Question 1

Figure 8-7
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-7.As a result of the tax,

Accepted Answer

A)  consumer surplus decreases from $150 to $60. 
B)  producer surplus decreases from $125 to $45. 
C)  the market experiences a deadweight loss of $45. 
D)  All of the above are correct. 
A)  consumer surplus decreases from $150 to $60. 
B)  producer surplus decreases from $125 to $45. 
C)  the market experiences a deadweight loss of $45. 
D)  All of the above are correct.

Question 2

Figure 8-5
Suppose that the government imposes a tax of P3 - P1.  
-Refer to Figure 8-5.The tax causes a reduction in producer surplus that is represented by area

Accepted Answer

A)  A. 
B)  C+H. 
C)  D+H. 
D)  F. 
A)  A. 
B)  C+H. 
C)  D+H. 
D)  F.

Question 3

Taxes affect market participants by increasing the price paid by the buyer and received by the seller.

Accepted Answer

A) True 
 B)False

Question 4

The demand for bread is less elastic than the demand for donuts;hence,a tax on bread will create a larger deadweight loss than will the same tax on donuts,other things equal.

Accepted Answer

A) True 
 B)False

Question 5

Figure 8-6
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-6.Without a tax,producer surplus in this market is

Accepted Answer

A)  $1,500. 
B)  $2,400. 
C)  $3,000. 
D)  $3,600. 
A)  $1,500. 
B)  $2,400. 
C)  $3,000. 
D)  $3,600.

Question 6

Figure 8-5
Suppose that the government imposes a tax of P3 - P1.  
-Refer to Figure 8-5.The total surplus with the tax is represented by area

Accepted Answer

A)  C+H. 
B)  A+B+C. 
C)  D+H+F. 
D)  A+B+D+F. 
A)  C+H. 
B)  A+B+C. 
C)  D+H+F. 
D)  A+B+D+F.

Question 7

Suppose that the government imposes a tax on dairy products.The deadweight loss from this tax will likely be greater in the

Accepted Answer

A)  first year after it is imposed than in the fifth year after it is imposed because demand and supply will be more elastic in the first year than in the fifth year. 
B)  first year after it is imposed than in the fifth year after it is imposed because demand and supply will be less elastic in the first year than in the fifth year. 
C)  fifth year after it is imposed than in the first year after it is imposed because demand and supply will be more elastic in the first year than in the fifth year. 
D)  fifth year after it is imposed than in the first year after it is imposed because demand and supply will be less elastic in the first year than in the fifth year. 
A)  first year after it is imposed than in the fifth year after it is imposed because demand and supply will be more elastic in the first year than in the fifth year. 
B)  first year after it is imposed than in the fifth year after it is imposed because demand and supply will be less elastic in the first year than in the fifth year. 
C)  fifth year after it is imposed than in the first year after it is imposed because demand and supply will be more elastic in the first year than in the fifth year. 
D)  fifth year after it is imposed than in the first year after it is imposed because demand and supply will be less elastic in the first year than in the fifth year.

Question 8

Figure 8-3
The vertical distance between points A and C represents a tax in the market.  
-Refer to Figure 8-3.The per unit burden of the tax on buyers is

Accepted Answer

A)  P3 - P1. 
B)  P3 - P2. 
C)  P2 - P1. 
D)  P4 - P3. 
A)  P3 - P1. 
B)  P3 - P2. 
C)  P2 - P1. 
D)  P4 - P3.

Question 9

Taxes on labor have the effect of encouraging

Accepted Answer

A)  workers to work more hours. 
B)  the elderly to postpone retirement. 
C)  second earners within a family to take a job. 
D)  unscrupulous people to take part in the underground economy. 
A)  workers to work more hours. 
B)  the elderly to postpone retirement. 
C)  second earners within a family to take a job. 
D)  unscrupulous people to take part in the underground economy.

Question 10

The amount of deadweight loss that results from a tax of a given size is determined by

Accepted Answer

A)  whether the tax is levied on buyers or sellers. 
B)  the number of buyers in the market relative to the number of sellers. 
C)  the price elasticities of demand and supply. 
D)  the ratio of the tax per unit to the effective price received by sellers. 
A)  whether the tax is levied on buyers or sellers. 
B)  the number of buyers in the market relative to the number of sellers. 
C)  the price elasticities of demand and supply. 
D)  the ratio of the tax per unit to the effective price received by sellers.

Question 11

Figure 8-3
The vertical distance between points A and C represents a tax in the market.  
-Refer to Figure 8-3.Which of the following equations is valid for the deadweight loss of the tax?

Accepted Answer

A)  Deadweight loss = (1/2)(P2 - P1)(Q2 + Q1) 
B)  Deadweight loss = (1/2)(P3 - P1)(Q2  + Q1) 
C)  Deadweight loss = (1/2)(P3 - P2)(Q2 - Q1) 
D)  Deadweight loss = (1/2)(P3 - P1)(Q2 - Q1) 
A)  Deadweight loss = (1/2)(P2 - P1)(Q2 + Q1) 
B)  Deadweight loss = (1/2)(P3 - P1)(Q2  + Q1) 
C)  Deadweight loss = (1/2)(P3 - P2)(Q2 - Q1) 
D)  Deadweight loss = (1/2)(P3 - P1)(Q2 - Q1)

Question 12

Figure 8-4
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-4.The amount of tax revenue received by the government is equal to

Accepted Answer

A)  $210. 
B)  $420. 
C)  $980. 
D)  $1,600. 
A)  $210. 
B)  $420. 
C)  $980. 
D)  $1,600.

Question 13

Suppose that policymakers are considering placing a tax on either of two markets.In Market A,the tax will have a significant effect on the price consumers pay,but it will not affect equilibrium quantity very much.In Market B,the same tax will have only a small effect on the price consumers pay,but it will have a large effect on the equilibrium quantity.Other factors are held constant.In which market will the tax have a larger deadweight loss?

Accepted Answer

A)  Market A 
B)  Market B 
C)  The deadweight loss will be the same in both markets. 
D)  There is not enough information to answer the question. 
A)  Market A 
B)  Market B 
C)  The deadweight loss will be the same in both markets. 
D)  There is not enough information to answer the question.

Question 14

When a tax is levied on a good,

Accepted Answer

A)  government revenues exceed the loss in total welfare. 
B)  there is a decrease in the quantity of the good bought and sold in the market. 
C)  the price that sellers receive exceeds the price that buyers pay. 
D)  All of the above are correct. 
A)  government revenues exceed the loss in total welfare. 
B)  there is a decrease in the quantity of the good bought and sold in the market. 
C)  the price that sellers receive exceeds the price that buyers pay. 
D)  All of the above are correct.

Question 15

In the market for widgets,the supply curve is the typical upward-sloping straight line,and the demand curve is the typical downward-sloping straight line.The equilibrium quantity in the market for widgets is 200 per month when there is no tax.Then a tax of $5 per widget is imposed.The price paid by buyers increases by $2 and the after-tax price received by sellers falls by $3.The government is able to raise $750 per month in revenue from the tax.The deadweight loss from the tax is

Accepted Answer

A)  $250. 
B)  $125. 
C)  $75. 
D)  $50. 
A)  $250. 
B)  $125. 
C)  $75. 
D)  $50.

Question 16

The loss in total surplus resulting from a tax is called

Accepted Answer

A)  a deficit. 
B)  economic loss. 
C)  deadweight loss. 
D)  inefficiency. 
A)  a deficit. 
B)  economic loss. 
C)  deadweight loss. 
D)  inefficiency.

Question 17

If the tax on a good is increased from $1 per unit to $3 per unit,the deadweight loss from the tax increases by a factor of

Accepted Answer

A)  2 
B)  3 
C)  9 
D)  18 
A)  2 
B)  3 
C)  9 
D)  18

Question 18

Figure 8-5
Suppose that the government imposes a tax of P3 - P1.  
-Refer to Figure 8-5.The price that sellers effectively receive after the tax is imposed is

Accepted Answer

A)  P1. 
B)  P2. 
C)  P3. 
D)  P4. 
A)  P1. 
B)  P2. 
C)  P3. 
D)  P4.

Question 19

Figure 8-1  
-Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The area measured by M represents

Accepted Answer

A)  consumer surplus after the tax. 
B)  consumer surplus before the tax. 
C)  producer surplus after the tax. 
D)  producer surplus before the tax. 
A)  consumer surplus after the tax. 
B)  consumer surplus before the tax. 
C)  producer surplus after the tax. 
D)  producer surplus before the tax.

Question 20

Figure 8-10
The vertical distance between points A and B represents the original tax.  
-Refer to Figure 8-10.If the government changed the per-unit tax from $5.00 to $7.50,then the price paid by buyers would be $10.50,the price received by sellers would be $3,and the quantity sold in the market would be 0.5 units.Compared to the original tax rate,this higher tax rate would

Accepted Answer

A)  increase government revenue and increase the deadweight loss from the tax. 
B)  increase government revenue and decrease the deadweight loss from the tax. 
C)  decrease government revenue and increase the deadweight loss from the tax. 
D)  decrease government revenue and decrease the deadweight loss from the tax. 
A)  increase government revenue and increase the deadweight loss from the tax. 
B)  increase government revenue and decrease the deadweight loss from the tax. 
C)  decrease government revenue and increase the deadweight loss from the tax. 
D)  decrease government revenue and decrease the deadweight loss from the tax.

Exam 8: Application: The Costs of Taxation

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7.As a result of the tax,

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The tax causes a reduction in producer surplus that is represented by area

Taxes affect market participants by increasing the price paid by the buyer and received by the seller.

The demand for bread is less elastic than the demand for donuts;hence,a tax on bread will create a larger deadweight loss than will the same tax on donuts,other things equal.

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.Without a tax,producer surplus in this market is

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The total surplus with the tax is represented by area

Suppose that the government imposes a tax on dairy products.The deadweight loss from this tax will likely be greater in the

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3.The per unit burden of the tax on buyers is

Taxes on labor have the effect of encouraging

The amount of deadweight loss that results from a tax of a given size is determined by

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3.Which of the following equations is valid for the deadweight loss of the tax?

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4.The amount of tax revenue received by the government is equal to

When a tax is levied on a good,

The loss in total surplus resulting from a tax is called

If the tax on a good is increased from $1 per unit to $3 per unit,the deadweight loss from the tax increases by a factor of

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The price that sellers effectively receive after the tax is imposed is

Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The area measured by M represents

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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