Question 1

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 2

Figure 8-16
-Refer to Figure 8-16. Panel (a) and Panel (b) each illustrate a $2 tax placed on a market. In comparison to Panel (a), Panel (b) illustrates which of the following statements?

Accepted Answer

A)  When demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic. 
B)  When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic. 
C)  When supply is relatively inelastic, the deadweight loss of a tax is smaller than when supply is relatively elastic. 
D)  When supply is relatively elastic, the deadweight loss of a tax is larger than when supply is relatively inelastic. 
A)  When demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic. 
B)  When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic. 
C)  When supply is relatively inelastic, the deadweight loss of a tax is smaller than when supply is relatively elastic. 
D)  When supply is relatively elastic, the deadweight loss of a tax is larger than when supply is relatively inelastic.

Question 3

Figure 8-6
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-6. What happens to total surplus in this market when the tax is imposed?

Accepted Answer

A)  Total surplus increases by $1,500. 
B)  Total surplus increases by $3,000. 
C)  Total surplus decreases by $1,500. 
D)  Total surplus decreases by $,3000. 
A)  Total surplus increases by $1,500. 
B)  Total surplus increases by $3,000. 
C)  Total surplus decreases by $1,500. 
D)  Total surplus decreases by $,3000.

Question 4

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 quantity sold to

Accepted Answer

A)  increase by 20 units. 
B)  increase by 500 units. 
C)  decrease by 20 units. 
D)  decrease by 500 units. 
A)  increase by 20 units. 
B)  increase by 500 units. 
C)  decrease by 20 units. 
D)  decrease by 500 units.

Question 5

Suppose the federal government doubles the gasoline tax. The deadweight loss associated with the tax

Accepted Answer

A)  also doubles. 
B)  triples. 
C)  quadruples. 
D)  rises by a factor of 8. 
A)  also doubles. 
B)  triples. 
C)  quadruples. 
D)  rises by a factor of 8.

Question 6

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

Accepted Answer

Consumer surplus is

Question 7

Describe the Laffer curve.

Accepted Answer

The Laffer curve depicts the r

Question 8

Assume that for good X the supply curve for a good is a typical, upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. If the good is taxed, and the tax is doubled, the

Accepted Answer

A)  base of the triangle that represents the deadweight loss doubles. 
B)  height of the triangle that represents the deadweight loss doubles. 
C)  deadweight loss of the tax quadruples. 
D)  All of the above are correct. 
A)  base of the triangle that represents the deadweight loss doubles. 
B)  height of the triangle that represents the deadweight loss doubles. 
C)  deadweight loss of the tax quadruples. 
D)  All of the above are correct.

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 loss of producer surplus as a result of the tax is

Accepted Answer

A)  $3,000. 
B)  $6,000. 
C)  $9,000. 
D)  $12,000. 
A)  $3,000. 
B)  $6,000. 
C)  $9,000. 
D)  $12,000.

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 producer surplus after the tax is imposed?

Accepted Answer

Producer surplus is

Question 11

With linear demand and supply curves in a market, suppose a tax of $0.20 per unit on a good creates a deadweight loss of $40. If the tax is increased to $0.50 per unit, the deadweight loss from the new tax will be

Accepted Answer

A)  $200. 
B)  $250. 
C)  $475. 
D)  $625. 
A)  $200. 
B)  $250. 
C)  $475. 
D)  $625.

Question 12

Figure 8-11  
-Refer to Figure 8-11. The tax revenue that the government collects equals

Accepted Answer

A)    . 
B)    . 
C)    . 
D)    . 
A)    . 
B)    . 
C)    . 
D)    .

Question 13

If the size of a tax doubles, the deadweight loss doubles.

Accepted Answer

A) True 
 B)False

Question 14

For the purpose of analyzing the gains and losses from a tax on a good, we use tax revenue as a direct measure of the

Accepted Answer

A)  government's benefit from the tax. 
B)  government's loss from the tax. 
C)  deadweight loss of the tax. 
D)  overall net gain to society of the tax. 
A)  government's benefit from the tax. 
B)  government's loss from the tax. 
C)  deadweight loss of the tax. 
D)  overall net gain to society of the tax.

Question 15

When a tax is imposed on a good for which both demand and supply are very elastic,

Accepted Answer

A)  sellers effectively pay the majority of the tax. 
B)  buyers effectively pay the majority of the tax. 
C)  the tax burden is equally divided between buyers and sellers. 
D)  None of the above is correct; further information would be required to determine how the burden of the tax is distributed between buyers and sellers. 
A)  sellers effectively pay the majority of the tax. 
B)  buyers effectively pay the majority of the tax. 
C)  the tax burden is equally divided between buyers and sellers. 
D)  None of the above is correct; further information would be required to determine how the burden of the tax is distributed between buyers and sellers.

Question 16

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 quantity sold to

Accepted Answer

A)  increase by 1 unit. 
B)  decrease by 1 unit. 
C)  increase by 2 units. 
D)  decrease by 2 units. 
A)  increase by 1 unit. 
B)  decrease by 1 unit. 
C)  increase by 2 units. 
D)  decrease by 2 units.

Question 17

Suppose a tax of $1 per unit is imposed on a good. The more elastic the demand for the good, other things equal,

Accepted Answer

A)  the larger is the decrease in quantity demanded as a result of the tax. 
B)  the smaller is the tax burden on buyers relative to the tax burden on sellers. 
C)  the larger is the deadweight loss of the tax. 
D)  All of the above are correct. 
A)  the larger is the decrease in quantity demanded as a result of the tax. 
B)  the smaller is the tax burden on buyers relative to the tax burden on sellers. 
C)  the larger is the deadweight loss of the tax. 
D)  All of the above are correct.

Question 18

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 19

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 20

Total surplus in a market does not change when the government imposes a tax on that market because the loss of consumer surplus and producer surplus is equal to the gain of government revenue.

Accepted Answer

A) True 
 B)False

Exam 8: Application: the Costs of Taxation

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

Figure 8-16 -Refer to Figure 8-16. Panel (a) and Panel (b) each illustrate a $2 tax placed on a market. In comparison to Panel (a), Panel (b) illustrates which of the following statements?

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. What happens to total surplus in this market when the tax is imposed?

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 quantity sold to

Suppose the federal government doubles the gasoline tax. The deadweight loss associated with the tax

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

Describe the Laffer curve.

Assume that for good X the supply curve for a good is a typical, upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. If the good is taxed, and the tax is doubled, the

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The loss of producer surplus as a result of the 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 producer surplus after the tax is imposed?

With linear demand and supply curves in a market, suppose a tax of $0.20 per unit on a good creates a deadweight loss of $40. If the tax is increased to $0.50 per unit, the deadweight loss from the new tax will be

Figure 8-11 -Refer to Figure 8-11. The tax revenue that the government collects equals

If the size of a tax doubles, the deadweight loss doubles.

For the purpose of analyzing the gains and losses from a tax on a good, we use tax revenue as a direct measure of the

When a tax is imposed on a good for which both demand and supply are very elastic,

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 quantity sold to

Suppose a tax of $1 per unit is imposed on a good. The more elastic the demand for the good, other things equal,

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

Total surplus in a market does not change when the government imposes a tax on that market because the loss of consumer surplus and producer surplus is equal to the gain of government revenue.

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 Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

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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