Question 1

A tax placed on a good

Accepted Answer

A)  causes the effective price to sellers to increase. 
B)  affects the welfare of buyers of the good but not the welfare of sellers. 
C)  causes the equilibrium quantity of the good to decrease. 
D)  creates a burden that is usually borne entirely by the sellers of the good. 
A)  causes the effective price to sellers to increase. 
B)  affects the welfare of buyers of the good but not the welfare of sellers. 
C)  causes the equilibrium quantity of the good to decrease. 
D)  creates a burden that is usually borne entirely by the sellers of the good.

Question 2

Diana is a personal trainer whose client Charles pays $80 per hour-long session.Charles values this service at $100 per hour,while the opportunity cost of Diana's time is $75 per hour.The government places a tax of $10 per hour on personal trainers.Before the tax,what is the total surplus?

Accepted Answer

A)  $25 
B)  $20 
C)  $5 
D)  $0 
A)  $25 
B)  $20 
C)  $5 
D)  $0

Question 3

Suppose a tax of $1 per unit is imposed on a good.The more elastic the demand for the good,other things equal,

Accepted Answer

A)  the larger is the decrease in quantity demanded as a result of the tax. 
B)  the smaller is the tax burden on buyers relative to the tax burden on sellers. 
C)  the larger is the deadweight loss of the tax. 
D)  All of the above are correct. 
A)  the larger is the decrease in quantity demanded as a result of the tax. 
B)  the smaller is the tax burden on buyers relative to the tax burden on sellers. 
C)  the larger is the deadweight loss of the tax. 
D)  All of the above are correct.

Question 4

The more elastic are supply and demand in a market,the greater are the distortions caused by a tax on that market,and the more likely it is that a tax cut in that market will raise tax revenue.

Accepted Answer

A) True 
 B)False

Question 5

The Social Security tax,and to a large extent,the federal income tax,are labor taxes.

Accepted Answer

A) True 
 B)False

Question 6

Concerning the labor market and taxes on labor,economists disagree about

Accepted Answer

A)  the size of the tax on labor. 
B)  the size of the deadweight loss of the tax on labor. 
C)  whether or not a tax on labor places a wedge between the wage that firms pay and the wage that workers receive. 
D)  All of the above are correct. 
A)  the size of the tax on labor. 
B)  the size of the deadweight loss of the tax on labor. 
C)  whether or not a tax on labor places a wedge between the wage that firms pay and the wage that workers receive. 
D)  All of the above are correct.

Question 7

Suppose the tax on liquor is increased so that the tax goes from being a "medium" tax to being a "large" tax.As a result,it is likely that

Accepted Answer

A)  tax revenue increases,and the deadweight loss increases. 
B)  tax revenue increases,and the deadweight loss decreases. 
C)  tax revenue decreases,and the deadweight loss increases. 
D)  tax revenue decreases,and the deadweight loss decreases. 
A)  tax revenue increases,and the deadweight loss increases. 
B)  tax revenue increases,and the deadweight loss decreases. 
C)  tax revenue decreases,and the deadweight loss increases. 
D)  tax revenue decreases,and the deadweight loss decreases.

Question 8

Figure 8-2
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-2.The imposition of the tax causes the quantity sold to

Accepted Answer

A)  increase by 1 unit. 
B)  decrease by 1 unit. 
C)  increase by 2 units. 
D)  decrease by 2 units. 
A)  increase by 1 unit. 
B)  decrease by 1 unit. 
C)  increase by 2 units. 
D)  decrease by 2 units.

Question 9

When a tax is imposed on a good,the

Accepted Answer

A)  supply curve for the good always shifts. 
B)  demand curve for the good always shifts. 
C)  amount of the good that buyers are willing to buy at each price always remains unchanged. 
D)  equilibrium quantity of the good always decreases. 
A)  supply curve for the good always shifts. 
B)  demand curve for the good always shifts. 
C)  amount of the good that buyers are willing to buy at each price always remains unchanged. 
D)  equilibrium quantity of the good always decreases.

Question 10

When a tax is levied on buyers,the

Accepted Answer

A)  supply curves shifts upward by the amount of the tax. 
B)  tax creates a wedge between the price buyers effectively pay and the price sellers receive. 
C)  tax has no effect on the well-being of sellers. 
D)  All of the above are correct. 
A)  supply curves shifts upward by the amount of the tax. 
B)  tax creates a wedge between the price buyers effectively pay and the price sellers receive. 
C)  tax has no effect on the well-being of sellers. 
D)  All of the above are correct.

Question 11

Figure 8-5
Suppose that the government imposes a tax of P3 - P1.  
-Refer to Figure 8-5.Consumer surplus before the tax was levied is represented by area

Accepted Answer

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

Question 12

According to the economist Milton Friedman,the "least bad" tax is a tax on

Accepted Answer

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

Question 13

Total surplus with a tax is equal to

Accepted Answer

A)  consumer surplus plus producer surplus. 
B)  consumer surplus minus producer surplus. 
C)  consumer surplus plus producer surplus minus tax revenue. 
D)  consumer surplus plus producer surplus plus tax revenue. 
A)  consumer surplus plus producer surplus. 
B)  consumer surplus minus producer surplus. 
C)  consumer surplus plus producer surplus minus tax revenue. 
D)  consumer surplus plus producer surplus plus tax revenue.

Question 14

Economists generally agree that the most important tax in the U.S.economy is the

Accepted Answer

A)  income tax. 
B)  tax on labor. 
C)  inheritance or death tax. 
D)  tax on corporate profits. 
A)  income tax. 
B)  tax on labor. 
C)  inheritance or death tax. 
D)  tax on corporate profits.

Question 15

In which of the following instances would the deadweight loss of the tax on airline tickets increase by a factor of 9?

Accepted Answer

A)  The tax on airline tickets increases from $20 per ticket to $60 per ticket. 
B)  The tax on airline tickets increases from $20 per ticket to $90 per ticket. 
C)  The tax on airline tickets increases from $15 per ticket to $60 per ticket. 
D)  The tax on airline tickets increases from $15 per ticket to $135 per ticket. 
A)  The tax on airline tickets increases from $20 per ticket to $60 per ticket. 
B)  The tax on airline tickets increases from $20 per ticket to $90 per ticket. 
C)  The tax on airline tickets increases from $15 per ticket to $60 per ticket. 
D)  The tax on airline tickets increases from $15 per ticket to $135 per ticket.

Question 16

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,buyers effectively pay

Accepted Answer

A)  $16 for each unit of the good,and sellers effectively receive $12 for each unit of the good. 
B)  $16 for each unit of the good,and sellers effectively receive $8 for each unit of the good. 
C)  $12 for each unit of the good,and sellers effectively receive $8 for each unit of the good. 
D)  $14 for each unit of the good,and sellers effectively receive $10 for each unit of the good. 
A)  $16 for each unit of the good,and sellers effectively receive $12 for each unit of the good. 
B)  $16 for each unit of the good,and sellers effectively receive $8 for each unit of the good. 
C)  $12 for each unit of the good,and sellers effectively receive $8 for each unit of the good. 
D)  $14 for each unit of the good,and sellers effectively receive $10 for each unit of the good.

Question 17

A tax raises the price received by sellers and lowers the price paid by buyers.

Accepted Answer

A) True 
 B)False

Question 18

If the tax on a good is doubled,the deadweight loss of the tax

Accepted Answer

A)  remains constant. 
B)  doubles. 
C)  quadruples. 
D)  increases by a percentage that cannot be determined without further information. 
A)  remains constant. 
B)  doubles. 
C)  quadruples. 
D)  increases by a percentage that cannot be determined without further information.

Question 19

Figure 8-3
The vertical distance between points A and C represents a tax in the market.  
-Refer to Figure 8-3.The amount of deadweight loss associated with the tax is equal to

Accepted Answer

A)  P3ACP1. 
B)  ABC. 
C)  P2ADP3. 
D)  P1DCP2. 
A)  P3ACP1. 
B)  ABC. 
C)  P2ADP3. 
D)  P1DCP2.

Question 20

Figure 8-4
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-4.The price that buyers effectively pay after the tax is imposed is

Accepted Answer

A)  $24. 
B)  $16. 
C)  $14. 
D)  $10. 
A)  $24. 
B)  $16. 
C)  $14. 
D)  $10.

Exam 8: Application: The Costs of Taxation

A tax placed on a good

Diana is a personal trainer whose client Charles pays $80 per hour-long session.Charles values this service at $100 per hour,while the opportunity cost of Diana's time is $75 per hour.The government places a tax of $10 per hour on personal trainers.Before the tax,what is the total surplus?

Suppose a tax of $1 per unit is imposed on a good.The more elastic the demand for the good,other things equal,

The more elastic are supply and demand in a market,the greater are the distortions caused by a tax on that market,and the more likely it is that a tax cut in that market will raise tax revenue.

The Social Security tax,and to a large extent,the federal income tax,are labor taxes.

Concerning the labor market and taxes on labor,economists disagree about

Suppose the tax on liquor is increased so that the tax goes from being a "medium" tax to being a "large" tax.As a result,it is likely that

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2.The imposition of the tax causes the quantity sold to

When a tax is imposed on a good,the

When a tax is levied on buyers,the

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.Consumer surplus before the tax was levied is represented by area

According to the economist Milton Friedman,the "least bad" tax is a tax on

Total surplus with a tax is equal to

Economists generally agree that the most important tax in the U.S.economy is the

In which of the following instances would the deadweight loss of the tax on airline tickets increase by a factor of 9?

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,buyers effectively pay

A tax raises the price received by sellers and lowers the price paid by buyers.

If the tax on a good is doubled,the deadweight loss of the tax

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3.The amount of deadweight loss associated with the tax is equal to

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4.The price that buyers effectively pay after the tax is imposed is

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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