Question 1

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

Accepted Answer

Total tax revenue is

Question 2

A tax placed on a good

Accepted Answer

A)  causes the effective price to sellers to increase. 
B)  affects the welfare of buyers of the good but not the welfare of sellers. 
C)  causes the equilibrium quantity of the good to decrease. 
D)  creates a burden that is usually borne entirely by the sellers of the good. 
A)  causes the effective price to sellers to increase. 
B)  affects the welfare of buyers of the good but not the welfare of sellers. 
C)  causes the equilibrium quantity of the good to decrease. 
D)  creates a burden that is usually borne entirely by the sellers of the good.

Question 3

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 B on the curve, then an increase 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 4

Figure 8-6
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-6. Total surplus with the tax in place is

Accepted Answer

A)  $1,500. 
B)  $3,600. 
C)  $4,500. 
D)  $6,000. 
A)  $1,500. 
B)  $3,600. 
C)  $4,500. 
D)  $6,000.

Question 5

The supply curve for whiskey is the typical upward-sloping straight line, and the demand curve for whiskey is the typical downward-sloping straight line. When whiskey is taxed, the area on the relevant supply-and-demand graph that represents

Accepted Answer

A)  government's tax revenue is a rectangle. 
B)  the deadweight loss of the tax is a triangle. 
C)  the loss of consumer surplus caused by the tax is neither a rectangle nor a triangle. 
D)  All of the above are correct. 
A)  government's tax revenue is a rectangle. 
B)  the deadweight loss of the tax is a triangle. 
C)  the loss of consumer surplus caused by the tax is neither a rectangle nor a triangle. 
D)  All of the above are correct.

Question 6

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 maximize the deadweight losses) from the tax?

Accepted Answer

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

Question 7

Figure 8-19
The vertical distance between points A and B represents the original tax.  
-Refer to Figure 8-19. If the government changed the per-unit tax from $5.00 to $7.50, then the price paid by buyers would be $10.50, the price received by sellers would be $3, and the quantity sold in the market would be 0.5 units. Compared to the original tax rate, this higher tax rate would

Accepted Answer

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

Question 8

The Laffer curve illustrates that

Accepted Answer

A)  deadweight loss rises by the square of the increase in a tax. 
B)  deadweight loss rises exponentially as a tax increases. 
C)  tax revenue first rises, then falls as a tax increases. 
D)  Both a) and b) are correct. 
A)  deadweight loss rises by the square of the increase in a tax. 
B)  deadweight loss rises exponentially as a tax increases. 
C)  tax revenue first rises, then falls as a tax increases. 
D)  Both a) and b) are correct.

Question 9

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

Accepted Answer

Consumers will pay $

Question 10

Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, the

Accepted Answer

A)  less elastic is the demand for the good. 
B)  less elastic is the supply of the good. 
C)  smaller is the amount of the tax. 
D)  All of the above are correct. 
A)  less elastic is the demand for the good. 
B)  less elastic is the supply of the good. 
C)  smaller is the amount of the tax. 
D)  All of the above are correct.

Question 11

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 sellers is

Accepted Answer

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

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 total surplus with the tax is

Accepted Answer

A)  $2,000. 
B)  $3,000. 
C)  $15,000. 
D)  $20,000. 
A)  $2,000. 
B)  $3,000. 
C)  $15,000. 
D)  $20,000.

Question 13

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 14

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.

Question 15

A tax places a wedge between the price buyers pay and the price sellers receive.

Accepted Answer

A) True 
 B)False

Question 16

When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic,

Accepted Answer

A)  buyers of the good will bear most of the burden of the tax. 
B)  sellers of the good will bear most of the burden of the tax. 
C)  buyers and sellers will each bear 50 percent of the burden of the tax. 
D)  both equilibrium price and quantity will increase. 
A)  buyers of the good will bear most of the burden of the tax. 
B)  sellers of the good will bear most of the burden of the tax. 
C)  buyers and sellers will each bear 50 percent of the burden of the tax. 
D)  both equilibrium price and quantity will increase.

Question 17

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:   What will be the deadweight loss from this tax?

Accepted Answer

The deadwe

Question 18

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 19

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

Accepted Answer

Producer s

Question 20

Figure 8-3
The vertical distance between points A and C represents a tax in the market.  
-Refer to Figure 8-3. The per-unit burden of the tax on sellers is

Accepted Answer

A)  P3 - P1. 
B)  P3 - P2. 
C)  P2 - P1. 
D)  P4 - P3. 
A)  P3 - P1. 
B)  P3 - P2. 
C)  P2 - P1. 
D)  P4 - P3.

Exam 8: Application: The Costs of Taxation

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

A tax placed on a good

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 B on the curve, then an increase in the tax rate will

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. Total surplus with the tax in place is

The supply curve for whiskey is the typical upward-sloping straight line, and the demand curve for whiskey is the typical downward-sloping straight line. When whiskey is taxed, the area on the relevant supply-and-demand graph that represents

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 maximize the deadweight losses) from the tax?

The Laffer curve illustrates that

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

Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, 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 sellers is

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The total surplus with 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 received by sellers to decrease by

A tax places a wedge between the price buyers pay and the price sellers receive.

When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic,

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: What will be the deadweight loss from this tax?

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

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. The per-unit burden of the tax on sellers 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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