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.E) A) and B)
F) B) and D)

Question 2

Sellers of a product will bear the larger part of the tax burden,and buyers will bear a smaller part of the tax burden,when the

Accepted Answer

A)  tax is placed on the sellers of the product.
B)  tax is placed on the buyers of the product.
C)  supply of the product is more elastic than the demand for the product.
D)  demand for the product is more elastic than the supply of the product.E) B) and C)
F) A) and B)

Question 3

Which of the following is a tax on labor?

Accepted Answer

A)  Medicare tax
B)  inheritance tax
C)  sales tax
D)  All of the above are labor taxes.E) B) and D)
F) B) and C)

Question 4

Economists disagree on whether labor taxes cause small or large deadweight losses.This disagreement arises primarily because economists hold different views about

Accepted Answer

A)  the size of labor taxes.
B)  the importance of labor taxes imposed by the federal government relative to the importance of labor taxes imposed by the various states.
C)  the elasticity of labor supply.
D)  the elasticity of labor demand.E) None of the above
F) A) and C)

Question 5

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.E) All of the above
F) A) and B)

Question 6

The size of the deadweight loss generated from a tax is affected by the

Accepted Answer

A)  elasticities of both supply and demand.
B)  elasticity of demand only.
C)  elasticity of supply only.
D)  total revenue collected by the government.E) A) and D)
F) C) and D)

Question 7

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) B) and D)
F) None of the above C

Question 8

Figure 8-14 
-Refer to Figure 8-14.Which of the following statements is correct?

Accepted Answer

A)  Supply 1 is more elastic than supply 2.
B)  Demand 2 is more elastic than demand 1.
C)  Demand 1 is more elastic than supply 1.
D)  All of the above are correct.E) A) and D)
F) None of the above

Question 9

The deadweight loss from a $3 tax will be largest 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.E) C) and D)
F) A) and B)

Question 10

The amount of deadweight loss from a tax depends upon the

Accepted Answer

A)  price elasticity of demand.
B)  price elasticity of supply.
C)  amount of the tax per unit.
D)  All of the above are correct.E) A) and C)
F) All of the above

Question 11

Suppose that policymakers are considering placing a tax on either of two markets.In Market A,the tax will have a significant effect on the price consumers pay,but it will not affect equilibrium quantity very much.In Market B,the same tax will have only a small effect on the price consumers pay,but it will have a large effect on the equilibrium quantity.Other factors are held constant.In which market will the tax have a larger deadweight loss?

Accepted Answer

A)  Market A
B)  Market B
C)  The deadweight loss will be the same in both markets.
D)  There is not enough information to answer the question.E) A) and D)
F) B) and C)

Question 12

Assume the supply curve for cigars is a typical,upward-sloping straight line,and the demand curve for cigars is a typical,downward-sloping straight line.Suppose the equilibrium quantity in the market for cigars is 1,000 per month when there is no tax.Then a tax of $0.50 per cigar is imposed.The effective price paid by buyers increases from $1.50 to $1.90 and the effective price received by sellers falls from $1.50 to $1.40.The government's tax revenue amounts to $475 per month.Which of the following statements is correct?

Accepted Answer

A)  The demand for cigars is less elastic than the supply of cigars.
B)  The tax causes a decrease in consumer surplus of $390 and a decrease in producer surplus of $97.50.
C)  The deadweight loss of the tax is $12.50.
D)  All of the above are correct.E) B) and D)
F) B) and C)

Question 13

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

Accepted Answer

A)  smaller is the response of quantity supplied to the tax.
B)  larger is the tax burden on sellers relative to the tax burden on buyers.
C)  larger is the deadweight loss of the tax.
D)  All of the above are correct.E) B) and C)
F) None of the above

Question 14

Labor taxes may distort labor markets greatly if

Accepted Answer

A)  labor supply is highly inelastic.
B)  many workers choose to work 40 hours per week regardless of their earnings.
C)  the number of hours many part-time workers want to work is very sensitive to the wage rate.
D)  "underground" workers do not respond to changes in the wages of legal jobs because they prefer not to pay taxes.E) A) and D)
F) All of the above

Question 15

If the labor supply curve is nearly vertical,a tax on labor

Accepted Answer

A)  has a large deadweight loss.
B)  raises a small amount of tax revenue.
C)  has little impact on the amount of work that workers are willing to do.
D)  results in a large tax burden on the firms that hire labor.E) A) and B)
F) A) and C)

Question 16

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) B) and D)

Question 17

Suppose the government imposes a tax on cheese.The deadweight loss from this tax will likely be greater in the

Accepted Answer

A)  first year after it is imposed than in the eighth year after it is imposed because demand and supply will be more elastic in the first year than in the eighth year.
B)  first year after it is imposed than in the eighth year after it is imposed because demand and supply will be less elastic in the first year than in the eighth year.
C)  eighth year after it is imposed than in the first year after it is imposed because demand and supply will be more elastic in the first year than in the eighth year.
D)  eighth year after it is imposed than in the first year after it is imposed because demand and supply will be less elastic in the first year than in the eighth year.E) C) and D)
F) B) and D)

Question 18

Economists generally agree that the most important tax in the U.S.economy is the

Accepted Answer

A)  income tax.
B)  tax on labor.
C)  inheritance or death tax.
D)  tax on corporate profits.E) C) and D)
F) A) and C) B

Question 19

Taxes on labor encourage which of the following?

Accepted Answer

A)  labor demand to be more inelastic
B)  mothers to stay at home rather than work in the labor force
C)  workers to work overtime
D)  fathers to take on second jobsE) A) and D)
F) C) and D)

Question 20

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.E) A) and B)
F) A) and C) B

Exam 8: Application the Cost of Taxation: The Determinants of the Deadweight Loss

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

Correct Answer
verified

Sellers of a product will bear the larger part of the tax burden,and buyers will bear a smaller part of the tax burden,when the

Correct Answer
verified

Which of the following is a tax on labor?

Correct Answer
verified

Economists disagree on whether labor taxes cause small or large deadweight losses.This disagreement arises primarily because economists hold different views about

Correct Answer
verified

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

Correct Answer
verified

The size of the deadweight loss generated from a tax is affected by the

Correct Answer
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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?

Correct Answer
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C

Figure 8-14 -Refer to Figure 8-14.Which of the following statements is correct?

Correct Answer
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The deadweight loss from a $3 tax will be largest in a market with

Correct Answer
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The amount of deadweight loss from a tax depends upon the

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

Correct Answer
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Labor taxes may distort labor markets greatly if

Correct Answer
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If the labor supply curve is nearly vertical,a tax on labor

Correct Answer
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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?

Correct Answer
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Suppose the government imposes a tax on cheese.The deadweight loss from this tax will likely be greater in the

Correct Answer
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Economists generally agree that the most important tax in the U.S.economy is the

Correct Answer
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B

Taxes on labor encourage which of the following?

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

Correct Answer
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B

Exam 8: Application the Cost of Taxation: The Determinants of the Deadweight Loss

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

Correct AnswerverifiedShow Answer

Sellers of a product will bear the larger part of the tax burden,and buyers will bear a smaller part of the tax burden,when the

Correct AnswerverifiedShow Answer

Which of the following is a tax on labor?

Correct AnswerverifiedShow Answer

Economists disagree on whether labor taxes cause small or large deadweight losses.This disagreement arises primarily because economists hold different views about

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The size of the deadweight loss generated from a tax is affected by the

Correct AnswerverifiedShow 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?

Correct AnswerverifiedC

Figure 8-14 -Refer to Figure 8-14.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

The deadweight loss from a $3 tax will be largest in a market with

Correct AnswerverifiedShow Answer

The amount of deadweight loss from a tax depends upon the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Labor taxes may distort labor markets greatly if

Correct AnswerverifiedShow Answer

If the labor supply curve is nearly vertical,a tax on labor

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose the government imposes a tax on cheese.The deadweight loss from this tax will likely be greater in the

Correct AnswerverifiedShow Answer

Economists generally agree that the most important tax in the U.S.economy is the

Correct AnswerverifiedB

Taxes on labor encourage which of the following?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedB

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C

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B

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B