Question 1

When a tax on a good is enacted,

Accepted Answer

A)   buyers and sellers share the burden of the tax regardless of whether the tax is levied on buyers or on sellers.
B)   buyers always bear the full burden of the tax.
C)   sellers always bear the full burden of the tax.
D)   sellers bear the full burden of the tax if the tax is levied on them; buyers bear the full burden of the tax if the tax is levied on them.E) C) and D)
F) All of the above

Question 2

Figure 8-11 
-Refer to Figure 8-11. The price labeled as P1 on the vertical axis represents the price

Accepted Answer

A)   received by sellers before the tax is imposed.
B)   received by sellers after the tax is imposed.
C)   paid by buyers before the tax is imposed.
D)   paid by buyers after the tax is imposed.E) B) and C)
F) A) and D)

Question 3

Figure 8-25 
-Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is total surplus after the tax is imposed?

Accepted Answer

Total surp...

Question 4

Figure 8-26 
-Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much tax revenue is collected after the tax is imposed?

Accepted Answer

Total tax revenue is...

Question 5

Taxes on labor tend to increase the number of hours that people choose to work.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

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

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

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.E) All of the above
F) None of the above

Question 9

Figure 8-25 
-Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is producer surplus after the tax is imposed?

Accepted Answer

Producer s...

Question 10

A tax on a good

Accepted Answer

A)   raises the price that buyers effectively pay and raises the price that sellers effectively receive.
B)   raises the price that buyers effectively pay and lowers the price that sellers effectively receive.
C)   lowers the price that buyers effectively pay and raises the price that sellers effectively receive.
D)   lowers the price that buyers effectively pay and lowers the price that sellers effectively receive.E) A) and B)
F) B) and C)

Question 11

Figure 8-1 
-Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The deadweight loss due to the tax is measured by the area

Accepted Answer

A)   J+K+L+M.
B)   J+K+L+M+N.
C)   I+Y.
D)   I+Y+B.E) None of the above
F) All of the above

Question 12

Figure 8-21 
-Refer to Figure 8-21. Suppose the government places a $3 per-unit tax on this good. The smallest deadweight loss from the tax would occur in a market where demand is represented by

Accepted Answer

A)   Demand 1, and supply is represented by Supply 1.
B)   Demand 1, and supply is represented by Supply 2.
C)   Demand 2, and supply is represented by Supply 1.
D)   Demand 2, and supply is represented by Supply 2.E) None of the above
F) All of the above

Question 13

Economist Arthur Laffer made the argument that tax rates in the United States were so high that reducing the rates would increase tax revenue.

Accepted Answer

A) True 
 B)False

Question 14

Figure 8-1 
-Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by K+L represents

Accepted Answer

A)   tax revenue.
B)   consumer surplus before the tax.
C)   producer surplus after the tax.
D)   total surplus before the tax.E) A) and B)
F) A) and D)

Question 15

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 doubled, the

Accepted Answer

A)   base of the triangle that represents the deadweight loss quadruples.
B)   height of the triangle that represents the deadweight loss doubles.
C)   deadweight loss of the tax doubles.
D)   All of the above are correct.E) None of the above
F) B) and D)

Question 16

Figure 8-10 
-Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. The price that sellers receive is

Accepted Answer

A)   P0.
B)   P2.
C)   P5.
D)   P8.E) A) and D)
F) A) and C)

Question 17

When a tax is imposed on a good, the resulting decrease in consumer surplus is always larger than the resulting decrease in producer surplus.

Accepted Answer

A) True 
 B)False

Question 18

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 19

Figure 8-10 
-Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. The tax revenue is

Accepted Answer

A)   P0-P2)  x Q2.
B)   P2-P8)  x Q2.
C)   P2-P5)  x Q5.
D)   P5-P8)  x Q5.E) None of the above
F) C) and D)

Question 20

When the price of a good is measured in dollars, then the size of the deadweight loss that results from taxing that good is measured in

Accepted Answer

A)   units of the good that is being taxed.
B)   units of a related good that is not being taxed.
C)   dollars.
D)   percentage change.E) B) and C)
F) A) and C)

Exam 8: Application: the Costs of Taxation

Figure 8-10 -Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. The tax revenue is

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Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much tax revenue is collected after the tax is imposed?

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Figure 8-1 -Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by K+L represents

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Figure 8-11 -Refer to Figure 8-11. The price labeled as P1 on the vertical axis represents the price

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Which of the following is not correct?

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

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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 8-1 -Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The deadweight loss due to the tax is measured by the area

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

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Economist Arthur Laffer made the argument that tax rates in the United States were so high that reducing the rates would increase tax revenue.

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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 doubled, the

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When a tax on a good is enacted,

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Taxes on labor tend to increase the number of hours that people choose to work.

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Figure 8-21 -Refer to Figure 8-21. Suppose the government places a $3 per-unit tax on this good. The smallest deadweight loss from the tax would occur in a market where demand is represented by

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A tax on a good

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When a tax is imposed on a good, the resulting decrease in consumer surplus is always larger than the resulting decrease in producer surplus.

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Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is producer surplus after the tax is imposed?

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Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is total surplus after the tax is imposed?

Correct AnswerverifiedTotal surp...View AnswerShow Answer

When the price of a good is measured in dollars, then the size of the deadweight loss that results from taxing that good is measured in

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Figure 8-10 -Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. The price that sellers receive is

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Total tax revenue is...
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The deadwe...
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Producer s...
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Total surp...
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