Question 1

Concerning the labor market and taxes on labor, economists disagree about

Accepted Answer

A)  the size of the tax on labor. 
B)  the size of the deadweight loss of the tax on labor. 
C)  whether or not a tax on labor places a wedge between the wage that firms pay and the wage that workers receive. 
D)  All of the above are correct. 
A)  the size of the tax on labor. 
B)  the size of the deadweight loss of the tax on labor. 
C)  whether or not a tax on labor places a wedge between the wage that firms pay and the wage that workers receive. 
D)  All of the above are correct.

Question 2

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

Accepted Answer

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

Question 3

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 4

Figure 8-6
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-6. Without a tax, total surplus in this market is

Accepted Answer

A)  $3,000. 
B)  $4,800. 
C)  $6,000. 
D)  $7,200. 
A)  $3,000. 
B)  $4,800. 
C)  $6,000. 
D)  $7,200.

Question 5

In the market for widgets, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. The equilibrium quantity in the market for widgets is 250 per month when there is no tax. Then a tax of $6 per widget is imposed. As a result, the government is able to raise $750 per month in tax revenue. We can conclude that the after-tax quantity of widgets is

Accepted Answer

A)  75 per month. 
B)  100 per month. 
C)  125 per month. 
D)  150 per month. 
A)  75 per month. 
B)  100 per month. 
C)  125 per month. 
D)  150 per month.

Question 6

Suppose that instead of a supply-demand diagram, you are given the following information:
Qs = 100 + 3P Qd = 400 - 2P
From this information compute equilibrium price and quantity. Now suppose that a tax is placed on buyers so that
Qd = 400 - 2(P + T).
If T = 15, solve for the new equilibrium price and quantity. (Note: P is the price received by sellers and P + T is the price paid by buyers.) Compare these answers for equilibrium price and quantity with your first answers. What does this show you?

Accepted Answer

Prior to the tax, the equilibrium price

Question 7

If the size of a tax triples, the deadweight loss increases by a factor of six.

Accepted Answer

A) True 
 B)False

Question 8

Taxes affect market participants by increasing the price paid by the buyer and decreasing the price received by the seller.

Accepted Answer

A) True 
 B)False

Question 9

Figure 8-5
Suppose that the government imposes a tax of P3 - P1.  
-Refer to Figure 8-5. The price that buyers effectively pay after the tax is imposed is

Accepted Answer

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

Question 10

Scenario 8-2
Roland mows Karla's lawn for $25. Roland's opportunity cost of mowing Karla's lawn is $20, and Karla's willingness to pay Roland to mow her lawn is $28.
-Refer to Scenario 8-2. If Karla hires Roland to mow her lawn, Karla's consumer surplus is

Accepted Answer

A)  $3. 
B)  $5. 
C)  $8. 
D)  $25. 
A)  $3. 
B)  $5. 
C)  $8. 
D)  $25.

Question 11

Taxes drive a wedge into the market by raising the price that sellers receive and lowering the price that buyers pay.

Accepted Answer

A) True 
 B)False

Question 12

Figure 8-4
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-4. The price that sellers effectively receive after the tax is imposed is

Accepted Answer

A)  $12. 
B)  between $8 and $12. 
C)  between $5 and $8. 
D)  $5. 
A)  $12. 
B)  between $8 and $12. 
C)  between $5 and $8. 
D)  $5.

Question 13

The Laffer curve relates

Accepted Answer

A)  the tax rate to tax revenue raised by the tax. 
B)  the tax rate to the deadweight loss of the tax. 
C)  the price elasticity of supply to the deadweight loss of the tax. 
D)  government welfare payments to the birth rate. 
A)  the tax rate to tax revenue raised by the tax. 
B)  the tax rate to the deadweight loss of the tax. 
C)  the price elasticity of supply to the deadweight loss of the tax. 
D)  government welfare payments to the birth rate.

Question 14

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 15

If the labor supply curve is very elastic, a tax on labor

Accepted Answer

A)  has a large deadweight loss. 
B)  raises enough tax revenue to offset the loss in welfare. 
C)  has a relatively small impact on the number of hours that workers choose to work. 
D)  results in a large tax burden on the firms that hire labor. 
A)  has a large deadweight loss. 
B)  raises enough tax revenue to offset the loss in welfare. 
C)  has a relatively small impact on the number of hours that workers choose to work. 
D)  results in a large tax burden on the firms that hire labor.

Question 16

Anger over British taxes played a significant role in bringing about the

Accepted Answer

A)  election of John Adams as the second American president. 
B)  American Revolution. 
C)  War of 1812. 
D)  "no new taxes" clause in the U.S. Constitution. 
A)  election of John Adams as the second American president. 
B)  American Revolution. 
C)  War of 1812. 
D)  "no new taxes" clause in the U.S. Constitution.

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:   If T = 40, how much will be the deadweight loss from this tax?

Accepted Answer

The deadwe

Question 18

Use the following graph shown to fill in the table that follows.

Accepted Answer

The answer of Use the following graph shown to fill...

Question 19

Total surplus with a tax is equal to

Accepted Answer

A)  consumer surplus plus producer surplus. 
B)  consumer surplus minus producer surplus. 
C)  consumer surplus plus producer surplus minus tax revenue. 
D)  consumer surplus plus producer surplus plus tax revenue. 
A)  consumer surplus plus producer surplus. 
B)  consumer surplus minus producer surplus. 
C)  consumer surplus plus producer surplus minus tax revenue. 
D)  consumer surplus plus producer surplus plus tax revenue.

Question 20

Figure 8-21  
-Refer to Figure 8-21. Suppose the market is represented by Demand 1 and Supply 1. At first the government places a $3 per-unit tax on this good. Then the government decides to raise the tax to $6 per unit. Compared to the original tax rate, the higher tax will

Accepted Answer

A)  increase tax revenue and increase the deadweight loss from the tax. 
B)  not change tax revenue and increase 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)  not change tax revenue and increase 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.

Exam 8: Application: the Costs of Taxation

Concerning the labor market and taxes on labor, economists disagree about

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

When a tax is imposed on a good, the

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. Without a tax, total surplus in this market is

If the size of a tax triples, the deadweight loss increases by a factor of six.

Taxes affect market participants by increasing the price paid by the buyer and decreasing the price received by the seller.

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. The price that buyers effectively pay after the tax is imposed is

Scenario 8-2 Roland mows Karla's lawn for $25. Roland's opportunity cost of mowing Karla's lawn is $20, and Karla's willingness to pay Roland to mow her lawn is $28. -Refer to Scenario 8-2. If Karla hires Roland to mow her lawn, Karla's consumer surplus is

Taxes drive a wedge into the market by raising the price that sellers receive and lowering the price that buyers pay.

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4. The price that sellers effectively receive after the tax is imposed is

The Laffer curve relates

If the labor supply curve is very elastic, a tax on labor

Anger over British taxes played a significant role in bringing about the

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, how much will be the deadweight loss from this tax?

Use the following graph shown to fill in the table that follows.

Total surplus with a tax is equal to

Figure 8-21 -Refer to Figure 8-21. Suppose the market is represented by Demand 1 and Supply 1. At first the government places a $3 per-unit tax on this good. Then the government decides to raise the tax to $6 per unit. Compared to the original tax rate, the higher tax will

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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