Question 1

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

Accepted Answer

Consumer s

Question 2

The loss in total surplus resulting from a tax is called

Accepted Answer

A)  a deficit. 
B)  economic loss. 
C)  deadweight loss. 
D)  inefficiency. 
A)  a deficit. 
B)  economic loss. 
C)  deadweight loss. 
D)  inefficiency.

Question 3

If the tax on a good is tripled, the deadweight loss of the tax

Accepted Answer

A)  remains constant. 
B)  triples. 
C)  increases by a factor of 9. 
D)  increases by a factor of 12. 
A)  remains constant. 
B)  triples. 
C)  increases by a factor of 9. 
D)  increases by a factor of 12.

Question 4

The deadweight loss from a $3 tax will be largest in a market with

Accepted Answer

A)  inelastic supply and elastic demand. 
B)  inelastic supply and inelastic demand. 
C)  elastic supply and elastic demand. 
D)  elastic supply and inelastic demand. 
A)  inelastic supply and elastic demand. 
B)  inelastic supply and inelastic demand. 
C)  elastic supply and elastic demand. 
D)  elastic supply and inelastic demand.

Question 5

A decrease in the size of a tax is most likely to increase tax revenue in a market with

Accepted Answer

A)  elastic demand and elastic supply. 
B)  elastic demand and inelastic supply. 
C)  inelastic demand and elastic supply. 
D)  inelastic demand and inelastic supply. 
A)  elastic demand and elastic supply. 
B)  elastic demand and inelastic supply. 
C)  inelastic demand and elastic supply. 
D)  inelastic demand and inelastic supply.

Question 6

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 sellers effectively receive 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 7

A deadweight loss is a consequence of a tax on a good because the tax

Accepted Answer

A)  induces the government to increase its expenditures. 
B)  induces buyers to consume less, and sellers to produce less. 
C)  increases the equilibrium price in the market. 
D)  imposes a loss on buyers that is greater than the loss to sellers. 
A)  induces the government to increase its expenditures. 
B)  induces buyers to consume less, and sellers to produce less. 
C)  increases the equilibrium price in the market. 
D)  imposes a loss on buyers that is greater than the loss to sellers.

Question 8

Figure 8-24. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax.  
-Refer to Figure 8-24. Tax revenue would

Accepted Answer

A)  decrease if the economy began at point B and then the tax rate was decreased. 
B)  increase if the economy began at point F and then the tax rate was decreased. 
C)  decrease if the economy began at point C and then the tax rate was increased. 
D)  All of the above are correct. 
A)  decrease if the economy began at point B and then the tax rate was decreased. 
B)  increase if the economy began at point F and then the tax rate was decreased. 
C)  decrease if the economy began at point C and then the tax rate was increased. 
D)  All of the above are correct.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Taxes on labor encourage all of the following except

Accepted Answer

A)  older workers to take early retirement from the labor force. 
B)  mothers to stay at home rather than work in the labor force. 
C)  workers to work overtime. 
D)  people to be paid "under the table." 
A)  older workers to take early retirement from the labor force. 
B)  mothers to stay at home rather than work in the labor force. 
C)  workers to work overtime. 
D)  people to be paid "under the table."

Question 11

In which of the following instances would the deadweight loss of the tax on cartons of cigarettes increase by a factor of 9?

Accepted Answer

A)  The tax on cartons of cigarettes increases from $10 to $11.11. 
B)  The tax on cartons of cigarettes increases from $10 to $20. 
C)  The tax on cartons of cigarettes increases from $10 to $30. 
D)  The tax on cartons of cigarettes increases from $10 to $90. 
A)  The tax on cartons of cigarettes increases from $10 to $11.11. 
B)  The tax on cartons of cigarettes increases from $10 to $20. 
C)  The tax on cartons of cigarettes increases from $10 to $30. 
D)  The tax on cartons of cigarettes increases from $10 to $90.

Question 12

Taxes on labor tend to encourage the elderly to retire early.

Accepted Answer

A) True 
 B)False

Question 13

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

Question 14

Figure 8-18  
-Refer to Figure 8-18. Suppose the government imposes a $1 tax in each of the four markets represented by supply curves S1, S2, S3, and S4. The deadweight will be the smallest in the market represented by

Accepted Answer

A)  S1. 
B)  S2. 
C)  S3. 
D)  S4. 
A)  S1. 
B)  S2. 
C)  S3. 
D)  S4.

Question 15

Suppose that the market for product X is characterized by a typical, downward-sloping, linear demand curve and a typical, upward-sloping, linear supply curve. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $4 tax per unit?

Accepted Answer

The deadweight loss will be $8

Question 16

When a tax is levied on the sellers of a good, the

Accepted Answer

A)  supply curve shifts upward by the amount of the tax. 
B)  quantity demanded decreases for all conceivable prices of the good. 
C)  quantity supplied increases for all conceivable prices of the good. 
D)  None of the above is correct. 
A)  supply curve shifts upward by the amount of the tax. 
B)  quantity demanded decreases for all conceivable prices of the good. 
C)  quantity supplied increases for all conceivable prices of the good. 
D)  None of the above is correct.

Question 17

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 18

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 19

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 20

Tax revenue equals the size of the tax multiplied by the quantity sold in the market after the tax is levied.

Accepted Answer

A) True 
 B)False

Exam 8: Application: The Costs of Taxation

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

The loss in total surplus resulting from a tax is called

If the tax on a good is tripled, the deadweight loss of the tax

The deadweight loss from a $3 tax will be largest in a market with

A decrease in the size of a tax is most likely to increase tax revenue in a market with

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 sellers effectively receive after the tax is imposed is

A deadweight loss is a consequence of a tax on a good because the tax

Figure 8-24. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-24. Tax revenue would

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

Taxes on labor encourage all of the following except

In which of the following instances would the deadweight loss of the tax on cartons of cigarettes increase by a factor of 9?

Taxes on labor tend to encourage the elderly to retire early.

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

Figure 8-18 -Refer to Figure 8-18. Suppose the government imposes a $1 tax in each of the four markets represented by supply curves S1, S2, S3, and S4. The deadweight will be the smallest in the market represented by

Suppose that the market for product X is characterized by a typical, downward-sloping, linear demand curve and a typical, upward-sloping, linear supply curve. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $4 tax per unit?

When a tax is levied on the sellers of a good, the

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

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 amount of the tax on each unit of the good is

Tax revenue equals the size of the tax multiplied by the quantity sold in the market after the tax is levied.

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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