Question 1

To evaluate the welfare effects of taxes on economic activity, economists:

Accepted Answer

A)  do nothing because taxes provide public services that are always valued 
B)  measure changes to consumer and producer surplus 
C)  measure changes to equilibrium price and quantity 
D)  measure expenditures on social welfare by the government 
A)  do nothing because taxes provide public services that are always valued 
B)  measure changes to consumer and producer surplus 
C)  measure changes to equilibrium price and quantity 
D)  measure expenditures on social welfare by the government

Question 2

Suppose that a tax is imposed on the log market to discourage deforestation. What would you predict about (a) the size of the deadweight loss of the tax in the short run relative to the long run, and (b) the amount of revenue collected from the tax in the short run relative to the long run? Explain why.

Accepted Answer

Because both demand and supply tend to b

Question 3

What factors must be taken into account in order to fully understand the effect of taxes on economic wellbeing?

Accepted Answer

In order to assess the impact of taxes o

Question 4

A tax places a wedge between the price buyers pay and the price sellers receive.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A)  $1200 
B)  $2400 
C)  $3200 
D)  $4800 
A)  $1200 
B)  $2400 
C)  $3200 
D)  $4800

Question 6

Using demand-supply diagrams, show the difference in deadweight loss between a market with inelastic demand and supply curves and a market with elastic demand and supply curves.

Accepted Answer

The answer of Using demand-supply diagrams, show the difference in...

Question 7

The benefit received by the sellers of a good in a market is measured by:

Accepted Answer

A)  consumer surplus 
B)  producer surplus 
C)  the amount buyers pay for the good in excess of the amount the good is actually worth 
D)  the amount it costs producers to produce the good 
A)  consumer surplus 
B)  producer surplus 
C)  the amount buyers pay for the good in excess of the amount the good is actually worth 
D)  the amount it costs producers to produce the good

Question 8

When a tax is imposed on a market, the government collects revenues. These revenues however, are less than the loss in consumer surplus and producer surplus.

Accepted Answer

A) True 
 B)False

Question 9

Graph 8-1
  
-According to Graph 8-1, after the tax is levied, producer surplus 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

Question 10

When a tax is levied on the sellers of a good, the supply curve:

Accepted Answer

A)  shifts right and down by less than the tax 
B)  shifts left and up by an amount equal to the tax 
C)  shifts left and down by an amount less than the tax 
D)  shifts right and up by an amount equal to the tax 
A)  shifts right and down by less than the tax 
B)  shifts left and up by an amount equal to the tax 
C)  shifts left and down by an amount less than the tax 
D)  shifts right and up by an amount equal to the tax

Question 11

Phil offers to do Don's housework for $20 per week. Don's opportunity cost of doing housework is $30 per week, and Phil's opportunity cost of doing housework is $10 per week.
-According to the information provided, the total gain in welfare due to the transaction described here is:

Accepted Answer

A)  $10 per week 
B)  $20 per week 
C)  $30 per week 
D)  $40 per week 
A)  $10 per week 
B)  $20 per week 
C)  $30 per week 
D)  $40 per week

Question 12

Because the supply of land is perfectly inelastic, the deadweight loss of a tax on land is high.

Accepted Answer

A) True 
 B)False

Question 13

If the supply of labour is inelastic, the deadweight loss from labour taxes is large.

Accepted Answer

A) True 
 B)False

Question 14

Economists disagree on the issue of how much labour taxes distort the outcome in labour markets and create deadweight loss. What characteristic of labour supply is at the heart of the disagreement?

Accepted Answer

The disagreement among economists about

Question 15

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

Accepted Answer

A)  $6400 
B)  $4800 
C)  $2400 
D)  $1200 
A)  $6400 
B)  $4800 
C)  $2400 
D)  $1200

Question 16

The deadweight loss of a tax increases as demand and supply curves become more inelastic.

Accepted Answer

A) True 
 B)False

Question 17

According to the famous economist Milton Friedman, the 'least bad' tax is a tax on:

Accepted Answer

A)  income received from profits and interest 
B)  the value of unimproved land 
C)  labour income 
D)  the value of land including the improvements to the land 
A)  income received from profits and interest 
B)  the value of unimproved land 
C)  labour income 
D)  the value of land including the improvements to the land

Question 18

If the supply of a good is relatively elastic, changing the price causes:

Accepted Answer

A)  a relatively small change in the amounts that buyers are willing to buy 
B)  a relatively small change in the amounts sellers are willing to sell 
C)  a relatively large change in the amounts sellers are willing to sell 
D)  no change in the amounts sellers are willing to sell 
A)  a relatively small change in the amounts that buyers are willing to buy 
B)  a relatively small change in the amounts sellers are willing to sell 
C)  a relatively large change in the amounts sellers are willing to sell 
D)  no change in the amounts sellers are willing to sell

Question 19

A tax levied on the buyers 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 20

A tax on unimproved land falls entirely on landowners, because the supply of land is perfectly inelastic.

Accepted Answer

A) True 
 B)False

Exam 8: Application: The Costs of Taxation

To evaluate the welfare effects of taxes on economic activity, economists:

What factors must be taken into account in order to fully understand the effect of taxes on economic wellbeing?

A tax places a wedge between the price buyers pay and the price sellers receive.

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

Using demand-supply diagrams, show the difference in deadweight loss between a market with inelastic demand and supply curves and a market with elastic demand and supply curves.

The benefit received by the sellers of a good in a market is measured by:

When a tax is imposed on a market, the government collects revenues. These revenues however, are less than the loss in consumer surplus and producer surplus.

Graph 8-1 -According to Graph 8-1, after the tax is levied, producer surplus is represented by area:

When a tax is levied on the sellers of a good, the supply curve:

Phil offers to do Don's housework for $20 per week. Don's opportunity cost of doing housework is $30 per week, and Phil's opportunity cost of doing housework is $10 per week. -According to the information provided, the total gain in welfare due to the transaction described here is:

Because the supply of land is perfectly inelastic, the deadweight loss of a tax on land is high.

If the supply of labour is inelastic, the deadweight loss from labour taxes is large.

Economists disagree on the issue of how much labour taxes distort the outcome in labour markets and create deadweight loss. What characteristic of labour supply is at the heart of the disagreement?

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

The deadweight loss of a tax increases as demand and supply curves become more inelastic.

According to the famous economist Milton Friedman, the 'least bad' tax is a tax on:

If the supply of a good is relatively elastic, changing the price causes:

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

A tax on unimproved land falls entirely on landowners, because the supply of land is perfectly inelastic.

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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