Question 1

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 (b), Panel (a) 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.

Question 2

Taxes on labor have the effect of encouraging

Accepted Answer

A)  workers to work more hours. 
B)  the elderly to postpone retirement. 
C)  second earners within a family to take a job. 
D)  unscrupulous people to take part in the underground economy.

Question 3

Figure 8-6
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-6. The amount of the tax on each unit of the good is

Accepted Answer

A)  $6. 
B)  $8. 
C)  $10. 
D)  $12.

Question 4

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 imposed in this market, the price sellers effectively receive is

Accepted Answer

A)  $4. 
B)  $6. 
C)  $10. 
D)  $16.

Question 5

Which of the following is not correct?

Accepted Answer

A)  Economists who argue that labor taxes are highly distorting believe that labor supply is fairly elastic. 
B)  Economists who argue that labor taxes are not highly distorting believe that labor supply is fairly inelastic. 
C)  Economists who argue that labor supply is fairly inelastic cite elderly workers who adjust the date they retire as an example. 
D)  Economists who argue that labor supply is fairly elastic cite workers who adjust the hours of overtime that they work as an example.

Question 6

Which of the following statements is correct?

Accepted Answer

A)  A decrease in the size of a tax always decreases the tax revenue raised by that tax. 
B)  A decrease in the size of a tax always decreases the deadweight loss of that tax. 
C)  Tax revenue decreases when there is a small decrease in the tax rate and the economy is on the downward- sloping part of the Laffer curve. 
D)  An increase in the size of a tax leads to an increase in the deadweight loss of the tax only if the economy is on the upward-sloping part of the Laffer curve.

Question 7

Figure 8-11 
-Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then, when the tax is imposed,

Accepted Answer

A)  the government collects $28 in tax revenue. 
B)  producer surplus decreases by $13. 
C)  consumer surplus decreases by $11. 
D)  the deadweight loss amounts to $9.

Question 8

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 consumer surplus when the tax is imposed in this market?

Accepted Answer

A)  Consumer surplus falls by $3,600. 
B)  Consumer surplus falls by $2,700. 
C)  Consumer surplus falls by $1,800. 
D)  Consumer surplus falls by $900.

Question 9

Suppose the demand curve and the supply curve in a market are both linear. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $3 tax per unit?

Accepted Answer

The answer of Suppose the demand curve and the supply...

Question 10

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 11

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

Accepted Answer

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

Question 12

The benefit to sellers of participating in a market is measured by the

Accepted Answer

A)  amount of taxes collected on sales of the good. 
B)  producer surplus. 
C)  amount sellers receive for their product. 
D)  sellers' willingness to sell.

Question 13

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 14

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, consumer surplus is the area

Accepted Answer

A)  A. 
B)  B+C. 
C)  A+B+C. 
D)  A+B+D+J+K.

Question 15

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 producer surplus when the tax is imposed in this market?

Accepted Answer

A)  Producer surplus falls by $600. 
B)  Producer surplus falls by $900. 
C)  Producer surplus falls by $1,800. 
D)  Producer surplus falls by $2,100.

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 loss of consumer surplus associated with some buyers dropping out of the market as a result of the tax is

Accepted Answer

A)  $0. 
B)  $1.50. 
C)  $3. 
D)  $4.50.

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 answer of Scenario 8-3
Suppose the market demand and market...

Question 18

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

Accepted Answer

A)  increase from $600 to $800. 
B)  decrease from $800 to $300. 
C)  decrease from $600 to $300. 
D)  remain unchanged at $600.

Question 19

The benefit that government receives from a tax is measured by

Accepted Answer

A)  the change in the equilibrium quantity of the good. 
B)  the change in the equilibrium price of the good. 
C)  tax revenue. 
D)  total surplus.

Question 20

When a tax is imposed on sellers, producer surplus decreases but consumer surplus increases.

Accepted Answer

A) True 
 B)False

Exam 8: Application: the Costs of Taxation

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 (b) , Panel (a) illustrates which of the following statements?

Taxes on labor have the effect of encouraging

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. The amount of the tax on each unit of the good is

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 imposed in this market, the price sellers effectively receive is

Which of the following is not correct?

Which of the following statements is correct?

Figure 8-11 -Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then, when the tax is imposed,

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 consumer surplus when the tax is imposed in this market?

Suppose the demand curve and the supply curve in a market are both linear. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $3 tax per unit?

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

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

The benefit to sellers of participating in a market is measured by the

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

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, consumer surplus is the area

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 producer surplus when the tax is imposed in this market?

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2. The loss of consumer surplus associated with some buyers dropping out of the market as a result of the tax is

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 8-9 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

The benefit that government receives from a tax is measured by

When a tax is imposed on sellers, producer surplus decreases but consumer surplus increases.