Question 1

Figure 8-9
The vertical distance between points A and C represents a tax in the market.  
-Refer to Figure 8-9. The producer surplus without the tax is

Accepted Answer

A)  $3,000. 
B)  $8,000. 
C)  $12,000. 
D)  $24,000. 
A)  $3,000. 
B)  $8,000. 
C)  $12,000. 
D)  $24,000.

Question 2

The deadweight loss from a tax

Accepted Answer

A)  does not vary in amount when the price elasticity of demand changes. 
B)  does not vary in amount when the amount of the tax per unit changes. 
C)  is larger, the larger is the amount of the tax per unit. 
D)  is smaller, the larger is the amount of the tax per unit. 
A)  does not vary in amount when the price elasticity of demand changes. 
B)  does not vary in amount when the amount of the tax per unit changes. 
C)  is larger, the larger is the amount of the tax per unit. 
D)  is smaller, the larger is the amount of the tax per unit.

Question 3

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 allow the government to minimize the deadweight loss(es) from the tax?

Accepted Answer

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

Question 4

Figure 8-13  
-Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The loss of consumer surplus resulting from this tax is

Accepted Answer

A)  $80. 
B)  $40. 
C)  $30. 
D)  $10. 
A)  $80. 
B)  $40. 
C)  $30. 
D)  $10.

Question 5

Figure 8-2
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-2. The per-unit burden of the tax on sellers is

Accepted Answer

A)  $2.
B $3. 
C)  $4. 
D)  $5. 
A)  $2.
B $3. 
C)  $4. 
D)  $5.

Question 6

Suppose the price of milk is $2.39 per gallon, and the equilibrium quantity of milk is 100 thousand gallons per day with no tax on milk. Starting from this initial situation, which of the following scenarios would result in the smallest deadweight loss?

Accepted Answer

A)  The price elasticity of demand for milk is 0.3, the price elasticity of supply for milk is 0.7, and the milk tax amounts to $0.40 per gallon. 
B)  The price elasticity of demand for milk is 0.2, the price elasticity of supply for milk is 0.5, and the milk tax amounts to $0.30 per gallon. 
C)  The price elasticity of demand for milk is 0.2, the price elasticity of supply for milk is 0.7, and the milk tax amounts to $0.30 per gallon. 
D)  The price elasticity of demand for milk is 0.1, the price elasticity of supply for milk is 0.5, and the milk tax amounts to $0.20 per gallon. 
A)  The price elasticity of demand for milk is 0.3, the price elasticity of supply for milk is 0.7, and the milk tax amounts to $0.40 per gallon. 
B)  The price elasticity of demand for milk is 0.2, the price elasticity of supply for milk is 0.5, and the milk tax amounts to $0.30 per gallon. 
C)  The price elasticity of demand for milk is 0.2, the price elasticity of supply for milk is 0.7, and the milk tax amounts to $0.30 per gallon. 
D)  The price elasticity of demand for milk is 0.1, the price elasticity of supply for milk is 0.5, and the milk tax amounts to $0.20 per gallon.

Question 7

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 consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is

Accepted Answer

A)  $0. 
B)  $3. 
C)  $1.50. 
D)  $4.50. 
A)  $0. 
B)  $3. 
C)  $1.50. 
D)  $4.50.

Question 8

The more elastic are supply and demand in a market, the greater are the distortions caused by a tax on that market, and the more likely it is that a tax cut in that market will raise tax revenue.

Accepted Answer

A) True 
 B)False

Question 9

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:   How much tax revenue will be collected after this tax is imposed?

Accepted Answer

The tax re

Question 10

The size of a tax and the deadweight loss that results from the tax are

Accepted Answer

A)  positively related. 
B)  negatively related. 
C)  independent of each other. 
D)  equal to each other. 
A)  positively related. 
B)  negatively related. 
C)  independent of each other. 
D)  equal to each other.

Question 11

Suppose a tax of $3 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 $3,900 and decreases producer surplus by $3,000. The tax generates tax revenue of $6,000. The tax decreased the equilibrium quantity of the good from

Accepted Answer

A)  2,000 to 1,500. 
B)  2,400 to 2,000. 
C)  2,600 to 2,000. 
D)  3,000 to 2,400. 
A)  2,000 to 1,500. 
B)  2,400 to 2,000. 
C)  2,600 to 2,000. 
D)  3,000 to 2,400.

Question 12

Taxes affect market participants by increasing the price paid by the buyer and decreasing the price received by the seller.

Accepted Answer

A) True 
 B)False

Question 13

To measure the gains and losses from a tax on a good, economists use the tools of

Accepted Answer

A)  macroeconomics. 
B)  welfare economics. 
C)  international-trade theory. 
D)  circular-flow analysis. 
A)  macroeconomics. 
B)  welfare economics. 
C)  international-trade theory. 
D)  circular-flow analysis.

Question 14

Kate is a personal trainer whose client William pays $80 per hour-long session. William values this service at $100 per hour, while the opportunity cost of Kate's time is $75 per hour. The government places a tax of $10 per hour on personal trainers. After the tax, what is likely to happen in the market for personal training?

Accepted Answer

A)  Kate and William will agree to a new price somewhere between $85 and $100. 
B)  Kate and William will agree to a new price somewhere between $70 and $110. 
C)  Kate will no longer offer personal training services to William because she must charge more than $100 in order to cover her opportunity costs and pay the tax. 
D)  The price will remain at $80, and Kate will pay the $10 tax. 
A)  Kate and William will agree to a new price somewhere between $85 and $100. 
B)  Kate and William will agree to a new price somewhere between $70 and $110. 
C)  Kate will no longer offer personal training services to William because she must charge more than $100 in order to cover her opportunity costs and pay the tax. 
D)  The price will remain at $80, and Kate will pay the $10 tax.

Question 15

Figure 8-7
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-7. As a result of the tax, consumer surplus decreases by

Accepted Answer

A)  $130, producer surplus decreases by $170, tax revenue is $240, and deadweight loss is $60. 
B)  $150, producer surplus decreases by $150, tax revenue is $240, and deadweight loss is $60. 
C)  $160, producer surplus decreases by $160, tax revenue is $240, and deadweight loss is $80. 
D)  $240, producer surplus decreases by $240, tax revenue is $400, and deadweight loss is $80. 
A)  $130, producer surplus decreases by $170, tax revenue is $240, and deadweight loss is $60. 
B)  $150, producer surplus decreases by $150, tax revenue is $240, and deadweight loss is $60. 
C)  $160, producer surplus decreases by $160, tax revenue is $240, and deadweight loss is $80. 
D)  $240, producer surplus decreases by $240, tax revenue is $400, and deadweight loss is $80.

Question 16

As the tax on a good increases from $1 per unit to $2 per unit to $3 per unit and so on, the

Accepted Answer

A)  tax revenue increases at first, but it eventually peaks and then decreases. 
B)  deadweight loss increases at first, but it eventually peaks and then decreases. 
C)  tax revenue always increases, and the deadweight loss always increases. 
D)  tax revenue always decreases, and the deadweight loss always increases. 
A)  tax revenue increases at first, but it eventually peaks and then decreases. 
B)  deadweight loss increases at first, but it eventually peaks and then decreases. 
C)  tax revenue always increases, and the deadweight loss always increases. 
D)  tax revenue always decreases, and the deadweight loss always increases.

Question 17

Figure 8-8
Suppose the government imposes a $10 per unit tax on a good.  
-Refer to Figure 8-8. The government collects tax revenue that is the area

Accepted Answer

A)  L. 
B)  B+D. 
C)  C+F. 
D)  F+G+L. 
A)  L. 
B)  B+D. 
C)  C+F. 
D)  F+G+L.

Question 18

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. The size of the tax is

Accepted Answer

A)  P0-P2. 
B)  P2-P8. 
C)  P2-P5. 
D)  P5-P8. 
A)  P0-P2. 
B)  P2-P8. 
C)  P2-P5. 
D)  P5-P8.

Question 19

Figure 8-25  
-Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is total surplus after the tax is imposed?

Accepted Answer

Total surp

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 received by sellers to decrease by

Accepted Answer

A)  $20. 
B)  $200. 
C)  $300. 
D)  $500. 
A)  $20. 
B)  $200. 
C)  $300. 
D)  $500.

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The producer surplus without the tax is

The deadweight loss from a tax

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 allow the government to minimize the deadweight loss(es) from the tax?

Figure 8-13 -Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The loss of consumer surplus resulting from this tax is

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2. The per-unit burden of the tax on sellers is

Suppose the price of milk is $2.39 per gallon, and the equilibrium quantity of milk is 100 thousand gallons per day with no tax on milk. Starting from this initial situation, which of the following scenarios would result in the smallest deadweight loss?

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 consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is

The more elastic are supply and demand in a market, the greater are the distortions caused by a tax on that market, and the more likely it is that a tax cut in that market will raise tax revenue.

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: How much tax revenue will be collected after this tax is imposed?

The size of a tax and the deadweight loss that results from the tax are

Taxes affect market participants by increasing the price paid by the buyer and decreasing the price received by the seller.

To measure the gains and losses from a tax on a good, economists use the tools of

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7. As a result of the tax, consumer surplus decreases by

As the tax on a good increases from $1 per unit to $2 per unit to $3 per unit and so on, the

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. The government collects tax revenue that is the area

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. The size of the tax is

Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is total surplus after the tax is imposed?

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 received by sellers to decrease by

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

Filters

Exam 8: Application: The Costs of Taxation

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The producer surplus without the tax is

The deadweight loss from a tax

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 allow the government to minimize the deadweight loss(es) from the tax?

Figure 8-13 -Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The loss of consumer surplus resulting from this tax is

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2. The per-unit burden of the tax on sellers is

Suppose the price of milk is $2.39 per gallon, and the equilibrium quantity of milk is 100 thousand gallons per day with no tax on milk. Starting from this initial situation, which of the following scenarios would result in the smallest deadweight loss?

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 consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is

The more elastic are supply and demand in a market, the greater are the distortions caused by a tax on that market, and the more likely it is that a tax cut in that market will raise tax revenue.

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: How much tax revenue will be collected after this tax is imposed?

The size of a tax and the deadweight loss that results from the tax are

Taxes affect market participants by increasing the price paid by the buyer and decreasing the price received by the seller.

To measure the gains and losses from a tax on a good, economists use the tools of

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7. As a result of the tax, consumer surplus decreases by

As the tax on a good increases from $1 per unit to $2 per unit to $3 per unit and so on, the

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. The government collects tax revenue that is the area

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. The size of the tax is

Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is total surplus after the tax is imposed?

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 received by sellers to decrease by

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

Filters