Question 1

Taxes drive a wedge into the market by raising the price that sellers receive and lowering the price that buyers pay.

Accepted Answer

A) True 
 B)False

Question 2

Figure 8-1  
-Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by I+J+K+L+M+Y represents

Accepted Answer

A)  total surplus before the tax. 
B)  total surplus after the tax. 
C)  consumer surplus before the tax. 
D)  deadweight loss from the tax. 
A)  total surplus before the tax. 
B)  total surplus after the tax. 
C)  consumer surplus before the tax. 
D)  deadweight loss from the tax.

Question 3

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 4

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 5

The less freedom people are given to choose the date of their retirement, the

Accepted Answer

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

Question 6

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. The price paid by buyers increases by $2 and the after-tax price received by sellers falls by $3. The government is able to raise $750 per month in revenue from the tax. The deadweight loss from the tax is

Accepted Answer

A)  $250. 
B)  $125. 
C)  $75. 
D)  $50. 
A)  $250. 
B)  $125. 
C)  $75. 
D)  $50.

Question 7

Figure 8-17  
-Refer to Figure 8-17. Suppose the government imposes a $1 tax in each of the four markets represented by demand curves D1, D2, D3, and D4. The deadweight will be the largest in the market represented by

Accepted Answer

A)  D1. 
B)  D2. 
C)  D3. 
D)  D4. 
A)  D1. 
B)  D2. 
C)  D3. 
D)  D4.

Question 8

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

Accepted Answer

A)  $6, and consumer surplus with the tax is $1.50. 
B)  $6, and consumer surplus with the tax is $4.50. 
C)  $10, and consumer surplus with the tax is $1.50. 
D)  $10, and consumer surplus with the tax is $4.50. 
A)  $6, and consumer surplus with the tax is $1.50. 
B)  $6, and consumer surplus with the tax is $4.50. 
C)  $10, and consumer surplus with the tax is $1.50. 
D)  $10, and consumer surplus with the tax is $4.50.

Question 9

When a tax is levied on buyers, the

Accepted Answer

A)  supply curves shifts upward by the amount of the tax. 
B)  tax creates a wedge between the price buyers effectively pay and the price sellers receive. 
C)  tax has no effect on the well-being of sellers. 
D)  All of the above are correct. 
A)  supply curves shifts upward by the amount of the tax. 
B)  tax creates a wedge between the price buyers effectively pay and the price sellers receive. 
C)  tax has no effect on the well-being of sellers. 
D)  All of the above are correct.

Question 10

Figure 8-12  
-Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The per-unit burden of the tax on buyers is

Accepted Answer

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

Question 11

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 losses) 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 12

The amount of deadweight loss that results from a tax of a given size is determined by

Accepted Answer

A)  whether the tax is levied on buyers or sellers. 
B)  the number of buyers in the market relative to the number of sellers. 
C)  the price elasticities of demand and supply. 
D)  the ratio of the tax per unit to the effective price received by sellers. 
A)  whether the tax is levied on buyers or sellers. 
B)  the number of buyers in the market relative to the number of sellers. 
C)  the price elasticities of demand and supply. 
D)  the ratio of the tax per unit to the effective price received by sellers.

Question 13

Normally, both buyers and sellers of a good become worse off when the good is taxed.

Accepted Answer

A) True 
 B)False

Question 14

When a tax is imposed on buyers, consumer surplus and producer surplus both decrease.

Accepted Answer

A) True 
 B)False

Question 15

Figure 8-1  
-Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by J+K+L+M represents

Accepted Answer

A)  total surplus after the tax. 
B)  total surplus before the tax. 
C)  deadweight loss from the tax. 
D)  tax revenue. 
A)  total surplus after the tax. 
B)  total surplus before the tax. 
C)  deadweight loss from the tax. 
D)  tax revenue.

Question 16

Figure 8-4
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-4. The price that sellers effectively receive after the tax is imposed is

Accepted Answer

A)  $12. 
B)  between $8 and $12. 
C)  between $5 and $8. 
D)  $5. 
A)  $12. 
B)  between $8 and $12. 
C)  between $5 and $8. 
D)  $5.

Question 17

Suppose a tax of $0.10 per unit on a good creates a deadweight loss of $100. If the tax is increased to $0.25 per unit, the deadweight loss from the new tax would be

Accepted Answer

A)  $200. 
B)  $250. 
C)  $475. 
D)  $625. 
A)  $200. 
B)  $250. 
C)  $475. 
D)  $625.

Question 18

Figure 8-11  
-Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then, when the tax is imposed,

Accepted Answer

A)  consumer surplus decreases by $13. 
B)  producer surplus decreases by $13. 
C)  the deadweight loss amounts to $6. 
D)  the amount of the good that is sold remains unchanged. 
A)  consumer surplus decreases by $13. 
B)  producer surplus decreases by $13. 
C)  the deadweight loss amounts to $6. 
D)  the amount of the good that is sold remains unchanged.

Question 19

When a tax is imposed on a good, the

Accepted Answer

A)  supply curve for the good always shifts. 
B)  demand curve for the good always shifts. 
C)  amount of the good that buyers are willing to buy at each price always remains unchanged. 
D)  equilibrium quantity of the good always decreases. 
A)  supply curve for the good always shifts. 
B)  demand curve for the good always shifts. 
C)  amount of the good that buyers are willing to buy at each price always remains unchanged. 
D)  equilibrium quantity of the good always decreases.

Question 20

Figure 8-11  
-Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then the deadweight loss of the tax is

Accepted Answer

A)  $6. 
B)  $8. 
C)  $9. 
D)  $12. 
A)  $6. 
B)  $8. 
C)  $9. 
D)  $12.

Exam 8: Application: The Costs of Taxation

Taxes drive a wedge into the market by raising the price that sellers receive and lowering the price that buyers pay.

Figure 8-1 -Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by I+J+K+L+M+Y represents

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 8-12 -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

The less freedom people are given to choose the date of their retirement, the

Figure 8-17 -Refer to Figure 8-17. Suppose the government imposes a $1 tax in each of the four markets represented by demand curves D1, D2, D3, and D4. The deadweight will be the largest in the market represented by

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

When a tax is levied on buyers, the

Figure 8-12 -Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The per-unit burden of the tax on buyers is

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 losses) from the tax?

The amount of deadweight loss that results from a tax of a given size is determined by

Normally, both buyers and sellers of a good become worse off when the good is taxed.

When a tax is imposed on buyers, consumer surplus and producer surplus both decrease.

Figure 8-1 -Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by J+K+L+M represents

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4. The price that sellers effectively receive after the tax is imposed is

Suppose a tax of $0.10 per unit on a good creates a deadweight loss of $100. If the tax is increased to $0.25 per unit, the deadweight loss from the new tax would be

Figure 8-11 -Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then, when the tax is imposed,

When a tax is imposed on a good, the

Figure 8-11 -Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then the deadweight loss 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 Costs of Production

Firms in Competitive Markets

Monopoly

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

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

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