Question 1

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 2

Figure 8-12  
-Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The amount of tax revenue collected by the government is

Accepted Answer

A)  $7.50. 
B)  $15.00. 
C)  $22.50. 
D)  $45.00. 
A)  $7.50. 
B)  $15.00. 
C)  $22.50. 
D)  $45.00.

Question 3

Scenario 8-3
Suppose the market demand and market supply curves are given by the equations:  
-Refer to Scenario 8-3. What are the equilibrium price and equilibrium quantity in this market?

Accepted Answer

The equilibrium pric

Question 4

Tom walks Bethany's dog once a day for $50 per week. Bethany values this service at $60 per week, while the opportunity cost of Tom's time is $30 per week. The government places a tax of $35 per week on dog walkers. After the tax, what is the loss in total surplus?

Accepted Answer

A)  $50 
B)  $30 
C)  $25 
D)  $0 
A)  $50 
B)  $30 
C)  $25 
D)  $0

Question 5

When a tax is imposed, the loss of consumer surplus and producer surplus as a result of the tax exceeds the tax revenue collected by the government.

Accepted Answer

A) True 
 B)False

Question 6

In 1776, the American Revolution was sparked by anger over

Accepted Answer

A)  the extravagant lifestyle of British royalty. 
B)  the crimes of British soldiers stationed in the American colonies. 
C)  British taxes imposed on the American colonies. 
D)  the failure of the British to protect American colonists from attack by hostile Native Americans. 
A)  the extravagant lifestyle of British royalty. 
B)  the crimes of British soldiers stationed in the American colonies. 
C)  British taxes imposed on the American colonies. 
D)  the failure of the British to protect American colonists from attack by hostile Native Americans.

Question 7

If the tax on gasoline increases from $2 to $4 per gallon, the deadweight loss from the tax increases by a factor of

Accepted Answer

A)  one-half. 
B)  two. 
C)  four. 
D)  six. 
A)  one-half. 
B)  two. 
C)  four. 
D)  six.

Question 8

Figure 8-12  
-Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The loss of producer surplus resulting from this tax is

Accepted Answer

A)  $5.50. 
B)  $17.50. 
C)  $22.50. 
D)  $45.00 
A)  $5.50. 
B)  $17.50. 
C)  $22.50. 
D)  $45.00

Question 9

Because taxes distort incentives, they cause markets to allocate resources inefficiently.

Accepted Answer

A) True 
 B)False

Question 10

Provide several examples of important taxes on labor in the United States. For a typical worker, what is the marginal tax rate on labor income once all the labor taxes are summed?

Accepted Answer

*the Social Security tax
*the

Question 11

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 12

Figure 8-25  
-Refer to Figure 8-25. How much is consumer surplus at the market equilibrium?

Accepted Answer

Consumer s

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

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)  $5. 
B)  $7. 
C)  $8. 
D)  $12. 
A)  $5. 
B)  $7. 
C)  $8. 
D)  $12.

Question 15

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 16

Using demand and supply diagrams, show the difference in deadweight loss between (a) a market with inelastic demand and supply and (b) a market with elastic demand and supply.

Accepted Answer

The answer of Using demand and supply diagrams, show the...

Question 17

Figure 8-11  
-Refer to Figure 8-11. The size of the tax is represented by the

Accepted Answer

A)  length of the line segment connecting points A and B. 
B)  length of the line segment connecting points A and C. 
C)  length of the line segment connecting points B and C. 
D)  area of the triangle bounded by the points A, B, and d. 
A)  length of the line segment connecting points A and B. 
B)  length of the line segment connecting points A and C. 
C)  length of the line segment connecting points B and C. 
D)  area of the triangle bounded by the points A, B, and d.

Question 18

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 buyers 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 19

Figure 8-22  
-Refer to Figure 8-22. Suppose the government initially imposes a $3 per-unit tax on this good. Now suppose the government is deciding whether to lower the tax to $1.50 or raise it to $4.50. Which of the following statements is not correct?

Accepted Answer

A)  Compared to the original tax, the larger tax will decrease tax revenue. 
B)  Compared to the original tax, the smaller tax will decrease deadweight loss. 
C)  Compared to the original tax, the smaller tax will decrease tax revenue. 
D)  Compared to the original tax, the larger tax will increase deadweight loss. 
A)  Compared to the original tax, the larger tax will decrease tax revenue. 
B)  Compared to the original tax, the smaller tax will decrease deadweight loss. 
C)  Compared to the original tax, the smaller tax will decrease tax revenue. 
D)  Compared to the original tax, the larger tax will increase deadweight loss.

Question 20

A tax on insulin is likely to cause a very large deadweight loss to society.

Accepted Answer

A) True 
 B)False

Exam 8: Application: The Costs of Taxation

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

Figure 8-12 -Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The amount of tax revenue collected by the government is

Scenario 8-3 Suppose the market demand and market supply curves are given by the equations: -Refer to Scenario 8-3. What are the equilibrium price and equilibrium quantity in this market?

Tom walks Bethany's dog once a day for $50 per week. Bethany values this service at $60 per week, while the opportunity cost of Tom's time is $30 per week. The government places a tax of $35 per week on dog walkers. After the tax, what is the loss in total surplus?

When a tax is imposed, the loss of consumer surplus and producer surplus as a result of the tax exceeds the tax revenue collected by the government.

In 1776, the American Revolution was sparked by anger over

If the tax on gasoline increases from $2 to $4 per gallon, the deadweight loss from the tax increases by a factor of

Figure 8-12 -Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The loss of producer surplus resulting from this tax is

Because taxes distort incentives, they cause markets to allocate resources inefficiently.

Provide several examples of important taxes on labor in the United States. For a typical worker, what is the marginal tax rate on labor income once all the labor taxes are summed?

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

Figure 8-25 -Refer to Figure 8-25. How much is consumer surplus at the market equilibrium?

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

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 8-2 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

Using demand and supply diagrams, show the difference in deadweight loss between (a) a market with inelastic demand and supply and (b) a market with elastic demand and supply.

Figure 8-11 -Refer to Figure 8-11. The size of the tax is represented by 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 buyers is

Figure 8-22 -Refer to Figure 8-22. Suppose the government initially imposes a $3 per-unit tax on this good. Now suppose the government is deciding whether to lower the tax to $1.50 or raise it to $4.50. Which of the following statements is not correct?

A tax on insulin is likely to cause a very large deadweight loss to society.

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

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