Question 1

Figure 8-19.The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. 
-Refer to Figure 8-19.If the economy is at point A on the curve,then a decrease in the tax rate will

Accepted Answer

A)   increase the deadweight loss of the tax and increase tax revenue.
B)   increase the deadweight loss of the tax and decrease tax revenue.
C)   decrease the deadweight loss of the tax and increase tax revenue.
D)   decrease the deadweight loss of the tax and decrease tax revenue.E) C) and D)
F) A) and B)

Question 2

If the size of a tax triples,the deadweight loss increases by a factor of six.

Accepted Answer

A) True 
 B)False

Question 3

Figure 8-4
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-4.The price that buyers effectively pay after the tax is imposed is

Accepted Answer

A)   $12.
B)   between $8 and $12.
C)   between $5 and $8.
D)   $5.E) B) and D)
F) A) and B)

Question 4

Suppose the price of milk is $2.39 per gallon,and the equilibrium quantity of milk is 100 thousand gallons per day with no tax on milk.Starting from this initial situation,which of the following scenarios would result in the smallest deadweight loss?

Accepted Answer

A)   The price elasticity of demand for milk is 0.3,the price elasticity of supply for milk is 0.7,and the milk tax amounts to $0.40 per gallon.
B)   The price elasticity of demand for milk is 0.2,the price elasticity of supply for milk is 0.5,and the milk tax amounts to $0.30 per gallon.
C)   The price elasticity of demand for milk is 0.2,the price elasticity of supply for milk is 0.7,and the milk tax amounts to $0.30 per gallon.
D)   The price elasticity of demand for milk is 0.1,the price elasticity of supply for milk is 0.5,and the milk tax amounts to $0.20 per gallon.E) All of the above
F) A) and C)

Question 5

Figure 8-3
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-3.The per-unit burden of the tax on sellers is

Accepted Answer

A)   P3 - P1.
B)   P3 - P2.
C)   P2 - P1.
D)   P4 - P3.E) All of the above
F) None of the above

Question 6

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) All of the above
F) A) and C)

Question 7

Taxes drive a wedge into the market by raising the price that sellers receive and lowering the price that buyers pay.

Accepted Answer

A) True 
 B)False

Question 8

For a good that is taxed,the area on the relevant supply-and-demand 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.E) A) and D)
F) C) and D)

Question 9

Figure 8-7
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-7.Suppose a 22nd unit of the good were sold by a seller to a buyer.Which of the following statements is correct?

Accepted Answer

A)   For the 22nd unit,the difference between the buyer's value and the seller's cost is less than the tax per unit.
B)   For the 22nd unit,the difference between the buyer's value and the seller's cost is greater than the tax per unit.
C)   For the 22nd unit,the difference between the buyer's value and the seller's cost is equal to the tax per unit.
D)   It makes sense for the buyer to buy and for the seller to sell the 22nd unit,with or without the tax in place.E) B) and C)
F) None of the above

Question 10

Taxes on labor tend to encourage second earners to stay at home rather than work in the labor force.

Accepted Answer

A) True 
 B)False

Question 11

Figure 8-2
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-2.The amount of tax revenue received by the government is

Accepted Answer

A)   $2.50.
B)   $4.
C)   $5.
D)   $9.E) A) and B)
F) A) and C)

Question 12

Figure 8-3 
-Refer to Figure 8-3.Suppose the government places a $4 tax per unit on this good.How many units of this good will be bought and sold after the tax is imposed?

Accepted Answer

60 units will be bou...

Question 13

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 size of the tax is

Accepted Answer

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

Question 14

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

Accepted Answer

A)   total surplus after the tax.
B)   total surplus before the tax.
C)   deadweight loss from the tax.
D)   tax revenue.E) None of the above
F) C) and D)

Question 15

Suppose a tax of $0.50 per unit on a good creates a deadweight loss of $100.If the tax is increased to $2.50 per unit,the deadweight loss from the new tax would be

Accepted Answer

A)   $200.
B)   $250.
C)   $500.
D)   $2,500.E) All of the above
F) A) and B)

Question 16

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

Question 17

Scenario 8-1
Suppose the market demand and market supply curves are given by the equations: 
-Refer to Scenario 8-1.Suppose that a tax of T is placed on buyers so that the demand curve becomes:  What price will sellers receive and what price will buyers pay after the tax is imposed?

Accepted Answer

Buyers wil...

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

When a tax is levied on the buyers of a good,the

Accepted Answer

A)   supply curve shifts upward by the amount of the tax.
B)   quantity supplied increases for all conceivable prices of the good.
C)   buyers of the good will send tax payments to the government.
D)   demand curve shifts to the right by the horizontal distance of the tax.E) B) and C)
F) A) and D)

Question 20

Suppose the government places a per-unit tax on a good..The smaller the price elasticities of demand and supply for the good,the

Accepted Answer

A)   smaller the deadweight loss from the tax.
B)   greater the deadweight loss from the tax.
C)   less efficient is the tax.
D)   more equitable is the distribution of the tax burden between buyers and sellers.E) B) and C)
F) A) and D)

Exam 8: Application: The Costs of Taxation

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

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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 tax revenue is

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Suppose a tax of $0.50 per unit on a good creates a deadweight loss of $100.If the tax is increased to $2.50 per unit,the deadweight loss from the new tax would be

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When a tax is levied on the buyers of a good,the

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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 price that buyers effectively pay after the tax is imposed is

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Suppose the government places a per-unit tax on a good..The smaller the price elasticities of demand and supply for the good,the

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Figure 8-3 -Refer to Figure 8-3.Suppose the government places a $4 tax per unit on this good.How many units of this good will be bought and sold after the tax is imposed?

Correct Answerverified60 units will be bou...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.The amount of tax revenue received by the government is

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Taxes on labor tend to encourage second earners to stay at home rather than work in the labor force.

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

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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 J+K+L+M represents

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Suppose the price of milk is $2.39 per gallon,and the equilibrium quantity of milk is 100 thousand gallons per day with no tax on milk.Starting from this initial situation,which of the following scenarios would result in the smallest deadweight loss?

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Scenario 8-1 Suppose the market demand and market supply curves are given by the equations: -Refer to Scenario 8-1.Suppose that a tax of T is placed on buyers so that the demand curve becomes: What price will sellers receive and what price will buyers pay after the tax is imposed?

Correct AnswerverifiedBuyers wil...View AnswerShow Answer

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 size of the tax is

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If the size of a tax triples,the deadweight loss increases by a factor of six.

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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.Suppose a 22nd unit of the good were sold by a seller to a buyer.Which of the following statements is correct?

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For a good that is taxed,the area on the relevant supply-and-demand graph that represents government's tax revenue is a

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Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3.The per-unit burden of the tax on sellers is

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Figure 8-19.The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-19.If the economy is at point A on the curve,then a decrease in the tax rate will

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Taxes drive a wedge into the market by raising the price that sellers receive and lowering the price that buyers pay.

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60 units will be bou...
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Buyers wil...
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