Question 1

Figure 8-26  
-Refer to Figure 8-26. How much is consumer surplus at the market equilibrium?

Accepted Answer

Consumer surplus is

Question 2

Figure 8-14  
-Refer to Figure 8-14. Which of the following statements is correct?

Accepted Answer

A)  Supply 1 is more elastic than supply 2. 
B)  Demand 2 is more elastic than demand 1. 
C)  Demand 1 is more elastic than supply 1. 
D)  All of the above are correct. 
A)  Supply 1 is more elastic than supply 2. 
B)  Demand 2 is more elastic than demand 1. 
C)  Demand 1 is more elastic than supply 1. 
D)  All of the above are correct.

Question 3

Figure 8-28  
-Refer to Figure 8-28. Suppose that Market A is characterized by Demand 1 and Supply 1, and Market B is characterized by Demand 1 and Supply 2. If an identical tax is imposed on each market, the tax will create a larger deadweight loss in which market? Explain.

Accepted Answer

The deadweight loss will be larger in Ma

Question 4

Figure 8-12  
-Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The tax causes the price received by sellers to

Accepted Answer

A)  decrease by $3. 
B)  increase by $2. 
C)  decrease by $1. 
D)  increase by $6. 
A)  decrease by $3. 
B)  increase by $2. 
C)  decrease by $1. 
D)  increase by $6.

Question 5

Illustrate on three demand-and-supply graphs how the size of a tax (small, medium and large) can alter total revenue and deadweight loss.

Accepted Answer

The answer of Illustrate on three demand-and-supply graphs how the...

Question 6

Which of the following scenarios is not consistent with the Laffer curve?

Accepted Answer

A)  The tax rate is very low, and tax revenue is very low. 
B)  The tax rate is very high, and tax revenue is very low. 
C)  The tax rate is very high, and tax revenue is very high. 
D)  The tax rate is moderate (between very high and very low), and tax revenue is relatively high. 
A)  The tax rate is very low, and tax revenue is very low. 
B)  The tax rate is very high, and tax revenue is very low. 
C)  The tax rate is very high, and tax revenue is very high. 
D)  The tax rate is moderate (between very high and very low), and tax revenue is relatively high.

Question 7

Figure 8-26  
-Refer to Figure 8-26. What are the equilibrium price and equilibrium quantity in this market?

Accepted Answer

The equilibrium pric

Question 8

Diana is a personal trainer whose client Charles pays $80 per hour-long session. Charles values this service at $100 per hour, while the opportunity cost of Diana's time is $75 per hour. The government places a tax of $10 per hour on personal trainers. Before the tax, what is the total surplus?

Accepted Answer

A)  $25 
B)  $5 
C)  $0 
D)  $20 
A)  $25 
B)  $5 
C)  $0 
D)  $20

Question 9

The benefit to buyers of participating in a market is measured by

Accepted Answer

A)  consumer surplus. 
B)  producer surplus. 
C)  total surplus. 
D)  deadweight loss. 
A)  consumer surplus. 
B)  producer surplus. 
C)  total surplus. 
D)  deadweight loss.

Question 10

For widgets, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. A tax of $15 per unit is imposed on widgets. The tax reduces the equilibrium quantity in the market by 300 units. The deadweight loss from the tax is

Accepted Answer

A)  $1,750. 
B)  $2,250. 
C)  $3,000. 
D)  $4,500. 
A)  $1,750. 
B)  $2,250. 
C)  $3,000. 
D)  $4,500.

Question 11

In 2012, in The Wall Street Journal, economists Edward Prescott and Lee Ohanian asserted that

Accepted Answer

A)  in the United States, when the average worker earns $100 from additional work, he or she will be able to consume an additional $85 worth of goods and services. 
B)  the typical American has always worked more hours per year than the typical Frenchman and the typical German, despite vastly different tax rates in those countries. 
C)  raising tax rates from their 2012 levels would significantly reduce U.S. economic activity. 
D)  raising tax rates from their 2012 levels would significantly increase the federal government's tax revenue. 
A)  in the United States, when the average worker earns $100 from additional work, he or she will be able to consume an additional $85 worth of goods and services. 
B)  the typical American has always worked more hours per year than the typical Frenchman and the typical German, despite vastly different tax rates in those countries. 
C)  raising tax rates from their 2012 levels would significantly reduce U.S. economic activity. 
D)  raising tax rates from their 2012 levels would significantly increase the federal government's tax revenue.

Question 12

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 13

Figure 8-10  
-Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. With the tax, the total surplus is

Accepted Answer

A)  [1/2 x (P0-P5) x Q5] + [1/2 x (P5-0) x Q5]. 
B)  [1/2 x (P0-P2) x Q2] +[(P2-P8) x Q2] + [1/2 x (P8-0) x Q2]. 
C)  (P2-P8) x Q2. 
D)  1/2 x (P2-P8) x (Q5-Q2). 
A)  [1/2 x (P0-P5) x Q5] + [1/2 x (P5-0) x Q5]. 
B)  [1/2 x (P0-P2) x Q2] +[(P2-P8) x Q2] + [1/2 x (P8-0) x Q2]. 
C)  (P2-P8) x Q2. 
D)  1/2 x (P2-P8) x (Q5-Q2).

Question 14

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

Accepted Answer

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

Question 15

The higher a country's tax rates, the more likely that country will be

Accepted Answer

A)  at the top of the Laffer curve. 
B)  on the positively sloped part of the Laffer curve. 
C)  on the negatively sloped part of the Laffer curve. 
D)  experiencing small deadweight losses. 
A)  at the top of the Laffer curve. 
B)  on the positively sloped part of the Laffer curve. 
C)  on the negatively sloped part of the Laffer curve. 
D)  experiencing small deadweight losses.

Question 16

Figure 8-7
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-7. Before the tax is imposed, the equilibrium price is

Accepted Answer

A)  $32, and the equilibrium quantity is 15. 
B)  $24, and the equilibrium quantity is 15. 
C)  $24, and the equilibrium quantity is 25. 
D)  $16, and the equilibrium quantity is 15. 
A)  $32, and the equilibrium quantity is 15. 
B)  $24, and the equilibrium quantity is 15. 
C)  $24, and the equilibrium quantity is 25. 
D)  $16, and the equilibrium quantity is 15.

Question 17

Figure 8-5
Suppose that the government imposes a tax of P3 - P1.  
-Refer to Figure 8-5. The benefit to the government is measured by

Accepted Answer

A)  tax revenue and is represented by area A+B. 
B)  tax revenue and is represented by area B+D. 
C)  the net gain in total surplus and is represented by area B+D. 
D)  the net gain in total surplus and is represented by area C+H. 
A)  tax revenue and is represented by area A+B. 
B)  tax revenue and is represented by area B+D. 
C)  the net gain in total surplus and is represented by area B+D. 
D)  the net gain in total surplus and is represented by area C+H.

Question 18

Scenario 8-3
Suppose the market demand and market supply curves are given by the equations:  
-Refer to Scenario 8-3. Suppose that a tax of T is placed on buyers so that the demand curve becomes:   What will be the deadweight loss from this tax?

Accepted Answer

The deadwe

Question 19

The less freedom young mothers have to work outside the home, the

Accepted Answer

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

Question 20

Figure 8-9
The vertical distance between points A and C represents a tax in the market.  
-Refer to Figure 8-9. The imposition of the tax causes the price paid by buyers to

Accepted Answer

A)  increase from $600 to $800. 
B)  increase from $300 to $800. 
C)  decrease from $600 to $300. 
D)  remain unchanged at $600. 
A)  increase from $600 to $800. 
B)  increase from $300 to $800. 
C)  decrease from $600 to $300. 
D)  remain unchanged at $600.

Exam 8: Application: The Costs of Taxation

Figure 8-26 -Refer to Figure 8-26. How much is consumer surplus at the market equilibrium?

Figure 8-14 -Refer to Figure 8-14. Which of the following statements is correct?

Figure 8-28 -Refer to Figure 8-28. Suppose that Market A is characterized by Demand 1 and Supply 1, and Market B is characterized by Demand 1 and Supply 2. If an identical tax is imposed on each market, the tax will create a larger deadweight loss in which market? Explain.

Figure 8-12 -Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The tax causes the price received by sellers to

Illustrate on three demand-and-supply graphs how the size of a tax (small, medium and large) can alter total revenue and deadweight loss.

Which of the following scenarios is not consistent with the Laffer curve?

Figure 8-26 -Refer to Figure 8-26. What are the equilibrium price and equilibrium quantity in this market?

Diana is a personal trainer whose client Charles pays $80 per hour-long session. Charles values this service at $100 per hour, while the opportunity cost of Diana's time is $75 per hour. The government places a tax of $10 per hour on personal trainers. Before the tax, what is the total surplus?

The benefit to buyers of participating in a market is measured by

For widgets, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. A tax of $15 per unit is imposed on widgets. The tax reduces the equilibrium quantity in the market by 300 units. The deadweight loss from the tax is

In 2012, in The Wall Street Journal, economists Edward Prescott and Lee Ohanian asserted that

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

Figure 8-10 -Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. With the tax, the total surplus is

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

The higher a country's tax rates, the more likely that country will be

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7. Before the tax is imposed, the equilibrium price is

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. The benefit to the government is measured by

Scenario 8-3 Suppose the market demand and market supply curves are given by the equations: -Refer to Scenario 8-3. Suppose that a tax of T is placed on buyers so that the demand curve becomes: What will be the deadweight loss from this tax?

The less freedom young mothers have to work outside the home, the

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The imposition of the tax causes the price paid by buyers 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

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