Question 1

A tax levied on the supplier of a product shifts the:

Accepted Answer

A)  supply curve upwards or to the left 
B)  supply curve downwards or to the right 
C)  demand curve upwards or to the right 
D)  demand curve downwards or to the left 
A)  supply curve upwards or to the left 
B)  supply curve downwards or to the right 
C)  demand curve upwards or to the right 
D)  demand curve downwards or to the left

Question 2

Graph 8-3
  
-According to Graph 8-3, the benefits to the government (total tax revenue) is:

Accepted Answer

A)  $4000 
B)  $3600 
C)  $2400 
D)  $1600 
A)  $4000 
B)  $3600 
C)  $2400 
D)  $1600

Question 3

As the size of a tax increases the deadweight loss from the tax remains constant.

Accepted Answer

A) True 
 B)False

Question 4

Often the tax revenue collected by the government equals the reduced welfare of buyers and sellers caused by the tax.

Accepted Answer

A) True 
 B)False

Question 5

Assume that the demand for salt is relatively inelastic and the demand for orange juice is relatively elastic. Compared to the deadweight loss from the same percentage tax on orange juice, the deadweight loss from imposing a tax on salt would be:

Accepted Answer

A)  greater 
B)  lesser 
C)  neither greater nor lesser 
D)  either greater or lesser 
A)  greater 
B)  lesser 
C)  neither greater nor lesser 
D)  either greater or lesser

Question 6

Using the graph below, determine each of the following:
a. equilibrium price before the tax
b. consumer surplus before the tax
c. producer surplus before the tax
d. total surplus before the tax
e. consumer surplus after the tax
f. producer surplus after the tax
g. total tax revenue
h. total surplus (consumer surplus + producer surplus + tax revenue) after the tax
i. deadweight loss

Accepted Answer

a. $55
b. $1250
c. $

Question 7

A tax levied on the buyers of a product shifts the demand curve downward or to the left.

Accepted Answer

A) True 
 B)False

Question 8

'Assume that the demand for entertainment is more elastic than the demand for petrol'. According to this statement, a tax levied on petrol will cause the loss of consumer surplus to be:

Accepted Answer

A)  zero (because raising the price of gasoline has no effect on the amount purchased) 
B)  relatively large 
C)  relatively small 
D)  either small or large (depending on the elasticity of supply) 
A)  zero (because raising the price of gasoline has no effect on the amount purchased) 
B)  relatively large 
C)  relatively small 
D)  either small or large (depending on the elasticity of supply)

Question 9

A tax on land will distort economic incentives unless the tax applies only to raw (unimproved) land.

Accepted Answer

A) True 
 B)False

Question 10

Sachin has been in the habit of mowing his sister, Darien's, lawn each week. She gives him for $20. Sachin's opportunity cost is $18, and Darien would be willing to pay $25 to have her lawn mown. What is the maximum tax the government can impose on lawn mowing without discouraging Sachin and Darien from continuing their mutually beneficial arrangement?

Accepted Answer

If the tax is less than $7, there will b

Question 11

The benefit received by buyers in the market for good X is measured by:

Accepted Answer

A)  the market price 
B)  the total expenditure of buyers 
C)  consumer surplus 
D)  the total cost to sellers of producing the good X 
A)  the market price 
B)  the total expenditure of buyers 
C)  consumer surplus 
D)  the total cost to sellers of producing the good X

Question 12

Which economic tool that can predict whether reducing a tax in a market will increase or decrease tax revenue?

Accepted Answer

The best predictor is the elasticity of

Question 13

The benefit received by the government from a tax is measured by:

Accepted Answer

A)  deadweight loss 
B)  tax revenue 
C)  equilibrium price 
D)  total surplus 
A)  deadweight loss 
B)  tax revenue 
C)  equilibrium price 
D)  total surplus

Question 14

According to the Laffer curve, what will happen to tax revenue if tax rates are reduced?

Accepted Answer

It depends on how high tax rates are to

Question 15

If the supply of land is fixed, a tax on land would be paid:

Accepted Answer

A)  entirely by the landowners 
B)  entirely by the renters or users of the land 
C)  partly by landowners and partly by land users 
D)  only by workers 
A)  entirely by the landowners 
B)  entirely by the renters or users of the land 
C)  partly by landowners and partly by land users 
D)  only by workers

Question 16

'Assume that the demand for entertainment is more elastic than the demand for petrol'. According to this statement, the tax levied on entertainment will cause the loss of consumer surplus to be:

Accepted Answer

A)  zero 
B)  relatively large 
C)  relatively small 
D)  either small or large (depending on the elasticity of supply) 
A)  zero 
B)  relatively large 
C)  relatively small 
D)  either small or large (depending on the elasticity of supply)

Question 17

Graph 8-2
   This graph shows supply and demand in a free market.
-According to Graph 8-2, total economic surplus would be represented by area:

Accepted Answer

A)  A + B 
B)  B + C 
C)  C + D 
D)  A + D 
A)  A + B 
B)  B + C 
C)  C + D 
D)  A + D

Question 18

Graph 8-3
  
-According to Graph 8-3, the reduction in producer surplus caused by the tax is:

Accepted Answer

A)  $1600 
B)  $800 
C)  $400 
D)  $200 
A)  $1600 
B)  $800 
C)  $400 
D)  $200

Question 19

Graph 8-3
  
-According to Graph 8-3, after the tax is levied, consumer surplus is:

Accepted Answer

A)  $2400 
B)  $1600 
C)  $800 
D)  $400 
A)  $2400 
B)  $1600 
C)  $800 
D)  $400

Question 20

Graph 8-1
  
-According to Graph 8-1, consumer surplus before the tax was levied is represented by area:

Accepted Answer

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

Exam 8: Application: The Costs of Taxation

A tax levied on the supplier of a product shifts the:

Graph 8-3 -According to Graph 8-3, the benefits to the government (total tax revenue) is:

As the size of a tax increases the deadweight loss from the tax remains constant.

Often the tax revenue collected by the government equals the reduced welfare of buyers and sellers caused by the tax.

Assume that the demand for salt is relatively inelastic and the demand for orange juice is relatively elastic. Compared to the deadweight loss from the same percentage tax on orange juice, the deadweight loss from imposing a tax on salt would be:

A tax levied on the buyers of a product shifts the demand curve downward or to the left.

'Assume that the demand for entertainment is more elastic than the demand for petrol'. According to this statement, a tax levied on petrol will cause the loss of consumer surplus to be:

A tax on land will distort economic incentives unless the tax applies only to raw (unimproved) land.

The benefit received by buyers in the market for good X is measured by:

Which economic tool that can predict whether reducing a tax in a market will increase or decrease tax revenue?

The benefit received by the government from a tax is measured by:

According to the Laffer curve, what will happen to tax revenue if tax rates are reduced?

If the supply of land is fixed, a tax on land would be paid:

'Assume that the demand for entertainment is more elastic than the demand for petrol'. According to this statement, the tax levied on entertainment will cause the loss of consumer surplus to be:

Graph 8-2 This graph shows supply and demand in a free market. -According to Graph 8-2, total economic surplus would be represented by area:

Graph 8-3 -According to Graph 8-3, the reduction in producer surplus caused by the tax is:

Graph 8-3 -According to Graph 8-3, after the tax is levied, consumer surplus is:

Graph 8-1 -According to Graph 8-1, consumer surplus before the tax was levied is represented by area:

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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