Question 1

Figure 8-1  
-Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The area measured by I+J+K+L+M+Y represents

Accepted Answer

A)  total surplus before the tax. 
B)  total surplus after the tax. 
C)  consumer surplus before the tax. 
D)  deadweight loss from the tax. 
A)  total surplus before the tax. 
B)  total surplus after the tax. 
C)  consumer surplus before the tax. 
D)  deadweight loss from the tax.

Question 2

When a tax is imposed on buyers,consumer surplus and producer surplus both decrease.

Accepted Answer

A) True 
 B)False

Question 3

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.As a result,the government is able to raise $750 per month in tax revenue.We can conclude that the post tax quantity of widgets is

Accepted Answer

A)  50 per month. 
B)  75 per month. 
C)  100 per month. 
D)  150 per month. 
A)  50 per month. 
B)  75 per month. 
C)  100 per month. 
D)  150 per month.

Question 4

Figure 8-3
The vertical distance between points A and C represents a tax in the market.  
-Refer to Figure 8-3.The loss in consumer surplus caused by the tax is measured by the area

Accepted Answer

A)  P1P3AC. 
B)  P3ABP2. 
C)  P1P3ABC. 
D)  ABC. 
A)  P1P3AC. 
B)  P3ABP2. 
C)  P1P3ABC. 
D)  ABC.

Question 5

Taxes on labor encourage all of the following except

Accepted Answer

A)  older workers to take early retirement from the labor force. 
B)  mothers to stay at home rather than work in the labor force. 
C)  workers to work overtime. 
D)  people to be paid "under the table." 
A)  older workers to take early retirement from the labor force. 
B)  mothers to stay at home rather than work in the labor force. 
C)  workers to work overtime. 
D)  people to be paid "under the table."

Question 6

Taxes cause deadweight losses because they

Accepted Answer

A)  lead to losses in surplus for consumers and for producers that,when taken together,exceed tax revenue collected by the government. 
B)  distort incentives to both buyers and sellers. 
C)  prevent buyers and sellers from realizing some of the gains from trade. 
D)  All of the above are correct. 
A)  lead to losses in surplus for consumers and for producers that,when taken together,exceed tax revenue collected by the government. 
B)  distort incentives to both buyers and sellers. 
C)  prevent buyers and sellers from realizing some of the gains from trade. 
D)  All of the above are correct.

Question 7

Figure 8-2
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-2.The amount of the tax on each unit of the good is

Accepted Answer

A)  $1. 
B)  $4. 
C)  $5. 
D)  $9. 
A)  $1. 
B)  $4. 
C)  $5. 
D)  $9.

Question 8

Suppose a tax is imposed on the buyers of fast-food French fries.The burden of the tax will

Accepted Answer

A)  fall entirely on the buyers of fast-food French fries. 
B)  fall entirely on the sellers of fast-food French fries. 
C)  be shared equally by the buyers and sellers of fast-food French fries. 
D)  be shared by the buyers and sellers of fast-food French fries but not necessarily equally. 
A)  fall entirely on the buyers of fast-food French fries. 
B)  fall entirely on the sellers of fast-food French fries. 
C)  be shared equally by the buyers and sellers of fast-food French fries. 
D)  be shared by the buyers and sellers of fast-food French fries but not necessarily equally.

Question 9

Figure 8-6
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-6.The amount of the tax on each unit of the good is

Accepted Answer

A)  $6. 
B)  $8. 
C)  $10. 
D)  $12. 
A)  $6. 
B)  $8. 
C)  $10. 
D)  $12.

Question 10

If a tax shifts the demand curve downward (or to the left),we can infer that the tax was levied on

Accepted Answer

A)  buyers of the good. 
B)  sellers of the good. 
C)  both buyers and sellers of the good. 
D)  We cannot infer anything because the shift described is not consistent with a tax. 
A)  buyers of the good. 
B)  sellers of the good. 
C)  both buyers and sellers of the good. 
D)  We cannot infer anything because the shift described is not consistent with a tax.

Question 11

Figure 8-4
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-4.The equilibrium price before the tax is imposed is

Accepted Answer

A)  $24,and the equilibrium quantity is 70. 
B)  $16,and the equilibrium quantity is 100. 
C)  $10,and the equilibrium quantity is 70. 
D)  $8,and the equilibrium quantity is 100. 
A)  $24,and the equilibrium quantity is 70. 
B)  $16,and the equilibrium quantity is 100. 
C)  $10,and the equilibrium quantity is 70. 
D)  $8,and the equilibrium quantity is 100.

Question 12

A tax places a wedge between the price buyers pay and the price sellers receive.

Accepted Answer

A) True 
 B)False

Question 13

The Laffer curve is the curve showing how tax revenue varies as the size of the tax varies.

Accepted Answer

A) True 
 B)False

Question 14

Suppose the government increases the size of a tax by 25 percent.The deadweight loss from that tax

Accepted Answer

A)  increases by 25 percent. 
B)  increases by more than 25 percent. 
C)  increases but by less than 25 percent. 
D)  decreases by 25 percent. 
A)  increases by 25 percent. 
B)  increases by more than 25 percent. 
C)  increases but by less than 25 percent. 
D)  decreases by 25 percent.

Question 15

The marginal tax rate on labor income for many workers in the United States is almost

Accepted Answer

A)  30 percent. 
B)  40 percent. 
C)  50 percent. 
D)  65 percent. 
A)  30 percent. 
B)  40 percent. 
C)  50 percent. 
D)  65 percent.

Question 16

Figure 8-5
Suppose that the government imposes a tax of P3 - P1.  
-Refer to Figure 8-5.Producer 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 17

A tax on unimproved land falls entirely on landowners because the supply of land is perfectly inelastic.

Accepted Answer

A) True 
 B)False

Question 18

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 the tax on each unit of the good is

Accepted Answer

A)  $14. 
B)  $10. 
C)  $8. 
D)  $6. 
A)  $14. 
B)  $10. 
C)  $8. 
D)  $6.

Question 19

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,the price buyers effectively pay is

Accepted Answer

A)  $4. 
B)  $6. 
C)  $10. 
D)  $16. 
A)  $4. 
B)  $6. 
C)  $10. 
D)  $16.

Question 20

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,consumer surplus decreases by

Accepted Answer

A)  $65,producer surplus decreases by $85,tax revenue is $120,and deadweight loss is $30. 
B)  $75,producer surplus decreases by $75,tax revenue is $120,and deadweight loss is $30. 
C)  $80,producer surplus decreases by $80,tax revenue is $120,and deadweight loss is $40. 
D)  $120,producer surplus decreases by $120,tax revenue is $200,and deadweight loss is $40. 
A)  $65,producer surplus decreases by $85,tax revenue is $120,and deadweight loss is $30. 
B)  $75,producer surplus decreases by $75,tax revenue is $120,and deadweight loss is $30. 
C)  $80,producer surplus decreases by $80,tax revenue is $120,and deadweight loss is $40. 
D)  $120,producer surplus decreases by $120,tax revenue is $200,and deadweight loss is $40.

Exam 8: Application: The Costs of Taxation

Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The area measured by I+J+K+L+M+Y represents

When a tax is imposed on buyers,consumer surplus and producer surplus both decrease.

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3.The loss in consumer surplus caused by the tax is measured by the area

Taxes on labor encourage all of the following except

Taxes cause deadweight losses because they

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2.The amount of the tax on each unit of the good is

Suppose a tax is imposed on the buyers of fast-food French fries.The burden of the tax will

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.The amount of the tax on each unit of the good is

If a tax shifts the demand curve downward (or to the left),we can infer that the tax was levied on

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4.The equilibrium price before the tax is imposed is

A tax places a wedge between the price buyers pay and the price sellers receive.

The Laffer curve is the curve showing how tax revenue varies as the size of the tax varies.

Suppose the government increases the size of a tax by 25 percent.The deadweight loss from that tax

The marginal tax rate on labor income for many workers in the United States is almost

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

A tax on unimproved land falls entirely on landowners because the supply of land is perfectly inelastic.

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 the tax on each unit of the good is

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,the price buyers effectively pay is

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,consumer surplus decreases by

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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