Question 1

The price elasticities of supply and demand affect

Accepted Answer

A)  both the size of the deadweight loss from a tax and the tax incidence. 
B)  the size of the deadweight loss from a tax but not the tax incidence. 
C)  the tax incidence but not the size of the deadweight loss from a tax. 
D)  neither the size of the deadweight loss from a tax nor the tax incidence. 
A)  both the size of the deadweight loss from a tax and the tax incidence. 
B)  the size of the deadweight loss from a tax but not the tax incidence. 
C)  the tax incidence but not the size of the deadweight loss from a tax. 
D)  neither the size of the deadweight loss from a tax nor the tax incidence.

Question 2

A tax on raw land causes

Accepted Answer

A)  a large deadweight loss. 
B)  no deadweight loss. 
C)  landlords to bear none of the burden of the tax. 
D)  the generation of such a large amount of tax revenue that all other taxes could be eliminated. 
A)  a large deadweight loss. 
B)  no deadweight loss. 
C)  landlords to bear none of the burden of the tax. 
D)  the generation of such a large amount of tax revenue that all other taxes could be eliminated.

Question 3

David walks Carolyn's dog once a day for $50 per week.Carolyn values this service at $60 per week,while the opportunity cost of David's time is $30 per week.The government places a tax of $35 per week on dog walkers.After the tax,what is the loss in total surplus?

Accepted Answer

A)  $50 
B)  $30 
C)  $25 
D)  $0 
A)  $50 
B)  $30 
C)  $25 
D)  $0

Question 4

Which of the following would likely have the smallest deadweight loss relative to the tax revenue?

Accepted Answer

A)  a head tax (that is,a tax everyone must pay regardless of what one does or buys) 
B)  an income tax 
C)  a tax on compact discs 
D)  a tax on caviar 
A)  a head tax (that is,a tax everyone must pay regardless of what one does or buys) 
B)  an income tax 
C)  a tax on compact discs 
D)  a tax on caviar

Question 5

Figure 8-5
Suppose that the government imposes a tax of P3 - P1.  
-Refer to Figure 8-5.The tax is levied on

Accepted Answer

A)  buyers only. 
B)  sellers only. 
C)  both buyers and sellers. 
D)  This is impossible to determine from the figure. 
A)  buyers only. 
B)  sellers only. 
C)  both buyers and sellers. 
D)  This is impossible to determine from the figure.

Question 6

Who once said that taxes are the price we pay for a civilized society?

Accepted Answer

A)  Aristotle 
B)  George Washington 
C)  Oliver Wendell Holmes,Jr. 
D)  Ronald Reagan 
A)  Aristotle 
B)  George Washington 
C)  Oliver Wendell Holmes,Jr. 
D)  Ronald Reagan

Question 7

The deadweight loss from a $2 tax will be smallest in a market with

Accepted Answer

A)  elastic demand and elastic supply. 
B)  elastic demand and inelastic supply. 
C)  inelastic demand and elastic supply. 
D)  inelastic demand and inelastic supply. 
A)  elastic demand and elastic supply. 
B)  elastic demand and inelastic supply. 
C)  inelastic demand and elastic supply. 
D)  inelastic demand and inelastic supply.

Question 8

Today's property tax

Accepted Answer

A)  taxes only raw land. 
B)  is exactly the same as Henry George's single-tax proposal. 
C)  taxes land and the improvements to land. 
D)  has no deadweight loss since the amount of revenue going to the government equals the reduction in the landowners' surplus. 
A)  taxes only raw land. 
B)  is exactly the same as Henry George's single-tax proposal. 
C)  taxes land and the improvements to land. 
D)  has no deadweight loss since the amount of revenue going to the government equals the reduction in the landowners' surplus.

Question 9

Scenario 8-1
Claudia would be willing to pay as much as $100 per week to have her house cleaned.John's opportunity cost of cleaning Claudia's house is $70 per week.
-Refer to Scenario 8-1.Assume Claudia is required to pay a tax of $40 when she hires someone to clean her house for a week.Which of the following is correct?

Accepted Answer

A)  Claudia will now clean her own house. 
B)  John will continue to clean Claudia's house,but his producer surplus will decline. 
C)  Total economic welfare (consumer surplus plus producer surplus plus tax revenue)will increase. 
D)  Claudia will continue to hire John to clean her house,but her consumer surplus will decline. 
A)  Claudia will now clean her own house. 
B)  John will continue to clean Claudia's house,but his producer surplus will decline. 
C)  Total economic welfare (consumer surplus plus producer surplus plus tax revenue)will increase. 
D)  Claudia will continue to hire John to clean her house,but her consumer surplus will decline.

Question 10

Figure 8-1  
-Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The consumer surplus before the tax is measured by the area

Accepted Answer

A)  M. 
B)  L+M+Y. 
C)  J. 
D)  J+K+I. 
A)  M. 
B)  L+M+Y. 
C)  J. 
D)  J+K+I.

Question 11

Which of the following statements about a land tax is correct?

Accepted Answer

A)  A tax on raw land causes a small but positive deadweight loss. 
B)  Landowners and renters share the burden of a tax on raw land. 
C)  The government's tax revenue exactly equals the loss of the landowners. 
D)  The supply of improvements to land such as sewers and roads is perfectly inelastic. 
A)  A tax on raw land causes a small but positive deadweight loss. 
B)  Landowners and renters share the burden of a tax on raw land. 
C)  The government's tax revenue exactly equals the loss of the landowners. 
D)  The supply of improvements to land such as sewers and roads is perfectly inelastic.

Question 12

A tax on a good causes the size of the market to increase.

Accepted Answer

A) True 
 B)False

Question 13

If T represents the size of the tax on a good and Q represents the quantity of the good that is sold,total tax revenue received by government can be expressed as

Accepted Answer

A)  T/Q. 
B)  T+Q. 
C)  TxQ. 
D)  (TxQ)/Q. 
A)  T/Q. 
B)  T+Q. 
C)  TxQ. 
D)  (TxQ)/Q.

Question 14

What happens to the total surplus in a market when the government imposes a tax?

Accepted Answer

A)  Total surplus increases by the amount of the tax. 
B)  Total surplus increases but by less than the amount of the tax. 
C)  Total surplus decreases. 
D)  Total surplus is unaffected by the tax. 
A)  Total surplus increases by the amount of the tax. 
B)  Total surplus increases but by less than the amount of the tax. 
C)  Total surplus decreases. 
D)  Total surplus is unaffected by the tax.

Question 15

When a tax is imposed on sellers,producer surplus decreases but consumer surplus increases.

Accepted Answer

A) True 
 B)False

Question 16

In order for Henry George's single tax on land not to distort economic incentives,the tax would have to be on

Accepted Answer

A)  improvements to land. 
B)  land used for commercial purposes. 
C)  land used for residential purposes. 
D)  raw land. 
A)  improvements to land. 
B)  land used for commercial purposes. 
C)  land used for residential purposes. 
D)  raw land.

Question 17

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

Accepted Answer

A)  the price elasticity of demand. 
B)  consumer surplus. 
C)  the maximum amount that buyers are willing to pay for the good. 
D)  the equilibrium price. 
A)  the price elasticity of demand. 
B)  consumer surplus. 
C)  the maximum amount that buyers are willing to pay for the good. 
D)  the equilibrium price.

Question 18

Figure 8-2
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-2.The loss of consumer surplus as a result of the tax is

Accepted Answer

A)  $1.50. 
B)  $3. 
C)  $4.50. 
D)  $6. 
A)  $1.50. 
B)  $3. 
C)  $4.50. 
D)  $6.

Question 19

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 20

Supply-side economics is a term associated with the views of

Accepted Answer

A)  Ronald Reagan and Arthur Laffer. 
B)  Karl Marx. 
C)  Bill Clinton and Greg Mankiw. 
D)  Milton Friedman. 
A)  Ronald Reagan and Arthur Laffer. 
B)  Karl Marx. 
C)  Bill Clinton and Greg Mankiw. 
D)  Milton Friedman.

Exam 8: Application: The Costs of Taxation

The price elasticities of supply and demand affect

A tax on raw land causes

David walks Carolyn's dog once a day for $50 per week.Carolyn values this service at $60 per week,while the opportunity cost of David's time is $30 per week.The government places a tax of $35 per week on dog walkers.After the tax,what is the loss in total surplus?

Which of the following would likely have the smallest deadweight loss relative to the tax revenue?

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The tax is levied on

Who once said that taxes are the price we pay for a civilized society?

The deadweight loss from a $2 tax will be smallest in a market with

Today's property tax

Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The consumer surplus before the tax is measured by the area

Which of the following statements about a land tax is correct?

A tax on a good causes the size of the market to increase.

If T represents the size of the tax on a good and Q represents the quantity of the good that is sold,total tax revenue received by government can be expressed as

What happens to the total surplus in a market when the government imposes a tax?

When a tax is imposed on sellers,producer surplus decreases but consumer surplus increases.

In order for Henry George's single tax on land not to distort economic incentives,the tax would have to be on

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

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2.The loss of consumer surplus as a result of the tax is

In 1776,the American Revolution was sparked by anger over

Supply-side economics is a term associated with the views of

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

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality 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 Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

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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