Question 1

Since the amount of land is fixed, the total supply of land is:

Accepted Answer

A)  relatively elastic 
B)  perfectly elastic 
C)  perfectly inelastic 
D)  relatively inelastic 
A)  relatively elastic 
B)  perfectly elastic 
C)  perfectly inelastic 
D)  relatively inelastic

Question 2

Deadweight loss is the:

Accepted Answer

A)  reduction in total surplus that results from a tax 
B)  loss of profit to businesses when a tax is imposed 
C)  reduction in consumer surplus when a tax is placed on buyers 
D)  decline in government revenue when taxes are reduced in a market 
A)  reduction in total surplus that results from a tax 
B)  loss of profit to businesses when a tax is imposed 
C)  reduction in consumer surplus when a tax is placed on buyers 
D)  decline in government revenue when taxes are reduced in a market

Question 3

If there is a decrease in the deadweight loss of a tax, this means that the tax has an increased economic cost.

Accepted Answer

A) True 
 B)False

Question 4

Graph 8-1
  
-According to Graph 8-1, the tax caused a reduction in producer surplus, it is represented by area:

Accepted Answer

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

Question 5

What is the relationship between a change in the size of a tax and the change in the deadweight loss from the tax?

Accepted Answer

The deadweight loss increases more than

Question 6

How is the deadweight loss of a tax affected by the elasticities of demand and supply?

Accepted Answer

The more elastic dem

Question 7

Use the graph below to fill in the table.

Accepted Answer

The answer of Use the graph below to fill in...

Question 8

Graph 8-3
  
-According to Graph 8-3, the total surplus (consumer, producer and government) with the tax is:

Accepted Answer

A)  $3200 
B)  $2400 
C)  $1600 
D)  $800 
A)  $3200 
B)  $2400 
C)  $1600 
D)  $800

Question 9

The Laffer curve is the curve showing how tax revenue varies as income rates vary.

Accepted Answer

A) True 
 B)False

Question 10

A tax on land:

Accepted Answer

A)  would result in a huge deadweight tax loss 
B)  would result in no deadweight tax loss 
C)  causes resource allocation to not be guided by market forces 
D)  would result in none of the above 
A)  would result in a huge deadweight tax loss 
B)  would result in no deadweight tax loss 
C)  causes resource allocation to not be guided by market forces 
D)  would result in none of the above

Question 11

Taxes are costly to market participants because they transfer resources from those participants to the government, even though they do not usually distort incentives or resource allocation.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

The less freedom people are given to choose the date of their retirement the:

Accepted Answer

A)  more elastic the supply of labour 
B)  less elastic the supply of labour 
C)  flatter the labour supply curve 
D)  larger the reduction in output caused by a tax on labour 
A)  more elastic the supply of labour 
B)  less elastic the supply of labour 
C)  flatter the labour supply curve 
D)  larger the reduction in output caused by a tax on labour

Question 14

When a tax is levied on a good:

Accepted Answer

A)  the market price falls because demand declines 
B)  the market price falls because supply falls 
C)  a wedge is placed between the price buyers pay and the price sellers receive 
D)  the market price rises because demand falls 
A)  the market price falls because demand declines 
B)  the market price falls because supply falls 
C)  a wedge is placed between the price buyers pay and the price sellers receive 
D)  the market price rises because demand falls

Question 15

A tax on insulin is likely to cause a tremendous deadweight loss to society.

Accepted Answer

A) True 
 B)False

Question 16

When a tax on a good is enacted:

Accepted Answer

A)  buyers always bear the full burden of the tax 
B)  sellers always bear the full burden of the tax 
C)  buyers and sellers share the burden of the tax regardless of whom it is levied on 
D)  sellers bear the full burden if the tax is levied on them, but buyers bear the full burden if the tax is levied on them 
A)  buyers always bear the full burden of the tax 
B)  sellers always bear the full burden of the tax 
C)  buyers and sellers share the burden of the tax regardless of whom it is levied on 
D)  sellers bear the full burden if the tax is levied on them, but buyers bear the full burden if the tax is levied on them

Question 17

The marginal tax rate on labour income for many workers in Australia is almost:

Accepted Answer

A)  30 per cent 
B)  40 per cent 
C)  50 per cent 
D)  60 per cent 
A)  30 per cent 
B)  40 per cent 
C)  50 per cent 
D)  60 per cent

Question 18

The effect of a tax on a good and make both sellers and buyers better off.

Accepted Answer

A) True 
 B)False

Question 19

Labour taxes encourage workers to work fewer hours, second earners to stay at home, the elderly to retire early, and the unscrupulous to engage in illegal activities.

Accepted Answer

A) True 
 B)False

Question 20

The amount of deadweight loss from taxes depends on:

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)  all of the above are correct 
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)  all of the above are correct

Exam 8: Application: The Costs of Taxation

Since the amount of land is fixed, the total supply of land is:

Deadweight loss is the:

If there is a decrease in the deadweight loss of a tax, this means that the tax has an increased economic cost.

Graph 8-1 -According to Graph 8-1, the tax caused a reduction in producer surplus, it is represented by area:

What is the relationship between a change in the size of a tax and the change in the deadweight loss from the tax?

How is the deadweight loss of a tax affected by the elasticities of demand and supply?

Use the graph below to fill in the table.

Graph 8-3 -According to Graph 8-3, the total surplus (consumer, producer and government) with the tax is:

The Laffer curve is the curve showing how tax revenue varies as income rates vary.

A tax on land:

Taxes are costly to market participants because they transfer resources from those participants to the government, even though they do not usually distort incentives or resource allocation.

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

The less freedom people are given to choose the date of their retirement the:

When a tax is levied on a good:

A tax on insulin is likely to cause a tremendous deadweight loss to society.

When a tax on a good is enacted:

The marginal tax rate on labour income for many workers in Australia is almost:

The effect of a tax on a good and make both sellers and buyers better off.

Labour taxes encourage workers to work fewer hours, second earners to stay at home, the elderly to retire early, and the unscrupulous to engage in illegal activities.

The amount of deadweight loss from taxes depends on:

Ten Lessons From 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

Business Strategy

Competition Policy

Monopolistic Competition

The Markets for the Factors of Production

Earnings, Unions and Discrimination

Income Inequity and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

Open-Economy Macroeconomics: Basic Concepts

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

Five Debates Over Macroeconomic Policy

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