Question 1

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 allow the government to minimize the deadweight losses) from the tax?

Accepted Answer

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

Question 2

The deadweight loss from a tax of $2 per unit will be smallest in a market with

Accepted Answer

A)  inelastic supply and elastic demand. 
B)  inelastic supply and inelastic demand. 
C)  elastic supply and elastic demand. 
D)  elastic supply and inelastic demand.

Question 3

Figure 8-11 
-Refer to Figure 8-11. The deadweight loss of the tax is represented by the

Accepted Answer

A)  length of the line segment connecting points A and B. 
B)  length of the line segment connecting points A and C. 
C)  length of the line segment connecting points B and C. 
D)  area of the triangle bounded by the points A, B, and C.

Question 4

Figure 8-26 
-Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. What price will sellers receive for the good after the tax is imposed?

Accepted Answer

The answer of Figure 8-26 
-Refer to Figure 8-26. Suppose...

Question 5

For a good that is taxed, the area on the relevant supply­and­demand graph that represents government's tax revenue is a

Accepted Answer

A)  triangle. 
B)  rectangle. 
C)  trapezoid. 
D)  None of the above is correct; government's tax revenue is the area between the supply and demand curves, above the horizontal axis, and below the effective price to buyers

Question 6

The most important tax in the U.S. economy is the tax on corporations' profits.

Accepted Answer

A) True 
 B)False

Question 7

When a tax is levied on a good, the buyers and sellers of the good share the burden,

Accepted Answer

A)  provided the tax is levied on the sellers. 
B)  provided the tax is levied on the buyers. 
C)  provided a portion of the tax is levied on the buyers, with the remaining portion levied on the sellers. 
D)  regardless of how the tax is levied.

Question 8

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

Accepted Answer

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

Question 9

Suppose the tax on gasoline is decreased from $0.60 per gallon to $0.40 per gallon. As a result,

Accepted Answer

A)  tax revenue necessarily decreases. 
B)  the deadweight loss of the tax necessarily decreases. 
C)  the demand curve for gasoline necessarily becomes steeper. 
D)  the supply curve for gasoline necessarily becomes flatter.

Question 10

The benefit to buyers of participating in a market is measured by

Accepted Answer

A)  consumer surplus. 
B)  producer surplus. 
C)  total surplus. 
D)  deadweight loss.

Question 11

The more elastic the supply, the larger the deadweight loss from a tax, all else equal.

Accepted Answer

A) True 
 B)False

Question 12

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 placed on this good, the quantity sold

Accepted Answer

A)  is 600, and buyers effectively pay $10. 
B)  is 300, and buyers effectively pay $10. 
C)  is 600, and buyers effectively pay $16. 
D)  is 300, and buyers effectively pay $16.

Question 13

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.

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 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.

Question 15

The demand for chicken wings is more elastic than the demand for razor blades. Suppose the government levies an equivalent tax on chicken wings and razor blades. The deadweight loss would be larger in the market for

Accepted Answer

A)  chicken wings than in the market for razor blades because the quantity of chicken wings would fall by more than the quantity of razor blades. 
B)  chicken wings than in the market for razor blades because the quantity of razor blades would fall by more than the quantity of chicken wings. 
C)  razor blades than in the market for chicken wings because the quantity of chicken wings would fall by more than the quantity of razor blades. 
D)  razor blades than in the market for chicken wings because the quantity of razor blades would fall by more than the quantity of chicken wings.

Question 16

When a tax is levied on a good,

Accepted Answer

A)  government revenues exceed the loss in total welfare. 
B)  there is a decrease in the quantity of the good bought and sold in the market. 
C)  the price that sellers receive exceeds the price that buyers pay. 
D)  All of the above are correct.

Question 17

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

The answer of Figure 8-25 
-Refer to Figure 8-25. Suppose...

Question 18

The higher a country's tax rates, the more likely that country will be

Accepted Answer

A)  at the top of the Laffer curve. 
B)  on the positively sloped part of the Laffer curve. 
C)  on the negatively sloped part of the Laffer curve. 
D)  experiencing small deadweight losses.

Question 19

To fully understand how taxes affect economic well-being, we must

Accepted Answer

A)  assume that economic well-being is not affected if all tax revenue is spent on goods and services for the people who are being taxed. 
B)  compare the taxes raised in the United States with those raised in other countries, especially France. 
C)  compare the reduced welfare of buyers and sellers to the amount of revenue the government raises. 
D)  take into account the fact that almost all taxes reduce the welfare of buyers, increase the welfare of sellers, and raise revenue for the government.

Question 20

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 200 per month when there is no tax. Then a tax of $5 per widget is imposed. As a result, the government is able to raise $800 per month in tax revenue. We can conclude that the equilibrium quantity of widgets has fallen by

Accepted Answer

A)  40 per month. 
B)  50 per month. 
C)  75 per month. 
D)  100 per month.

Exam 8: Application: the Costs of Taxation

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 allow the government to minimize the deadweight losses) from the tax?

The deadweight loss from a tax of $2 per unit will be smallest in a market with

Figure 8-11 -Refer to Figure 8-11. The deadweight loss of the tax is represented by the

Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. What price will sellers receive for the good after the tax is imposed?

For a good that is taxed, the area on the relevant supplyanddemand graph that represents government's tax revenue is a

The most important tax in the U.S. economy is the tax on corporations' profits.

When a tax is levied on a good, the buyers and sellers of the good share the burden,

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

Suppose the tax on gasoline is decreased from $0.60 per gallon to $0.40 per gallon. As a result,

The benefit to buyers of participating in a market is measured by

The more elastic the supply, the larger the deadweight loss from a tax, all else equal.

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 placed on this good, the quantity sold

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

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

The demand for chicken wings is more elastic than the demand for razor blades. Suppose the government levies an equivalent tax on chicken wings and razor blades. The deadweight loss would be larger in the market for

When a tax is levied on a good,

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?

The higher a country's tax rates, the more likely that country will be

To fully understand how taxes affect economic well-being, we must

Exam 8: Application: the Costs of Taxation

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 allow the government to minimize the deadweight losses) from the tax?

The deadweight loss from a tax of $2 per unit will be smallest in a market with

Figure 8-11 -Refer to Figure 8-11. The deadweight loss of the tax is represented by the

Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. What price will sellers receive for the good after the tax is imposed?

For a good that is taxed, the area on the relevant supply­and­demand graph that represents government's tax revenue is a

The most important tax in the U.S. economy is the tax on corporations' profits.

When a tax is levied on a good, the buyers and sellers of the good share the burden,

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

Suppose the tax on gasoline is decreased from $0.60 per gallon to $0.40 per gallon. As a result,

The benefit to buyers of participating in a market is measured by

The more elastic the supply, the larger the deadweight loss from a tax, all else equal.

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 placed on this good, the quantity sold

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

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

The demand for chicken wings is more elastic than the demand for razor blades. Suppose the government levies an equivalent tax on chicken wings and razor blades. The deadweight loss would be larger in the market for

When a tax is levied on a good,

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?

The higher a country's tax rates, the more likely that country will be

To fully understand how taxes affect economic well-being, we must

For a good that is taxed, the area on the relevant supplyanddemand graph that represents government's tax revenue is a