Question 1

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

Accepted Answer

A)  smaller is the response of quantity supplied to the tax. 
B)  larger is the tax burden on sellers relative to the tax burden on buyers. 
C)  larger is the deadweight loss of the tax. 
D)  All of the above are correct. 
A)  smaller is the response of quantity supplied to the tax. 
B)  larger is the tax burden on sellers relative to the tax burden on buyers. 
C)  larger is the deadweight loss of the tax. 
D)  All of the above are correct.

Question 2

A tax affects

Accepted Answer

A)  buyers only. 
B)  sellers only. 
C)  buyers and sellers only. 
D)  buyers,sellers,and the government. 
A)  buyers only. 
B)  sellers only. 
C)  buyers and sellers only. 
D)  buyers,sellers,and the government.

Question 3

If the labor supply curve is nearly vertical,a tax on labor

Accepted Answer

A)  has a large deadweight loss. 
B)  raises a small amount of tax revenue. 
C)  has little impact on the amount of work that workers are willing to do. 
D)  results in a large tax burden on the firms that hire labor. 
A)  has a large deadweight loss. 
B)  raises a small amount of tax revenue. 
C)  has little impact on the amount of work that workers are willing to do. 
D)  results in a large tax burden on the firms that hire labor.

Question 4

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 equilibrium quantity of widgets has fallen by

Accepted Answer

A)  25 per month. 
B)  50 per month. 
C)  75 per month. 
D)  100 per month. 
A)  25 per month. 
B)  50 per month. 
C)  75 per month. 
D)  100 per month.

Question 5

Consider a good to which a per-unit tax applies.The size of the deadweight that results from the tax is smaller,the

Accepted Answer

A)  less elastic is the demand for the good. 
B)  less elastic is the supply of the good. 
C)  smaller is the amount of the tax. 
D)  All of the above are correct. 
A)  less elastic is the demand for the good. 
B)  less elastic is the supply of the good. 
C)  smaller is the amount of the tax. 
D)  All of the above are correct.

Question 6

If the labor supply curve is very elastic,a tax on labor

Accepted Answer

A)  has a large deadweight loss. 
B)  raises enough tax revenue to offset the loss in welfare. 
C)  has a relatively small impact on the number of hours that workers choose to work. 
D)  results in a large tax burden on the firms that hire labor. 
A)  has a large deadweight loss. 
B)  raises enough tax revenue to offset the loss in welfare. 
C)  has a relatively small impact on the number of hours that workers choose to work. 
D)  results in a large tax burden on the firms that hire labor.

Question 7

Figure 8-3
The vertical distance between points A and C represents a tax in the market.  
-Refer to Figure 8-3.The price that buyers effectively pay after the tax is imposed is

Accepted Answer

A)  P1. 
B)  P2. 
C)  P3. 
D)  P4. 
A)  P1. 
B)  P2. 
C)  P3. 
D)  P4.

Question 8

Economists use the government's tax revenue to measure the public benefit from a tax.

Accepted Answer

A) True 
 B)False

Question 9

As the size of a tax increases,the government's tax revenue rises,then falls.

Accepted Answer

A) True 
 B)False

Question 10

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 is correct?

Accepted Answer

A)  The loss of producer surplus that is associated with some sellers dropping out of the market as a result of the tax is $30. 
B)  The loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is $60. 
C)  The loss of consumer surplus caused by this tax exceeds the loss of producer surplus caused by this tax. 
D)  This tax produces $200 in tax revenue for the government. 
A)  The loss of producer surplus that is associated with some sellers dropping out of the market as a result of the tax is $30. 
B)  The loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is $60. 
C)  The loss of consumer surplus caused by this tax exceeds the loss of producer surplus caused by this tax. 
D)  This tax produces $200 in tax revenue for the government.

Question 11

The Laffer curve illustrates how taxes in markets with greater elasticities of demand compare to taxes in markets with smaller elasticities of supply.

Accepted Answer

A) True 
 B)False

Question 12

Unlike the supply of raw land,the supply of improvements

Accepted Answer

A)  is perfectly inelastic. 
B)  has an elasticity that is greater than zero. 
C)  cannot be taxed,even if an attempt were made to tax it. 
D)  is exempt from taxation under current law. 
A)  is perfectly inelastic. 
B)  has an elasticity that is greater than zero. 
C)  cannot be taxed,even if an attempt were made to tax it. 
D)  is exempt from taxation under current law.

Question 13

The greater the elasticity of demand,the smaller the deadweight loss of a tax.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements is correct regarding the imposition of a tax on gasoline?

Accepted Answer

A)  The incidence of the tax depends upon whether the buyers or the sellers are required to remit tax payments to the government. 
B)  The incidence of the tax depends upon the price elasticities of demand and supply. 
C)  The amount of tax revenue raised by the tax depends upon whether the buyers or the sellers are required to remit tax payments to the government. 
D)  The amount of tax revenue raised by the tax does not depend upon the amount of the tax per unit. 
A)  The incidence of the tax depends upon whether the buyers or the sellers are required to remit tax payments to the government. 
B)  The incidence of the tax depends upon the price elasticities of demand and supply. 
C)  The amount of tax revenue raised by the tax depends upon whether the buyers or the sellers are required to remit tax payments to the government. 
D)  The amount of tax revenue raised by the tax does not depend upon the amount of the tax per unit.

Question 15

Ronald Reagan believed that reducing income tax rates would

Accepted Answer

A)  do little,if anything,to encourage hard work. 
B)  result in large increases in deadweight losses. 
C)  raise economic well-being and perhaps even tax revenue. 
D)  lower economic well-being,even though tax revenue could possibly increase. 
A)  do little,if anything,to encourage hard work. 
B)  result in large increases in deadweight losses. 
C)  raise economic well-being and perhaps even tax revenue. 
D)  lower economic well-being,even though tax revenue could possibly increase.

Question 16

Figure 8-6
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-6.Total surplus with the tax in place is

Accepted Answer

A)  $1,500. 
B)  $3,600. 
C)  $4,500. 
D)  $6,000. 
A)  $1,500. 
B)  $3,600. 
C)  $4,500. 
D)  $6,000.

Question 17

For good X,the supply curve is the typical upward-sloping straight line,and the demand curve is the typical downward-sloping straight line.A tax of $10 per unit is imposed on good X.The tax reduces the equilibrium quantity in the market by 200 units.The deadweight loss from the tax is

Accepted Answer

A)  $2,000. 
B)  $1,000. 
C)  $500. 
D)  $250. 
A)  $2,000. 
B)  $1,000. 
C)  $500. 
D)  $250.

Question 18

If the size of a tax triples,the deadweight loss increases by a factor of six.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following ideas is the most plausible?

Accepted Answer

A)  Tax revenue is more likely to increase when a low tax rate is increased than when a high tax rate is increased. 
B)  Tax revenue is less likely to increase when a low tax rate is increased than when a high tax rate is increased. 
C)  Tax revenue is likely to increase by the same amount when a low tax rate is increased and when a high tax rate is increased. 
D)  Decreasing a tax rate can never increase tax revenue. 
A)  Tax revenue is more likely to increase when a low tax rate is increased than when a high tax rate is increased. 
B)  Tax revenue is less likely to increase when a low tax rate is increased than when a high tax rate is increased. 
C)  Tax revenue is likely to increase by the same amount when a low tax rate is increased and when a high tax rate is increased. 
D)  Decreasing a tax rate can never increase tax revenue.

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 amount of deadweight loss as a result of the tax is

Accepted Answer

A)  $2.50. 
B)  $5. 
C)  $7.50. 
D)  $10. 
A)  $2.50. 
B)  $5. 
C)  $7.50. 
D)  $10.

Exam 8: Application: The Costs of Taxation

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

A tax affects

If the labor supply curve is nearly vertical,a tax on labor

Consider a good to which a per-unit tax applies.The size of the deadweight that results from the tax is smaller,the

If the labor supply curve is very elastic,a tax on labor

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3.The price that buyers effectively pay after the tax is imposed is

Economists use the government's tax revenue to measure the public benefit from a tax.

As the size of a tax increases,the government's tax revenue rises,then falls.

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 is correct?

The Laffer curve illustrates how taxes in markets with greater elasticities of demand compare to taxes in markets with smaller elasticities of supply.

Unlike the supply of raw land,the supply of improvements

The greater the elasticity of demand,the smaller the deadweight loss of a tax.

Which of the following statements is correct regarding the imposition of a tax on gasoline?

Ronald Reagan believed that reducing income tax rates would

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.Total surplus with the tax in place is

For good X,the supply curve is the typical upward-sloping straight line,and the demand curve is the typical downward-sloping straight line.A tax of $10 per unit is imposed on good X.The tax reduces the equilibrium quantity in the market by 200 units.The deadweight loss from the tax is

If the size of a tax triples,the deadweight loss increases by a factor of six.

Which of the following ideas is the most plausible?

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 deadweight loss 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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