Question 1

Economists disagree on whether labour taxes have a small or a large deadweight loss.

Accepted Answer

A) True 
 B)False

Question 2

Draw a supply-demand diagram for chocolate. On the diagram, show the equilibrium before and after the imposition of a tax. Now identify areas corresponding to each of the following:
a. consumer surplus before the tax
b. producer surplus before the tax
c. total surplus before the tax
d. consumer surplus after the tax
e. producer surplus after the tax
f. total surplus after the tax
g. tax revenue
h. deadweight loss

Accepted Answer

A useful way to answer this qu

Question 3

The deadweight loss of a tax is the reduction in total surplus in excess of the tax revenue collected that results from the tax.

Accepted Answer

A) True 
 B)False

Question 4

If the government tripled the taxes on new cameras, the deadweight loss from the camera tax would:

Accepted Answer

A)  more than triple 
B)  triple 
C)  increase by less than triple 
D)  be unchanged 
A)  more than triple 
B)  triple 
C)  increase by less than triple 
D)  be unchanged

Question 5

The appropriate measure of the benefit from a tax is the:

Accepted Answer

A)  consumer surplus 
B)  benefit received by those people who gain from government's expenditure of the tax revenue 
C)  producer surplus 
D)  government's budget balance, which is increased with more taxes 
A)  consumer surplus 
B)  benefit received by those people who gain from government's expenditure of the tax revenue 
C)  producer surplus 
D)  government's budget balance, which is increased with more taxes

Question 6

Illustrate on three demand-supply graphs how the size of a tax (small, medium and large) can alter total revenue and deadweight loss.

Accepted Answer

The answer of Illustrate on three demand-supply graphs how the...

Question 7

Other things being equal, as the size of a tax varies, the deadweight loss from the tax varies according to the square root of the size of the tax.

Accepted Answer

A) True 
 B)False

Question 8

Graph 8-3
  
-According to Graph 8-3, the price buyers pay after the tax is:

Accepted Answer

A)  $8 
B)  $12 
C)  $16 
D)  $20 
A)  $8 
B)  $12 
C)  $16 
D)  $20

Question 9

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

Accepted Answer

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

Question 10

Graph 8-1
  
-According to Graph 8-1, the tax caused a reduction in consumer 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 11

Assume that Jane cleans Joe's house weekly for $80. Joe would be willing to pay as much as $100 weekly to have his house cleaned. Jane's opportunity cost is $70.
-According to the information provided, if Jane cleans Joe's house, the consumer surplus is:

Accepted Answer

A)  $100 
B)  $80 
C)  $70 
D)  $20 
A)  $100 
B)  $80 
C)  $70 
D)  $20

Question 12

Graph 8-1
  
-According to Graph 8-1, the benefits to the government (total tax revenue) is represented by area:

Accepted Answer

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

Question 13

Assume that Jane cleans Joe's house weekly for $80. Joe would be willing to pay as much as $100 weekly to have his house cleaned. Jane's opportunity cost is $70.
-According to the information provided, assume that Joe is required to pay a tax of $40 when he hires someone to clean his house. Which of the following is true?

Accepted Answer

A)  Jane will continue to clean Joe's home, but consumer surplus will decline 
B)  Joe will now clean his own home 
C)  Jane will continue to cleans Joe's home but her producer surplus will decline 
D)  total economic welfare (consumer surplus plus producer surplus plus tax revenue) will increase 
A)  Jane will continue to clean Joe's home, but consumer surplus will decline 
B)  Joe will now clean his own home 
C)  Jane will continue to cleans Joe's home but her producer surplus will decline 
D)  total economic welfare (consumer surplus plus producer surplus plus tax revenue) will increase

Question 14

Graph 8-3
  
-According to Graph 8-3, the equilibrium market price before the tax is imposed is:

Accepted Answer

A)  $8 
B)  $12 
C)  $16 
D)  $20 
A)  $8 
B)  $12 
C)  $16 
D)  $20

Question 15

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, what will be Don's gain in consumer surplus as a result of the proposed transaction?

Accepted Answer

A)  Don will gain $30 per week 
B)  Don will gain $20 per week 
C)  Don will gain $10 per week 
D)  Don will gain no consumer surplus 
A)  Don will gain $30 per week 
B)  Don will gain $20 per week 
C)  Don will gain $10 per week 
D)  Don will gain no consumer surplus

Question 16

Economists generally agree that the most important tax in the Australian economy is the tax on:

Accepted Answer

A)  property 
B)  consumption 
C)  labour 
D)  income 
A)  property 
B)  consumption 
C)  labour 
D)  income

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

The underground economy refers to the extractive mining and petroleum industries.

Accepted Answer

A) True 
 B)False

Question 19

The Laffer curve:

Accepted Answer

A)  relates income tax rates to total income taxes collected 
B)  was so ridiculous that economists took it as a joke, hence the name, Laffer Curve 
C)  relates tax rates to deadweight welfare losses 
D)  relates government welfare payments to the birth rate 
A)  relates income tax rates to total income taxes collected 
B)  was so ridiculous that economists took it as a joke, hence the name, Laffer Curve 
C)  relates tax rates to deadweight welfare losses 
D)  relates government welfare payments to the birth rate

Question 20

When a tax is levied on a good:

Accepted Answer

A)  the quantity of the good sold will change 
B)  the price of the good sold will change 
C)  both price and quantity of the good sold will change 
D)  neither price nor quantity of the good sold will change 
A)  the quantity of the good sold will change 
B)  the price of the good sold will change 
C)  both price and quantity of the good sold will change 
D)  neither price nor quantity of the good sold will change

Exam 8: Application: The Costs of Taxation

Economists disagree on whether labour taxes have a small or a large deadweight loss.

The deadweight loss of a tax is the reduction in total surplus in excess of the tax revenue collected that results from the tax.

If the government tripled the taxes on new cameras, the deadweight loss from the camera tax would:

The appropriate measure of the benefit from a tax is the:

Illustrate on three demand-supply graphs how the size of a tax (small, medium and large) can alter total revenue and deadweight loss.

Other things being equal, as the size of a tax varies, the deadweight loss from the tax varies according to the square root of the size of the tax.

Graph 8-3 -According to Graph 8-3, the price buyers pay after the tax is:

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

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

Assume that Jane cleans Joe's house weekly for $80. Joe would be willing to pay as much as $100 weekly to have his house cleaned. Jane's opportunity cost is $70. -According to the information provided, if Jane cleans Joe's house, the consumer surplus is:

Graph 8-1 -According to Graph 8-1, the benefits to the government (total tax revenue) is represented by area:

Graph 8-3 -According to Graph 8-3, the equilibrium market price before the tax is imposed is:

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, what will be Don's gain in consumer surplus as a result of the proposed transaction?

Economists generally agree that the most important tax in the Australian economy is the tax on:

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

The underground economy refers to the extractive mining and petroleum industries.

The Laffer curve:

When a tax is levied on a good:

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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