Question 1

Which of the following statements is correct?

Accepted Answer

A)  According to the evidence from major industrial countries,there is no significant relationship between tax rates and the average number of hours worked per week. 
B)  In the early 1970s,the average French worker worked more hours per week than the average American worker;by the mid-1990s,the reverse was true. 
C)  Between the early 1970s and the mid-1990s,labor taxes in France decreased while labor taxes in the United States increased.. 
D)  All of the above are correct. 
A)  According to the evidence from major industrial countries,there is no significant relationship between tax rates and the average number of hours worked per week. 
B)  In the early 1970s,the average French worker worked more hours per week than the average American worker;by the mid-1990s,the reverse was true. 
C)  Between the early 1970s and the mid-1990s,labor taxes in France decreased while labor taxes in the United States increased.. 
D)  All of the above are correct.

Question 2

When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic,

Accepted Answer

A)  buyers of the good will bear most of the burden of the tax. 
B)  sellers of the good will bear most of the burden of the tax. 
C)  buyers and sellers will each bear 50 percent of the burden of the tax. 
D)  both equilibrium price and quantity will increase. 
A)  buyers of the good will bear most of the burden of the tax. 
B)  sellers of the good will bear most of the burden of the tax. 
C)  buyers and sellers will each bear 50 percent of the burden of the tax. 
D)  both equilibrium price and quantity will increase.

Question 3

It does not matter whether a tax is levied on the buyers or the sellers of a good because

Accepted Answer

A)  sellers always bear the full burden of the tax. 
B)  buyers always bear the full burden of the tax. 
C)  buyers and sellers will share the burden of the tax. 
D)  None of the above is correct;the incidence of the tax does depend on whether the buyers or the sellers are required to pay the tax. 
A)  sellers always bear the full burden of the tax. 
B)  buyers always bear the full burden of the tax. 
C)  buyers and sellers will share the burden of the tax. 
D)  None of the above is correct;the incidence of the tax does depend on whether the buyers or the sellers are required to pay the tax.

Question 4

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

Accepted Answer

A)  Milton Friedman 
B)  Theodore Roosevelt 
C)  Arthur Laffer 
D)  Oliver Wendell Holmes,Jr. 
A)  Milton Friedman 
B)  Theodore Roosevelt 
C)  Arthur Laffer 
D)  Oliver Wendell Holmes,Jr.

Question 5

If a tax shifts the supply curve downward (or to the right),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 6

When the government imposes taxes on buyers or sellers of a good,society

Accepted Answer

A)  loses some of the benefits of market efficiency. 
B)  gains efficiency but loses equality. 
C)  is better off because the government's tax revenues exceed the deadweight loss. 
D)  moves from an elastic supply curve to an inelastic supply curve. 
A)  loses some of the benefits of market efficiency. 
B)  gains efficiency but loses equality. 
C)  is better off because the government's tax revenues exceed the deadweight loss. 
D)  moves from an elastic supply curve to an inelastic supply curve.

Question 7

The result of the large tax cuts in the first Reagan Administration demonstrated very convincingly that Arthur Laffer was correct when he asserted that cuts in tax rates would increase tax revenue.

Accepted Answer

A) True 
 B)False

Question 8

The deadweight loss from a $1 tax will be smallest in a market with

Accepted Answer

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

Question 9

The most important tax in the U.S.economy is the tax on corporations' profits.

Accepted Answer

A) True 
 B)False

Question 10

The more freedom people are given to choose the date of their retirement,the

Accepted Answer

A)  more elastic is the supply of labor. 
B)  less elastic is the supply of labor. 
C)  steeper is the labor supply curve. 
D)  smaller is the decrease in employment that will result from a tax on labor. 
A)  more elastic is the supply of labor. 
B)  less elastic is the supply of labor. 
C)  steeper is the labor supply curve. 
D)  smaller is the decrease in employment that will result from a tax on labor.

Question 11

When a tax is placed on the buyers of a product,a result is that buyers effectively pay

Accepted Answer

A)  less than before the tax,and sellers effectively receive less than before the tax. 
B)  less than before the tax,and sellers effectively receive more than before the tax. 
C)  more than before the tax,and sellers effectively receive less than before the tax. 
D)  more than before the tax,and sellers effectively receive more than before the tax. 
A)  less than before the tax,and sellers effectively receive less than before the tax. 
B)  less than before the tax,and sellers effectively receive more than before the tax. 
C)  more than before the tax,and sellers effectively receive less than before the tax. 
D)  more than before the tax,and sellers effectively receive more than before the tax.

Question 12

Economist Arthur Laffer made the argument that tax rates in the United States were so high that reducing the rates would increase tax revenue.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A)  increases by 50 percent. 
B)  doubles. 
C)  triples. 
D)  quadruples. 
A)  increases by 50 percent. 
B)  doubles. 
C)  triples. 
D)  quadruples.

Question 14

The larger the deadweight loss from taxation,the larger the cost of government programs.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements is correct regarding a tax on a good and the resulting deadweight loss?

Accepted Answer

A)  The greater are the price elasticities of supply and demand,the greater is the deadweight loss. 
B)  The greater is the price elasticity of supply and the smaller is the price elasticity of demand,the greater is the deadweight loss. 
C)  The smaller are the decreases in quantity demanded and quantity supplied,the greater the deadweight loss. 
D)  The smaller is the wedge between the effective price to sellers and the effective price to buyers,the greater is the deadweight loss. 
A)  The greater are the price elasticities of supply and demand,the greater is the deadweight loss. 
B)  The greater is the price elasticity of supply and the smaller is the price elasticity of demand,the greater is the deadweight loss. 
C)  The smaller are the decreases in quantity demanded and quantity supplied,the greater the deadweight loss. 
D)  The smaller is the wedge between the effective price to sellers and the effective price to buyers,the greater is the deadweight loss.

Question 16

If a tax shifts the supply curve upward (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 17

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

Accepted Answer

A)  deadweight loss due to the tax. 
B)  loss in consumer surplus due to the tax. 
C)  loss in producer surplus due to the tax. 
D)  total surplus before the tax. 
A)  deadweight loss due to the tax. 
B)  loss in consumer surplus due to the tax. 
C)  loss in producer surplus due to the tax. 
D)  total surplus before the tax.

Question 18

Which of the following statements correctly describes the relationship between the size of the deadweight loss and the amount of tax revenue as the size of a tax increases from a small tax to a medium tax and finally to a large tax?

Accepted Answer

A)  Both the size of the deadweight loss and tax revenue increase. 
B)  The size of the deadweight loss increases,but the tax revenue decreases. 
C)  The size of the deadweight loss increases,but the tax revenue first increases,then decreases. 
D)  Both the size of the deadweight loss and tax revenue decrease. 
A)  Both the size of the deadweight loss and tax revenue increase. 
B)  The size of the deadweight loss increases,but the tax revenue decreases. 
C)  The size of the deadweight loss increases,but the tax revenue first increases,then decreases. 
D)  Both the size of the deadweight loss and tax revenue decrease.

Question 19

The Social Security tax is a tax on

Accepted Answer

A)  capital. 
B)  labor. 
C)  consumption expenditures. 
D)  earnings during retirement. 
A)  capital. 
B)  labor. 
C)  consumption expenditures. 
D)  earnings during retirement.

Question 20

Relative to a situation in which gasoline is not taxed,the imposition of a tax on gasoline causes the quantity of gasoline demanded to

Accepted Answer

A)  decrease and the quantity of gasoline supplied to decrease. 
B)  decrease and the quantity of gasoline supplied to increase. 
C)  increase and the quantity of gasoline supplied to decrease. 
D)  increase and the quantity of gasoline supplied to increase. 
A)  decrease and the quantity of gasoline supplied to decrease. 
B)  decrease and the quantity of gasoline supplied to increase. 
C)  increase and the quantity of gasoline supplied to decrease. 
D)  increase and the quantity of gasoline supplied to increase.

Exam 8: Application: The Costs of Taxation

Which of the following statements is correct?

When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic,

It does not matter whether a tax is levied on the buyers or the sellers of a good because

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

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

When the government imposes taxes on buyers or sellers of a good,society

The result of the large tax cuts in the first Reagan Administration demonstrated very convincingly that Arthur Laffer was correct when he asserted that cuts in tax rates would increase tax revenue.

The deadweight loss from a $1 tax will be smallest in a market with

The most important tax in the U.S.economy is the tax on corporations' profits.

The more freedom people are given to choose the date of their retirement,the

When a tax is placed on the buyers of a product,a result is that buyers effectively pay

Economist Arthur Laffer made the argument that tax rates in the United States were so high that reducing the rates would increase tax revenue.

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

The larger the deadweight loss from taxation,the larger the cost of government programs.

Which of the following statements is correct regarding a tax on a good and the resulting deadweight loss?

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

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

Which of the following statements correctly describes the relationship between the size of the deadweight loss and the amount of tax revenue as the size of a tax increases from a small tax to a medium tax and finally to a large tax?

The Social Security tax is a tax on

Relative to a situation in which gasoline is not taxed,the imposition of a tax on gasoline causes the quantity of gasoline demanded to

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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