Question 1

The amount of deadweight loss from a tax depends upon the

Accepted Answer

A)  price elasticity of demand. 
B)  price elasticity of supply. 
C)  amount of the tax per unit. 
D)  All of the above are correct. 
A)  price elasticity of demand. 
B)  price elasticity of supply. 
C)  amount of the tax per unit. 
D)  All of the above are correct.

Question 2

Other things equal,the deadweight loss of a tax

Accepted Answer

A)  decreases as the size of the tax increases. 
B)  increases as the size of the tax increases,but the increase in the deadweight loss is less rapid than the increase in the size of the tax. 
C)  increases as the size of the tax increases,and the increase in the deadweight loss is more rapid than the increase in the size of the tax. 
D)  increases as the price elasticities of demand and/or supply increase,but the deadweight loss does not change as the size of the tax increases. 
A)  decreases as the size of the tax increases. 
B)  increases as the size of the tax increases,but the increase in the deadweight loss is less rapid than the increase in the size of the tax. 
C)  increases as the size of the tax increases,and the increase in the deadweight loss is more rapid than the increase in the size of the tax. 
D)  increases as the price elasticities of demand and/or supply increase,but the deadweight loss does not change as the size of the tax increases.

Question 3

Figure 8-5
Suppose that the government imposes a tax of P3 - P1.  
-Refer to Figure 8-5.After the tax is levied,consumer surplus 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 4

Suppose a tax of $5 per unit is imposed on a good.The supply curve is a typical upward-sloping straight line,and the demand curve is a typical downward-sloping straight line.The tax decreases consumer surplus by $10,000 and decreases producer surplus by $15,000.The deadweight loss of the tax is $2,500.The tax decreased the equilibrium quantity of the good from

Accepted Answer

A)  6,500 to 5,500. 
B)  5,500 to 4,500. 
C)  5,000 to 3,000. 
D)  6,000 to 4,000. 
A)  6,500 to 5,500. 
B)  5,500 to 4,500. 
C)  5,000 to 3,000. 
D)  6,000 to 4,000.

Question 5

A deadweight loss is a consequence of a tax on a good because the tax

Accepted Answer

A)  induces the government to increase its expenditures. 
B)  induces buyers to consume less,and sellers to produce less. 
C)  increases the equilibrium price in the market. 
D)  imposes a loss on buyers that is greater than the loss to sellers. 
A)  induces the government to increase its expenditures. 
B)  induces buyers to consume less,and sellers to produce less. 
C)  increases the equilibrium price in the market. 
D)  imposes a loss on buyers that is greater than the loss to sellers.

Question 6

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

Accepted Answer

A)  $10,and total surplus with the tax is $2.50. 
B)  $10,and total surplus with the tax is $7.50. 
C)  $20,and total surplus with the tax is $2.50. 
D)  $20,and total surplus with the tax is $7.50. 
A)  $10,and total surplus with the tax is $2.50. 
B)  $10,and total surplus with the tax is $7.50. 
C)  $20,and total surplus with the tax is $2.50. 
D)  $20,and total surplus with the tax is $7.50.

Question 7

For a good that is taxed,the area on the relevant supply-and-demand graph that represents government's tax revenue is a

Accepted Answer

A)  triangle. 
B)  rectangle. 
C)  trapezoid. 
D)  None of the above is correct;government's tax revenue is the area between the supply and demand curves,above the horizontal axis,and below the effective price to buyers. 
A)  triangle. 
B)  rectangle. 
C)  trapezoid. 
D)  None of the above is correct;government's tax revenue is the area between the supply and demand curves,above the horizontal axis,and below the effective price to buyers.

Question 8

Figure 8-7
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-7.Suppose a 20th unit of the good were sold by a seller to a buyer.Which of the following statements is correct?

Accepted Answer

A)  For the 20th unit,the difference between the buyer's value and the seller's cost is less than the tax per unit. 
B)  For the 20th unit,the difference between the buyer's value and the seller's cost is greater than the tax per unit. 
C)  For the 20th unit,the difference between the buyer's value and the seller's cost is equal to the tax per unit. 
D)  It makes sense for the buyer to buy and for the seller to sell the 20th unit,with or without the tax in place. 
A)  For the 20th unit,the difference between the buyer's value and the seller's cost is less than the tax per unit. 
B)  For the 20th unit,the difference between the buyer's value and the seller's cost is greater than the tax per unit. 
C)  For the 20th unit,the difference between the buyer's value and the seller's cost is equal to the tax per unit. 
D)  It makes sense for the buyer to buy and for the seller to sell the 20th unit,with or without the tax in place.

Question 9

Taxes on labor tend to increase the number of hours that people choose to work.

Accepted Answer

A) True 
 B)False

Question 10

Table 8-1
  
-Refer to Table 8-1.Suppose the government is considering levying a tax in one or more of the markets described in the table.Which of the markets will maximize the deadweight loss(es)from the tax?

Accepted Answer

A)  market B only 
B)  markets A and C only 
C)  markets B and D only 
D)  market D only 
A)  market B only 
B)  markets A and C only 
C)  markets B and D only 
D)  market D only

Question 11

One result of a tax,regardless of whether the tax is placed on the buyers or the sellers,is that the

Accepted Answer

A)  size of the market is unchanged. 
B)  price the seller effectively receives is higher. 
C)  supply curve for the good shifts upward by the amount of the tax. 
D)  tax reduces the welfare of both buyers and sellers. 
A)  size of the market is unchanged. 
B)  price the seller effectively receives is higher. 
C)  supply curve for the good shifts upward by the amount of the tax. 
D)  tax reduces the welfare of both buyers and sellers.

Question 12

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 sellers 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 13

Figure 8-1  
-Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The producer surplus after the tax is measured by the area

Accepted Answer

A)  M. 
B)  L+M+N+Y+B. 
C)  L+M+Y. 
D)  J. 
A)  M. 
B)  L+M+N+Y+B. 
C)  L+M+Y. 
D)  J.

Question 14

Figure 8-1  
-Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The deadweight loss due to the tax is measured by the area

Accepted Answer

A)  J+K+L+M. 
B)  J+K+L+M+N. 
C)  I+Y. 
D)  I+Y+B. 
A)  J+K+L+M. 
B)  J+K+L+M+N. 
C)  I+Y. 
D)  I+Y+B.

Question 15

If a tax did not induce buyers or sellers to change their behavior,it would not cause a deadweight loss.

Accepted Answer

A) True 
 B)False

Question 16

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 tax revenue that the tax provides to the government?

Accepted Answer

A)  Tax revenue = (P2 - P1)xQ1 
B)  Tax revenue = (P3 - P1)xQ1 
C)  Tax revenue = (P3 - P2)xQ1 
D)  Tax revenue = (P3 - P1)x(Q2 - Q1) 
A)  Tax revenue = (P2 - P1)xQ1 
B)  Tax revenue = (P3 - P1)xQ1 
C)  Tax revenue = (P3 - P2)xQ1 
D)  Tax revenue = (P3 - P1)x(Q2 - Q1)

Question 17

Economists disagree on whether labor taxes cause small or large deadweight losses.This disagreement arises primarily because economists hold different views about

Accepted Answer

A)  the size of labor taxes. 
B)  the importance of labor taxes imposed by the federal government relative to the importance of labor taxes imposed by the various states. 
C)  the elasticity of labor supply. 
D)  the elasticity of labor demand. 
A)  the size of labor taxes. 
B)  the importance of labor taxes imposed by the federal government relative to the importance of labor taxes imposed by the various states. 
C)  the elasticity of labor supply. 
D)  the elasticity of labor demand.

Question 18

A tax on a good

Accepted Answer

A)  gives buyers an incentive to buy more of the good than they otherwise would buy. 
B)  gives sellers an incentive to produce less of the good than they otherwise would produce. 
C)  creates a benefit to the government,the size of which exceeds the loss in surplus to buyers and sellers. 
D)  All of the above are correct. 
A)  gives buyers an incentive to buy more of the good than they otherwise would buy. 
B)  gives sellers an incentive to produce less of the good than they otherwise would produce. 
C)  creates a benefit to the government,the size of which exceeds the loss in surplus to buyers and sellers. 
D)  All of the above are correct.

Question 19

Scenario 8-2
Tom mows Stephanie's lawn for $25.Tom's opportunity cost of mowing Stephanie's lawn is $20,and Stephanie's willingness to pay Tom to mow her lawn is $28.
-Refer to Scenario 8-2.If Stephanie hires Tom to mow her lawn,Tom's producer surplus is

Accepted Answer

A)  $2. 
B)  $3. 
C)  $5. 
D)  $25. 
A)  $2. 
B)  $3. 
C)  $5. 
D)  $25.

Question 20

Figure 8-2
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-2.The loss of producer surplus as a result of the tax is

Accepted Answer

A)  $1. 
B)  $2. 
C)  $3. 
D)  $4. 
A)  $1. 
B)  $2. 
C)  $3. 
D)  $4.

Exam 8: Application: The Costs of Taxation

The amount of deadweight loss from a tax depends upon the

Other things equal,the deadweight loss of a tax

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.After the tax is levied,consumer surplus is represented by area

A deadweight loss is a consequence of a tax on a good because the tax

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

For a good that is taxed,the area on the relevant supply-and-demand graph that represents government's tax revenue is a

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7.Suppose a 20th unit of the good were sold by a seller to a buyer.Which of the following statements is correct?

Taxes on labor tend to increase the number of hours that people choose to work.

Table 8-1 -Refer to Table 8-1.Suppose the government is considering levying a tax in one or more of the markets described in the table.Which of the markets will maximize the deadweight loss(es)from the tax?

One result of a tax,regardless of whether the tax is placed on the buyers or the sellers,is that 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 sellers is

Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The producer surplus after the tax is measured by the area

Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The deadweight loss due to the tax is measured by the area

If a tax did not induce buyers or sellers to change their behavior,it would not cause a deadweight loss.

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 tax revenue that the tax provides to the government?

Economists disagree on whether labor taxes cause small or large deadweight losses.This disagreement arises primarily because economists hold different views about

A tax on a good

Scenario 8-2 Tom mows Stephanie's lawn for $25.Tom's opportunity cost of mowing Stephanie's lawn is $20,and Stephanie's willingness to pay Tom to mow her lawn is $28. -Refer to Scenario 8-2.If Stephanie hires Tom to mow her lawn,Tom's producer surplus is

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2.The loss of producer surplus as a result of the tax 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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