Question 1

The larger the deadweight loss from taxation, the larger the cost of government programs.

Accepted Answer

A) True 
 B)False

Question 2

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, sellers effectively pay what amount of the $10 tax?

Accepted Answer

A)  $0 
B)  $4 
C)  $6 
D)  $10 
A)  $0 
B)  $4 
C)  $6 
D)  $10

Question 3

Suppose a tax of $5 per unit is imposed on a good, and the tax causes the equilibrium quantity of the good to decrease from 200 units to 100 units. The tax decreases consumer surplus by $450 and decreases producer surplus by $300. The deadweight loss from the tax is

Accepted Answer

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

Question 4

The more inelastic are demand and supply, the greater is the deadweight loss of a tax.

Accepted Answer

A) True 
 B)False

Question 5

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 6

Figure 8-4
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-4. The amount of tax revenue received by the government is equal to

Accepted Answer

A)  $245. 
B)  $350. 
C)  $490. 
D)  $700. 
A)  $245. 
B)  $350. 
C)  $490. 
D)  $700.

Question 7

Labor taxes may distort labor markets greatly if

Accepted Answer

A)  labor supply is highly inelastic. 
B)  many workers choose to work 40 hours per week regardless of their earnings. 
C)  the number of hours many part-time workers want to work is very sensitive to the wage rate. 
D)  "underground" workers do not respond to changes in the wages of legal jobs because they prefer not to pay taxes. 
A)  labor supply is highly inelastic. 
B)  many workers choose to work 40 hours per week regardless of their earnings. 
C)  the number of hours many part-time workers want to work is very sensitive to the wage rate. 
D)  "underground" workers do not respond to changes in the wages of legal jobs because they prefer not to pay taxes.

Question 8

Figure 8-29  
-Refer to Figure 8-29. As the size of the tax increases from $3 to $6 to $9, what happens to tax revenues?

Accepted Answer

When the tax is $3, tax revenue is $3 x

Question 9

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

Accepted Answer

A)  $120. 
B)  $80. 
C)  $50. 
D)  $25. 
A)  $120. 
B)  $80. 
C)  $50. 
D)  $25.

Question 10

Figure 8-26  
-Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much is the deadweight loss from this tax?

Accepted Answer

The deadweight loss from this tax is 0.5

Question 11

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

Accepted Answer

Total surp

Question 12

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 13

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.

Question 14

Figure 8-9
The vertical distance between points A and C represents a tax in the market.  
-Refer to Figure 8-9. The amount of tax revenue received by the government is

Accepted Answer

A)  $4,000. 
B)  $6,000. 
C)  $10,000. 
D)  $24,000. 
A)  $4,000. 
B)  $6,000. 
C)  $10,000. 
D)  $24,000.

Question 15

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

Accepted Answer

Producer s

Question 16

Figure 8-25  
-Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. What price will sellers receive for the good after the tax is imposed?

Accepted Answer

Sellers will receive

Question 17

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

Accepted Answer

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

Question 18

Figure 8-22  
-Refer to Figure 8-22. Suppose the government changed the per-unit tax on this good from $3.00 to $1.50. Compared to the original tax rate, this lower tax rate would

Accepted Answer

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

Question 19

Economists generally agree that the most important tax in the U.S. economy is the

Accepted Answer

A)  investment tax. 
B)  sales tax. 
C)  property tax. 
D)  labor tax. 
A)  investment tax. 
B)  sales tax. 
C)  property tax. 
D)  labor tax.

Question 20

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

Accepted Answer

Producer surplus is

Exam 8: Application: The Costs of Taxation

The larger the deadweight loss from taxation, the larger the cost of government programs.

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, sellers effectively pay what amount of the $10 tax?

Suppose a tax of $5 per unit is imposed on a good, and the tax causes the equilibrium quantity of the good to decrease from 200 units to 100 units. The tax decreases consumer surplus by $450 and decreases producer surplus by $300. The deadweight loss from the tax is

The more inelastic are demand and supply, the greater is the deadweight loss of a tax.

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 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4. The amount of tax revenue received by the government is equal to

Labor taxes may distort labor markets greatly if

Figure 8-29 -Refer to Figure 8-29. As the size of the tax increases from $3 to $6 to $9, what happens to tax revenues?

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

Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much is the deadweight loss from this tax?

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

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

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

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The amount of tax revenue received by the government is

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

Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. What price will sellers receive for the good after the tax is imposed?

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

Figure 8-22 -Refer to Figure 8-22. Suppose the government changed the per-unit tax on this good from $3.00 to $1.50. Compared to the original tax rate, this lower tax rate would

Economists generally agree that the most important tax in the U.S. economy is the

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

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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