Question 1

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 tax revenue is

Accepted Answer

A)  P0-P2) x Q2. 
B)  P2-P8) x Q2. 
C)  P2-P5) x Q5. 
D)  P5-P8) x Q5. 
A)  P0-P2) x Q2. 
B)  P2-P8) x Q2. 
C)  P2-P5) x Q5. 
D)  P5-P8) x Q5.

Question 2

Figure 8-21  
-Refer to Figure 8-21. Suppose the government places a $3 per-unit tax on this good. The smallest deadweight loss from the tax would occur in a market where demand is represented by

Accepted Answer

A)  Demand 1, and supply is represented by Supply 1. 
B)  Demand 1, and supply is represented by Supply 2. 
C)  Demand 2, and supply is represented by Supply 1. 
D)  Demand 2, and supply is represented by Supply 2. 
A)  Demand 1, and supply is represented by Supply 1. 
B)  Demand 1, and supply is represented by Supply 2. 
C)  Demand 2, and supply is represented by Supply 1. 
D)  Demand 2, and supply is represented by Supply 2.

Question 3

The most important tax in the U.S. economy is the tax on corporations' profits.

Accepted Answer

A) True 
 B)False

Question 4

Figure 8-23. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax.  
-Refer to Figure 8-23. If the economy is at point A on the curve, then a decrease in the tax rate will

Accepted Answer

A)  increase the deadweight loss of the tax and increase tax revenue. 
B)  increase the deadweight loss of the tax and decrease tax revenue. 
C)  decrease the deadweight loss of the tax and increase tax revenue. 
D)  decrease the deadweight loss of the tax and decrease tax revenue. 
A)  increase the deadweight loss of the tax and increase tax revenue. 
B)  increase the deadweight loss of the tax and decrease tax revenue. 
C)  decrease the deadweight loss of the tax and increase tax revenue. 
D)  decrease the deadweight loss of the tax and decrease tax revenue.

Question 5

If the size of a tax increases, tax revenue

Accepted Answer

A)  increases. 
B)  decreases. 
C)  remains the same. 
D)  may increase, decrease, or remain the same. 
A)  increases. 
B)  decreases. 
C)  remains the same. 
D)  may increase, decrease, or remain the same.

Question 6

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 producer surplus as a result of the tax is

Accepted Answer

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

Question 7

Figure 8-11  
-Refer to Figure 8-11. The price labeled as P2 on the vertical axis represents the

Accepted Answer

A)  difference between the price paid by buyers after the tax is imposed and the price paid by buyers before the tax is imposed. 
B)  difference between the price received by sellers before the tax is imposed and the price received by sellers after the tax is imposed. 
C)  price of the good before the tax is imposed. 
D)  price of the good after the tax is imposed. 
A)  difference between the price paid by buyers after the tax is imposed and the price paid by buyers before the tax is imposed. 
B)  difference between the price received by sellers before the tax is imposed and the price received by sellers after the tax is imposed. 
C)  price of the good before the tax is imposed. 
D)  price of the good after the tax is imposed.

Question 8

A tax affects

Accepted Answer

A)  buyers only. 
B)  sellers only. 
C)  buyers and sellers only. 
D)  buyers, sellers, and the government. 
A)  buyers only. 
B)  sellers only. 
C)  buyers and sellers only. 
D)  buyers, sellers, and the government.

Question 9

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 increase by

Accepted Answer

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

Question 10

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

Accepted Answer

Consumer surplus is

Question 11

Figure 8-6
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-6. When the tax is placed on this good, the quantity sold

Accepted Answer

A)  is 600, and buyers effectively pay $10. 
B)  is 300, and buyers effectively pay $10. 
C)  is 600, and buyers effectively pay $16. 
D)  is 300, and buyers effectively pay $16. 
A)  is 600, and buyers effectively pay $10. 
B)  is 300, and buyers effectively pay $10. 
C)  is 600, and buyers effectively pay $16. 
D)  is 300, and buyers effectively pay $16.

Question 12

A tax on a good causes the size of the market to increase.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following tools help us evaluate how taxes affect economic well-being? i) consumer surplus
Ii) producer surplus
Iii) tax revenue
Iv) deadweight loss

Accepted Answer

A)  i) and ii) only 
B)  i), ii), and iii) only 
C)  iii) and iv) only 
D)  i), ii), iii), and iv) 
A)  i) and ii) only 
B)  i), ii), and iii) only 
C)  iii) and iv) only 
D)  i), ii), iii), and iv)

Question 14

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

Question 15

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:   If T = 40, what price will buyers pay and what price will sellers receive?

Accepted Answer

Buyers will pay $80

Question 16

When a tax is placed on the buyers of a product, a result is that buyers effectively pay

Accepted Answer

A)  less than before the tax, and sellers effectively receive less than before the tax. 
B)  less than before the tax, and sellers effectively receive more than before the tax. 
C)  more than before the tax, and sellers effectively receive less than before the tax. 
D)  more than before the tax, and sellers effectively receive more than before the tax. 
A)  less than before the tax, and sellers effectively receive less than before the tax. 
B)  less than before the tax, and sellers effectively receive more than before the tax. 
C)  more than before the tax, and sellers effectively receive less than before the tax. 
D)  more than before the tax, and sellers effectively receive more than before the tax.

Question 17

Economists dismiss the idea that lower tax rates can lead to higher tax revenue, because there is a consensus that the relevant elasticities of demand and supply are very low.

Accepted Answer

A) True 
 B)False

Question 18

Suppose a tax of $3 is imposed on each new garden hose that is sold, resulting in a deadweight loss of $22,500. The supply curve is a typical upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. Before the tax was imposed, the equilibrium quantity of garden hoses was 100,000. We can conclude that the equilibrium quantity of garden hoses after the tax is imposed is

Accepted Answer

A)  75,000. 
B)  85,000. 
C)  90,000. 
D)  95,000. 
A)  75,000. 
B)  85,000. 
C)  90,000. 
D)  95,000.

Question 19

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 20

Figure 8-6
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-6. When the tax is imposed in this market, producer surplus is

Accepted Answer

A)  $450. 
B)  $600. 
C)  $900. 
D)  $1,500. 
A)  $450. 
B)  $600. 
C)  $900. 
D)  $1,500.

Exam 8: Application: The Costs of Taxation

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 tax revenue is

Figure 8-21 -Refer to Figure 8-21. Suppose the government places a $3 per-unit tax on this good. The smallest deadweight loss from the tax would occur in a market where demand is represented by

The most important tax in the U.S. economy is the tax on corporations' profits.

Figure 8-23. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-23. If the economy is at point A on the curve, then a decrease in the tax rate will

If the size of a tax increases, tax revenue

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 producer surplus as a result of the tax is

Figure 8-11 -Refer to Figure 8-11. The price labeled as P2 on the vertical axis represents the

A tax affects

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 increase by

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

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. When the tax is placed on this good, the quantity sold

A tax on a good causes the size of the market to increase.

Which of the following tools help us evaluate how taxes affect economic well-being? i) consumer surplus Ii) producer surplus Iii) tax revenue Iv) deadweight loss

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?

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: If T = 40, what price will buyers pay and what price will sellers receive?

When a tax is placed on the buyers of a product, a result is that buyers effectively pay

Economists dismiss the idea that lower tax rates can lead to higher tax revenue, because there is a consensus that the relevant elasticities of demand and supply are very low.

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

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. When the tax is imposed in this market, producer surplus 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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