Question 1

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 2

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 3

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

Accepted Answer

A) True 
 B)False

Question 4

Figure 8-8
Suppose the government imposes a $10 per unit tax on a good.  
-Refer to Figure 8-8. After the tax goes into effect, producer surplus is the area

Accepted Answer

A)  D+F+G+H+J. 
B)  D+F+G+H. 
C)  D+F+J. 
D)  J. 
A)  D+F+G+H+J. 
B)  D+F+G+H. 
C)  D+F+J. 
D)  J.

Question 5

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 6

The decrease in total surplus that results from a market distortion, such as a tax, is called a

Accepted Answer

A)  wedge loss. 
B)  revenue loss. 
C)  deadweight loss. 
D)  consumer surplus loss. 
A)  wedge loss. 
B)  revenue loss. 
C)  deadweight loss. 
D)  consumer surplus loss.

Question 7

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 amount of deadweight loss as a result of the tax is

Accepted Answer

A)  $4,000. 
B)  $5,000. 
C)  $6,000. 
D)  $10,000. 
A)  $4,000. 
B)  $5,000. 
C)  $6,000. 
D)  $10,000.

Question 8

The government's benefit from a tax can be measured by

Accepted Answer

A)  consumer surplus. 
B)  producer surplus. 
C)  tax revenue. 
D)  All of the above are correct. 
A)  consumer surplus. 
B)  producer surplus. 
C)  tax revenue. 
D)  All of the above are correct.

Question 9

The price elasticities of supply and demand affect

Accepted Answer

A)  both the size of the deadweight loss from a tax and the tax incidence. 
B)  the size of the deadweight loss from a tax but not the tax incidence. 
C)  the tax incidence but not the size of the deadweight loss from a tax. 
D)  neither the size of the deadweight loss from a tax nor the tax incidence. 
A)  both the size of the deadweight loss from a tax and the tax incidence. 
B)  the size of the deadweight loss from a tax but not the tax incidence. 
C)  the tax incidence but not the size of the deadweight loss from a tax. 
D)  neither the size of the deadweight loss from a tax nor the tax incidence.

Question 10

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 11

Tax revenues increase in direct proportion to increases in the size of the tax.

Accepted Answer

A) True 
 B)False

Question 12

Assume the price of gasoline is $2.00 per gallon, and the equilibrium quantity of gasoline is 10 million gallons per day with no tax on gasoline. Starting from this initial situation, which of the following scenarios would result in the largest deadweight loss?

Accepted Answer

A)  The price elasticity of demand for gasoline is 0.1; the price elasticity of supply for gasoline is 0.6; and the gasoline tax amounts to $0.20 per gallon. 
B)  The price elasticity of demand for gasoline is 0.1; the price elasticity of supply for gasoline is 0.4; and the gasoline tax amounts to $0.20 per gallon. 
C)  The price elasticity of demand for gasoline is 0.2; the price elasticity of supply for gasoline is 0.6; and the gasoline tax amounts to $0.30 per gallon. 
D)  There is insufficient information to make this determination. 
A)  The price elasticity of demand for gasoline is 0.1; the price elasticity of supply for gasoline is 0.6; and the gasoline tax amounts to $0.20 per gallon. 
B)  The price elasticity of demand for gasoline is 0.1; the price elasticity of supply for gasoline is 0.4; and the gasoline tax amounts to $0.20 per gallon. 
C)  The price elasticity of demand for gasoline is 0.2; the price elasticity of supply for gasoline is 0.6; and the gasoline tax amounts to $0.30 per gallon. 
D)  There is insufficient information to make this determination.

Question 13

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. The curve that is shown on the figure is called the

Accepted Answer

A)  deadweight-loss curve. 
B)  tax-incidence curve. 
C)  Laffer curve. 
D)  Lorenz curve. 
A)  deadweight-loss curve. 
B)  tax-incidence curve. 
C)  Laffer curve. 
D)  Lorenz curve.

Question 14

Assume the supply curve for diapers is a typical, upward-sloping straight line, and the demand curve for diapers is a typical, downward-sloping straight line. Suppose the equilibrium quantity in the market for diapers is 1,000 per month when there is no tax. Then a tax of $0.50 per diaper is imposed. The effective price paid by buyers increases from $1.50 to $1.90 and the effective price received by sellers falls from $1.50 to $1.40. The government's tax revenue amounts to $475 per month. Which of the following statements is correct?

Accepted Answer

A)  After the tax is imposed, the equilibrium quantity of diapers is 900 per month. 
B)  The demand for diapers is more elastic than the supply of diapers. 
C)  The deadweight loss of the tax is $12.50. 
D)  The tax causes a decrease in consumer surplus of $380. 
A)  After the tax is imposed, the equilibrium quantity of diapers is 900 per month. 
B)  The demand for diapers is more elastic than the supply of diapers. 
C)  The deadweight loss of the tax is $12.50. 
D)  The tax causes a decrease in consumer surplus of $380.

Question 15

A tax levied on the sellers of a good shifts the

Accepted Answer

A)  supply curve upward or to the left). 
B)  supply curve downward or to the right). 
C)  demand curve upward or to the right). 
D)  demand curve downward or to the left). 
A)  supply curve upward or to the left). 
B)  supply curve downward or to the right). 
C)  demand curve upward or to the right). 
D)  demand curve downward or to the left).

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 consumers pay for the good after the tax is imposed?

Accepted Answer

Consumers will pay $

Question 17

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 18

Figure 8-2
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-2. The imposition of the tax causes the price paid by buyers to

Accepted Answer

A)  decrease by $2. 
B)  increase by $3. 
C)  decrease by $4. 
D)  increase by $5. 
A)  decrease by $2. 
B)  increase by $3. 
C)  decrease by $4. 
D)  increase by $5.

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 8-9
The vertical distance between points A and C represents a tax in the market.  
-Refer to Figure 8-9. The equilibrium price and quantity before the imposition of the tax is

Accepted Answer

A)  P=$800 and Q=20. 
B)  P=$600 and Q=20. 
C)  P=$300 and Q=20. 
D)  P=$600 and Q=40. 
A)  P=$800 and Q=20. 
B)  P=$600 and Q=20. 
C)  P=$300 and Q=20. 
D)  P=$600 and Q=40.

Exam 8: Application: the Costs of Taxation

If the size of a tax increases, tax revenue

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

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

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. After the tax goes into effect, producer surplus is the area

The decrease in total surplus that results from a market distortion, such as a tax, is called a

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 amount of deadweight loss as a result of the tax is

The government's benefit from a tax can be measured by

The price elasticities of supply and demand affect

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?

Tax revenues increase in direct proportion to increases in the size of the tax.

Assume the price of gasoline is $2.00 per gallon, and the equilibrium quantity of gasoline is 10 million gallons per day with no tax on gasoline. Starting from this initial situation, which of the following scenarios would result in the largest deadweight loss?

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. The curve that is shown on the figure is called the

A tax levied on the sellers of a good shifts the

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?

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 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2. The imposition of the tax causes the price paid by buyers to

When a tax is imposed on a good, the

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The equilibrium price and quantity before the imposition 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

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

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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