Question 1

Which of the following statements is true for markets in which the demand curve slopes downward and the supply curve slopes upward?

Accepted Answer

A)  As the size of the tax increases,tax revenue continually rises and deadweight loss continually falls. 
B)  As the size of the tax increases,tax revenue and deadweight loss rise initially,but both eventually begin to fall. 
C)  As the size of the tax increases,tax revenue rises initially,but it eventually begins to fall;deadweight loss continually rises. 
D)  As the size of the tax increases,tax revenue rises initially,but it eventually begins to fall;deadweight loss falls initially,but eventually it begins to rise. 
A)  As the size of the tax increases,tax revenue continually rises and deadweight loss continually falls. 
B)  As the size of the tax increases,tax revenue and deadweight loss rise initially,but both eventually begin to fall. 
C)  As the size of the tax increases,tax revenue rises initially,but it eventually begins to fall;deadweight loss continually rises. 
D)  As the size of the tax increases,tax revenue rises initially,but it eventually begins to fall;deadweight loss falls initially,but eventually it begins to rise.

Question 2

Figure 8-6
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-6.What happens to total surplus in this market when the tax is imposed?

Accepted Answer

A)  Total surplus increases by $1,500. 
B)  Total surplus increases by $3,000. 
C)  Total surplus decreases by $1,500. 
D)  Total surplus decreases by $,3000. 
A)  Total surplus increases by $1,500. 
B)  Total surplus increases by $3,000. 
C)  Total surplus decreases by $1,500. 
D)  Total surplus decreases by $,3000.

Question 3

To fully understand how taxes affect economic well-being,we must compare the

Accepted Answer

A)  benefit to buyers with the loss to sellers. 
B)  price paid by buyers to the price received by sellers. 
C)  profits earned by firms to the losses incurred by consumers. 
D)  decrease in total surplus to the increase in revenue raised by the government. 
A)  benefit to buyers with the loss to sellers. 
B)  price paid by buyers to the price received by sellers. 
C)  profits earned by firms to the losses incurred by consumers. 
D)  decrease in total surplus to the increase in revenue raised by the government.

Question 4

The government's benefit from a tax can be measured by

Accepted Answer

A)  consumer surplus. 
B)  producer surplus. 
C)  tax revenue. 
D)  All of the above are correct. 
A)  consumer surplus. 
B)  producer surplus. 
C)  tax revenue. 
D)  All of the above are correct.

Question 5

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

Accepted Answer

A)  investment tax. 
B)  sales tax. 
C)  property tax. 
D)  labor tax. 
A)  investment tax. 
B)  sales tax. 
C)  property tax. 
D)  labor tax.

Question 6

When a tax is levied on buyers of a good,

Accepted Answer

A)  government collects too little revenue to justify the tax if the equilibrium quantity of the good decreases as a result of the tax. 
B)  there is an increase in the quantity of the good supplied. 
C)  a wedge is placed between the price buyers pay and the price sellers effectively receive. 
D)  the effective price to buyers decreases because the demand curve shifts leftward. 
A)  government collects too little revenue to justify the tax if the equilibrium quantity of the good decreases as a result of the tax. 
B)  there is an increase in the quantity of the good supplied. 
C)  a wedge is placed between the price buyers pay and the price sellers effectively receive. 
D)  the effective price to buyers decreases because the demand curve shifts leftward.

Question 7

In order for Henry George's land-tax argument to be valid,the land that is taxed must be

Accepted Answer

A)  improved land. 
B)  productive land. 
C)  raw land. 
D)  urban land. 
A)  improved land. 
B)  productive land. 
C)  raw land. 
D)  urban land.

Question 8

Figure 8-6
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-6.When the tax is imposed in this market,consumer surplus is

Accepted Answer

A)  $600. 
B)  $900. 
C)  $1,500. 
D)  $3,000. 
A)  $600. 
B)  $900. 
C)  $1,500. 
D)  $3,000.

Question 9

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 sellers effectively receive after the tax is imposed is

Accepted Answer

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

Question 10

Figure 8-2
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-2.Producer surplus without the tax is

Accepted Answer

A)  $4,and producer surplus with the tax is $1. 
B)  $4,and producer surplus with the tax is $3. 
C)  $10,and producer surplus with the tax is $1. 
D)  $10,and producer surplus with the tax is $3. 
A)  $4,and producer surplus with the tax is $1. 
B)  $4,and producer surplus with the tax is $3. 
C)  $10,and producer surplus with the tax is $1. 
D)  $10,and producer surplus with the tax is $3.

Question 11

When a tax is levied on a good,

Accepted Answer

A)  government collects revenues which might justify the loss in total welfare. 
B)  there is a decrease in the quantity of the good bought and sold in the market. 
C)  a wedge is placed between the price buyers pay and the price sellers effectively receive. 
D)  All of the above are correct. 
A)  government collects revenues which might justify the loss in total welfare. 
B)  there is a decrease in the quantity of the good bought and sold in the market. 
C)  a wedge is placed between the price buyers pay and the price sellers effectively receive. 
D)  All of the above are correct.

Question 12

Figure 8-8
Suppose the government imposes a $10 per unit tax on a good.  
-Refer to Figure 8-8.The government collects tax revenue that is the area

Accepted Answer

A)  L. 
B)  B+D. 
C)  C+F. 
D)  F+G+L. 
A)  L. 
B)  B+D. 
C)  C+F. 
D)  F+G+L.

Question 13

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,the equilibrium price and quantity are

Accepted Answer

A)  $16 and 300. 
B)  $10 and 600. 
C)  $10 and 300. 
D)  $6 and 300. 
A)  $16 and 300. 
B)  $10 and 600. 
C)  $10 and 300. 
D)  $6 and 300.

Question 14

Figure 8-9  
-Refer to Figure 8-9.Which of the following statements is not correct?

Accepted Answer

A)  Supply 2 is more elastic than supply 1. 
B)  Demand 2 is more elastic than demand 1. 
C)  Supply 1 is more inelastic than supply 2. 
D)  Demand 2 is more inelastic than supply 2. 
A)  Supply 2 is more elastic than supply 1. 
B)  Demand 2 is more elastic than demand 1. 
C)  Supply 1 is more inelastic than supply 2. 
D)  Demand 2 is more inelastic than supply 2.

Question 15

Figure 8-8
Suppose the government imposes a $10 per unit tax on a good.  
-Refer to Figure 8-8.The tax causes consumer surplus to decrease by the area

Accepted Answer

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

Question 16

The higher a country's tax rates,the more likely that country will be

Accepted Answer

A)  at the top of the Laffer curve. 
B)  on the positively sloped part of the Laffer curve. 
C)  on the negatively sloped part of the Laffer curve. 
D)  experiencing small deadweight losses. 
A)  at the top of the Laffer curve. 
B)  on the positively sloped part of the Laffer curve. 
C)  on the negatively sloped part of the Laffer curve. 
D)  experiencing small deadweight losses.

Question 17

The benefit to sellers of participating in a market is measured by the

Accepted Answer

A)  amount of taxes collected on sales of the good. 
B)  producer surplus. 
C)  amount sellers receive for their product. 
D)  sellers' willingness to sell. 
A)  amount of taxes collected on sales of the good. 
B)  producer surplus. 
C)  amount sellers receive for their product. 
D)  sellers' willingness to sell.

Question 18

If Henry George's single tax on land were applied today,

Accepted Answer

A)  it would make the supply of land more elastic. 
B)  the deadweight loss would be much larger than the deadweight loss of alternative taxes. 
C)  the tax would not raise enough revenue to pay for government spending. 
D)  it would increase immigration and decrease technology. 
A)  it would make the supply of land more elastic. 
B)  the deadweight loss would be much larger than the deadweight loss of alternative taxes. 
C)  the tax would not raise enough revenue to pay for government spending. 
D)  it would increase immigration and decrease technology.

Question 19

Figure 8-7
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-7.Which of the following statements summarizes the incidence of the tax?

Accepted Answer

A)  For each unit of the good that is sold,buyers bear one-half of the tax burden,and sellers bear one-half of the tax burden. 
B)  For each unit of the good that is sold,buyers bear one-third of the tax burden,and sellers bear two-thirds of the tax burden. 
C)  For each unit of the good that is sold,buyers bear one-fourth of the tax burden,and sellers bear three-fourths of the tax burden. 
D)  For each unit of the good that is sold,buyers bear three-fourths of the tax burden,and sellers bear one-fourth of the tax burden. 
A)  For each unit of the good that is sold,buyers bear one-half of the tax burden,and sellers bear one-half of the tax burden. 
B)  For each unit of the good that is sold,buyers bear one-third of the tax burden,and sellers bear two-thirds of the tax burden. 
C)  For each unit of the good that is sold,buyers bear one-fourth of the tax burden,and sellers bear three-fourths of the tax burden. 
D)  For each unit of the good that is sold,buyers bear three-fourths of the tax burden,and sellers bear one-fourth of the tax burden.

Question 20

Figure 8-6
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-6.What happens to consumer surplus when the tax is imposed in this market?

Accepted Answer

A)  Consumer surplus falls by $3,600. 
B)  Consumer surplus falls by $2,700. 
C)  Consumer surplus falls by $1,800. 
D)  Consumer surplus falls by $900. 
A)  Consumer surplus falls by $3,600. 
B)  Consumer surplus falls by $2,700. 
C)  Consumer surplus falls by $1,800. 
D)  Consumer surplus falls by $900.

Exam 8: Application: The Costs of Taxation

Which of the following statements is true for markets in which the demand curve slopes downward and the supply curve slopes upward?

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.What happens to total surplus in this market when the tax is imposed?

To fully understand how taxes affect economic well-being,we must compare the

The government's benefit from a tax can be measured by

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

When a tax is levied on buyers of a good,

In order for Henry George's land-tax argument to be valid,the land that is taxed must be

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.When the tax is imposed in this market,consumer surplus is

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 sellers effectively receive after the tax is imposed is

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2.Producer surplus without the tax is

When a tax is levied on a good,

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8.The government collects tax revenue that is the area

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,the equilibrium price and quantity are

Figure 8-9 -Refer to Figure 8-9.Which of the following statements is not correct?

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8.The tax causes consumer surplus to decrease by the area

The higher a country's tax rates,the more likely that country will be

The benefit to sellers of participating in a market is measured by the

If Henry George's single tax on land were applied today,

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7.Which of the following statements summarizes the incidence of the tax?

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.What happens to consumer surplus when the tax is imposed in this market?

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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