Question 1

To fully understand how taxes affect economic well-being, we must compare the

Accepted Answer

A) consumer surplus to the producer surplus. 
B) price paid by buyers to the price received by sellers. 
C) reduced welfare of buyers and sellers to the revenue raised by the government. 
D) consumer surplus to the deadweight loss. 
A) consumer surplus to the producer surplus. 
B) price paid by buyers to the price received by sellers. 
C) reduced welfare of buyers and sellers to the revenue raised by the government. 
D) consumer surplus to the deadweight loss.

Question 2

Tax revenue equals the size of the tax multiplied by the quantity sold in the market after the tax is levied.

Accepted Answer

A) True 
 B)False

Question 3

To measure the gains and losses from a tax on a good, economists use the tools of

Accepted Answer

A) macroeconomics. 
B) welfare economics. 
C) international-trade theory. 
D) circular-flow analysis. 
A) macroeconomics. 
B) welfare economics. 
C) international-trade theory. 
D) circular-flow analysis.

Question 4

Figure 8-1  
-Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by M 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 5

Figure 8-8
Suppose the government imposes a $10 per unit tax on a good.  
-Refer to Figure 8-8. After the tax goes into effect, producer surplus is the area

Accepted Answer

A) D+F+G+H+J. 
B) D+F+G+H. 
C) D+F+J. 
D) J. 
A) D+F+G+H+J. 
B) D+F+G+H. 
C) D+F+J. 
D) J.

Question 6

The deadweight loss of a tax rises even more rapidly than the size of the tax.

Accepted Answer

A) True 
 B)False

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 amount of the tax on each unit of the good is

Accepted Answer

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

Question 8

Which of the following events is consistent with an increase in the deadweight loss of the gasoline tax from $30 million to $120 million?

Accepted Answer

A) The tax on gasoline increases from $0.30 per gallon to $0.45 per gallon. 
B) The tax on gasoline increases from $0.30 per gallon to $0.60 per gallon. 
C) The tax on gasoline increases from $0.25 per gallon to $0.45 per gallon. 
D) The tax on gasoline increases from $0.25 per gallon to $1.00 per gallon. 
A) The tax on gasoline increases from $0.30 per gallon to $0.45 per gallon. 
B) The tax on gasoline increases from $0.30 per gallon to $0.60 per gallon. 
C) The tax on gasoline increases from $0.25 per gallon to $0.45 per gallon. 
D) The tax on gasoline increases from $0.25 per gallon to $1.00 per gallon.

Question 9

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

Question 10

The benefit to buyers of participating in a market is measured by

Accepted Answer

A) consumer surplus. 
B) producer surplus. 
C) total surplus. 
D) deadweight loss. 
A) consumer surplus. 
B) producer surplus. 
C) total surplus. 
D) deadweight loss.

Question 11

The demand for potted plants is more elastic than the demand for wallpaper. Suppose the government levies an equivalent tax on potted plants and wallpaper. The deadweight loss would be larger in the market for

Accepted Answer

A) potted plants than in the market for wallpaper because the quantity of potted plants would fall by more than the quantity of wallpaper. 
B) potted plants than in the market for wallpaper because the quantity of wallpaper would fall by more than the quantity of potted plants. 
C) wallpaper than in the market for potted plants because the quantity of potted plants would fall by more than the quantity of wallpaper. 
D) wallpaper than in the market for potted plants because the quantity of wallpaper would fall by more than the quantity of potted plants. 
A) potted plants than in the market for wallpaper because the quantity of potted plants would fall by more than the quantity of wallpaper. 
B) potted plants than in the market for wallpaper because the quantity of wallpaper would fall by more than the quantity of potted plants. 
C) wallpaper than in the market for potted plants because the quantity of potted plants would fall by more than the quantity of wallpaper. 
D) wallpaper than in the market for potted plants because the quantity of wallpaper would fall by more than the quantity of potted plants.

Question 12

Figure 8-4
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-4. The price that sellers effectively receive after the tax is imposed is

Accepted Answer

A) $12. 
B) between $8 and $12. 
C) between $5 and $8. 
D) $5. 
A) $12. 
B) between $8 and $12. 
C) between $5 and $8. 
D) $5.

Question 13

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 with the tax is

Accepted Answer

A) $3,000. 
B) $6,000. 
C) $9,000. 
D) $12,000. 
A) $3,000. 
B) $6,000. 
C) $9,000. 
D) $12,000.

Question 14

Figure 8-8
Suppose the government imposes a $10 per unit tax on a good.  
-Refer to Figure 8-8. The decrease in consumer and producer surpluses that is not offset by tax revenue is the area

Accepted Answer

A) C. 
B) F. 
C) G. 
D) C+F. 
A) C. 
B) F. 
C) G. 
D) C+F.

Question 15

Taxes are costly to market participants because they

Accepted Answer

A) transfer resources from market participants to the government. 
B) alter incentives. 
C) distort market outcomes. 
D) All of the above are correct. 
A) transfer resources from market participants to the government. 
B) alter incentives. 
C) distort market outcomes. 
D) All of the above are correct.

Question 16

In 1776, the American Revolution was sparked by anger over

Accepted Answer

A) the extravagant lifestyle of British royalty. 
B) the crimes of British soldiers stationed in the American colonies. 
C) British taxes imposed on the American colonies. 
D) the failure of the British to protect American colonists from attack by hostile Native Americans. 
A) the extravagant lifestyle of British royalty. 
B) the crimes of British soldiers stationed in the American colonies. 
C) British taxes imposed on the American colonies. 
D) the failure of the British to protect American colonists from attack by hostile Native Americans.

Question 17

If a tax shifts the supply curve downward (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 18

Taxes create deadweight losses.

Accepted Answer

A) True 
 B)False

Question 19

A tax on a good

Accepted Answer

A) raises the price that buyers effectively pay and raises the price that sellers effectively receive. 
B) raises the price that buyers effectively pay and lowers the price that sellers effectively receive. 
C) lowers the price that buyers effectively pay and raises the price that sellers effectively receive. 
D) lowers the price that buyers effectively pay and lowers the price that sellers effectively receive. 
A) raises the price that buyers effectively pay and raises the price that sellers effectively receive. 
B) raises the price that buyers effectively pay and lowers the price that sellers effectively receive. 
C) lowers the price that buyers effectively pay and raises the price that sellers effectively receive. 
D) lowers the price that buyers effectively pay and lowers the price that sellers effectively receive.

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 equilibrium price and quantity before the imposition of the tax is

Accepted Answer

A) P=$800 and Q=20. 
B) P=$600 and Q=20. 
C) P=$300 and Q=20. 
D) P=$600 and Q=40. 
A) P=$800 and Q=20. 
B) P=$600 and Q=20. 
C) P=$300 and Q=20. 
D) P=$600 and Q=40.

Exam 8: Application: The Costs of Taxation

To fully understand how taxes affect economic well-being, we must compare the

Tax revenue equals the size of the tax multiplied by the quantity sold in the market after the tax is levied.

To measure the gains and losses from a tax on a good, economists use the tools of

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

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. After the tax goes into effect, producer surplus is the area

The deadweight loss of a tax rises even more rapidly than 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 amount of the tax on each unit of the good is

Which of the following events is consistent with an increase in the deadweight loss of the gasoline tax from $30 million to $120 million?

A tax levied on the buyers of a good shifts the

The benefit to buyers of participating in a market is measured by

The demand for potted plants is more elastic than the demand for wallpaper. Suppose the government levies an equivalent tax on potted plants and wallpaper. The deadweight loss would be larger in the market for

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4. The price that sellers effectively receive after the tax is imposed is

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 with the tax is

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. The decrease in consumer and producer surpluses that is not offset by tax revenue is the area

Taxes are costly to market participants because they

In 1776, the American Revolution was sparked by anger over

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

Taxes create deadweight losses.

A tax on a good

Figure 8-9 The vertical distance between points A and C represent a tax in the market. -Refer to Figure 8-9. The equilibrium price and quantity before the imposition of the tax is

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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