally agree that the most important tax in the U.S. economy is the

Accepted Answer

A) income tax. 
B) tax on labor. 
C) inheritance or death tax. 
D) tax on corporate profits. 
A) income tax. 
B) tax on labor. 
C) inheritance or death tax. 
D) tax on corporate profits.

Question 14

Table 8-1
 $$\begin{array} { | c | c | } 
\hline \text { Marlet } & \text { Chareteristir } \
\hline \text { A } & \text { Denand is very elatic. } \
\hline B & \text { Denand is very inelastic. } \
\hline C & \text { Supply is vey elastic. } \
\hline D & \text { Supply is very inelatic. } \
\hline
\end{array}$$
-Refer to Table 8-1. Suppose the government is considering levying a tax in one or more of the markets described in the table. Which of the markets will allow the government to minimize the deadweight loss(es) from the tax?

Accepted Answer

A) market A only 
B) markets A and C only 
C) markets B and D only 
D) market C only 
A) market A only 
B) markets A and C only 
C) markets B and D only 
D) market C only

Question 15

If a tax shifts the demand curve upward (or to the right), we can infer that the tax was levied on

Accepted Answer

A) buyers of the good. 
B) sellers of the good. 
C) both buyers and sellers of the good. 
D) We cannot infer anything because the shift described is not consistent with a tax. 
A) buyers of the good. 
B) sellers of the good. 
C) both buyers and sellers of the good. 
D) We cannot infer anything because the shift described is not consistent with a tax.

Question 16

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. If the economy is at point B on the curve, then a small decrease in the tax rate will

Accepted Answer

A) increase the deadweight loss of the tax and increase tax revenue. 
B) increase the deadweight loss of the tax and decrease tax revenue. 
C) decrease the deadweight loss of the tax and increase tax revenue. 
D) decrease the deadweight loss of the tax and decrease tax revenue. 
A) increase the deadweight loss of the tax and increase tax revenue. 
B) increase the deadweight loss of the tax and decrease tax revenue. 
C) decrease the deadweight loss of the tax and increase tax revenue. 
D) decrease the deadweight loss of the tax and decrease tax revenue.

Question 17

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 tax revenue received by the government is equal to

Accepted Answer

A) $350. 
B) $490. 
C) $700. 
D) $840. 
A) $350. 
B) $490. 
C) $700. 
D) $840.

Question 18

A tax levied on the sellers of a good shifts the

Accepted Answer

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

Question 19

Figure 8-3
The vertical distance between points A and C represents a tax in the market.  
-Refer to Figure 8-3. The loss in consumer surplus caused by the tax is measured by the area

Accepted Answer

A) P1P3AC. 
B) P3ABP2. 
C) P1P3ABC. 
D) ABC. 
A) P1P3AC. 
B) P3ABP2. 
C) P1P3ABC. 
D) ABC.

Question 20

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

Accepted Answer

A) the quantity of tires bought and sold in the market is reduced. 
B) the price paid by buyers of tires decreases. 
C) the demand for tires decreases. 
D) there is a movement downward and to the right along the demand curve for tires. 
A) the quantity of tires bought and sold in the market is reduced. 
B) the price paid by buyers of tires decreases. 
C) the demand for tires decreases. 
D) there is a movement downward and to the right along the demand curve for tires.

Exam 8: Application: The Costs of Taxation

Taxes on labor tend to encourage the elderly to retire early.

A tax affects

Suppose the tax on liquor is increased so that the tax goes from being a "medium" tax to being a "large" tax. As a result, it is likely that

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. One effect of the tax is to

The amount of deadweight loss that results from a tax of a given size is determined by

Taxes affect market participants by increasing the price paid by the buyer and received by the seller.

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 consumer surplus when the tax is imposed in this market?

The Social Security tax, and to a large extent, the federal income tax, are labor taxes.

The supply curve for liquor is the typical upward-sloping straight line, and the demand curve for liquor is the typical downward-sloping straight line. When liquor is taxed, the area on the relevant supply-and-demand graph that represents the deadweight loss is

Figure 8-11 -Refer to Figure 8-11. Neither a shift of the demand curve nor a shift of the supply curve is shown on the figure. However, we know that, when the tax is imposed,

The idea that tax cuts would increase the quantity of labor supplied, thus increasing tax revenue, became know as supply-side economics.

Figure 8-1 -Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by J represents

Economists generally agree that the most important tax in the U.S. economy is the

If a tax shifts the demand curve upward (or to the right), we can infer that the tax was levied on

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. If the economy is at point B on the curve, then a small decrease in the tax rate will

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 tax revenue received by the government is equal to

A tax levied on the sellers of a good shifts the

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. The loss in consumer surplus caused by the tax is measured by the area

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

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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