Question 1

Suppose the demand curve and the supply curve in a market are both linear, and suppose the price elasticity of supply is 0.5. Will the deadweight loss from a $3 tax per unit be larger if the price elasticity of demand is 0.3 or if the price elasticity of demand is 0.7?

Accepted Answer

The deadweight loss ...

Question 2

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The consumer surplus without the tax is

Accepted Answer

A)  $2,000.
B)  $5,000.
C)  $8,000.
D)  $16,000.E) A) and D)
F) All of the above

Question 3

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 deadwe...

Question 4

Figure 8-14 
-Refer to Figure 8-14. Which of the following combinations will minimize the deadweight loss from a tax?

Accepted Answer

A)  supply 1 and demand 1
B)  supply 2 and demand 2
C)  supply 1 and demand 2
D)  supply 2 and demand 1E) B) and C)
F) A) and B)

Question 5

The greater the elasticity of demand, the smaller the deadweight loss of a tax.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

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 tripled, the

Accepted Answer

A)  base of the triangle that represents the deadweight loss triples.
B)  height of the triangle that represents the deadweight loss triples.
C)  deadweight loss of the tax increases by a factor of nine.
D)  All of the above are correct.E) A) and B)
F) All of the above

Question 8

Figure 8-25 
-Refer to Figure 8-25. How much is producer surplus at the market equilibrium?

Accepted Answer

Producer s...

Question 9

Who once said that taxes are the price we pay for a civilized society?

Accepted Answer

A)  Aristotle
B)  George Washington
C)  Oliver Wendell Holmes, Jr.
D)  Ronald ReaganE) None of the above
F) B) and D)

Question 10

Other things equal, the deadweight loss of a tax

Accepted Answer

A)  decreases as the size of the tax increases.
B)  increases as the size of the tax increases, but the increase in the deadweight loss is less rapid than the increase in the size of the tax.
C)  increases as the size of the tax increases, and the increase in the deadweight loss is more rapid than the increase in the size of the tax.
D)  increases as the price elasticities of demand and/or supply increase, but the deadweight loss does not change as the size of the tax increases.E) All of the above
F) C) and D)

Question 11

The deadweight loss of a tax rises even more rapidly than the size of the tax.

Accepted Answer

A) True 
 B)False

Question 12

The amount of deadweight loss that results from a tax of a given size is determined by

Accepted Answer

A)  whether the tax is levied on buyers or sellers.
B)  the number of buyers in the market relative to the number of sellers.
C)  the price elasticities of demand and supply.
D)  the ratio of the tax per unit to the effective price received by sellers.E) C) and D)
F) B) and D)

Question 13

Figure 8-5
Suppose that the government imposes a tax of P3 - P1. 
-Refer to Figure 8-5. After the tax is levied, producer surplus is represented by area

Accepted Answer

A)  A.
B)  A+B+C.
C)  D+H+F.
D)  F.E) C) and D)
F) A) and D)

Question 14

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.E) B) and D)
F) None of the above

Question 15

Figure 8-7
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-7. Before the tax is imposed, the equilibrium price is

Accepted Answer

A)  $32, and the equilibrium quantity is 15.
B)  $24, and the equilibrium quantity is 15.
C)  $24, and the equilibrium quantity is 25.
D)  $16, and the equilibrium quantity is 15.E) A) and B)
F) A) and C)

Question 16

If the tax on a good is increased from $1 per unit to $4 per unit, the deadweight loss from the tax increases by a factor of

Accepted Answer

A)  5.
B)  9.
C)  16.
D)  24.E) B) and D)
F) B) and C)

Question 17

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.E) C) and D)
F) None of the above

Question 18

When a tax is imposed, the loss of consumer surplus and producer surplus as a result of the tax exceeds the tax revenue collected by the government.

Accepted Answer

A) True 
 B)False

Question 19

Figure 8-4
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-4. The tax results in a loss of producer surplus that amounts to

Accepted Answer

A)  $75.50.
B)  $90.00.
C)  $112.50.
D)  $127.50.E) A) and B)
F) A) and C)

Question 20

Figure 8-2
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-2. Consumer surplus without the tax is

Accepted Answer

A)  $6, and consumer surplus with the tax is $1.50.
B)  $6, and consumer surplus with the tax is $4.50.
C)  $10, and consumer surplus with the tax is $1.50.
D)  $10, and consumer surplus with the tax is $4.50.E) A) and D)
F) None of the above

Exam 8: Applications: the Costs of Taxation

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?

Correct AnswerverifiedThe deadwe...View AnswerShow Answer

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?

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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 tripled, the

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Who once said that taxes are the price we pay for a civilized society?

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The greater the elasticity of demand, the smaller the deadweight loss of a tax.

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The amount of deadweight loss that results from a tax of a given size is determined by

Correct AnswerverifiedShow Answer

The deadweight loss of a tax rises even more rapidly than the size of the tax.

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If the tax on a good is increased from $1 per unit to $4 per unit, the deadweight loss from the tax increases by a factor of

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Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The consumer surplus without the tax is

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Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4. The tax results in a loss of producer surplus that amounts to

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Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. After the tax is levied, producer surplus is represented by area

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

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Figure 8-25 -Refer to Figure 8-25. How much is producer surplus at the market equilibrium?

Correct AnswerverifiedProducer s...View AnswerShow Answer

Other things equal, the deadweight loss of a tax

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Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7. Before the tax is imposed, the equilibrium price is

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Figure 8-14 -Refer to Figure 8-14. Which of the following combinations will minimize the deadweight loss from a tax?

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Suppose the demand curve and the supply curve in a market are both linear, and suppose the price elasticity of supply is 0.5. Will the deadweight loss from a $3 tax per unit be larger if the price elasticity of demand is 0.3 or if the price elasticity of demand is 0.7?

Correct AnswerverifiedThe deadweight loss ...View AnswerShow Answer

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2. Consumer surplus without the tax is

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

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When a tax is imposed, the loss of consumer surplus and producer surplus as a result of the tax exceeds the tax revenue collected by the government.

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The deadwe...
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Producer s...
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The deadweight loss ...
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