Question 1

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 buyers effectively pay is

Accepted Answer

A)   $4.
B)   $6.
C)   $10.
D)   $16.E) All of the above
F) B) and C)

Question 2

Figure 8-13 
-Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The amount of tax revenue collected by the government is

Accepted Answer

A)   $120.
B)   $80.
C)   $50.
D)   $30.E) All of the above
F) A) and B)

Question 3

A tax on a good causes the size of the market to increase.

Accepted Answer

A) True 
 B)False

Question 4

In which of the following instances would the deadweight loss of the tax on cartons of cigarettes increase by a factor of 9?

Accepted Answer

A)   The tax on cartons of cigarettes increases from $10 to $11.11.
B)   The tax on cartons of cigarettes increases from $10 to $20.
C)   The tax on cartons of cigarettes increases from $10 to $30.
D)   The tax on cartons of cigarettes increases from $10 to $90.E) B) and D)
F) All of the above

Question 5

Figure 8-5
Suppose that the government imposes a tax of P3 - P1. 
-Refer to Figure 8-5. The equilibrium price before the tax is imposed is

Accepted Answer

A)   P1.
B)   P2.
C)   P3.
D)   P4.E) A) and B)
F) A) and C)

Question 6

A tax on a good

Accepted Answer

A)   gives buyers an incentive to buy less of the good than they otherwise would buy.
B)   gives sellers an incentive to produce more of the good than they otherwise would produce.
C)   creates a benefit to the government, the size of which exceeds the loss in surplus to buyers and sellers.
D)   All of the above are correct.E) C) and D)
F) B) and C)

Question 7

Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, the

Accepted Answer

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

Question 8

Figure 8-3
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-3. The loss in producer surplus caused by the tax is measured by the area

Accepted Answer

A)   ABC.
B)   P1P3ABC.
C)   P1P2BC.
D)   P1C0.E) A) and B)
F) C) and D)

Question 9

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) B) and C)
F) C) and D)

Question 10

The demand for energy drinks is more elastic than the demand for milk. Would a tax on energy drinks or a tax on milk have a larger deadweight loss? Explain.

Accepted Answer

A tax on energy drinks would have a larg...

Question 11

When a tax is levied on a good, the buyers and sellers of the good share the burden,

Accepted Answer

A)   provided the tax is levied on the sellers.
B)   provided the tax is levied on the buyers.
C)   provided a portion of the tax is levied on the buyers, with the remaining portion levied on the sellers.
D)   regardless of how the tax is levied.E) A) and D)
F) None of the above

Question 12

Suppose that the market for large, 64-ounce soft drinks in the town of Pudgyville is characterized by a typical, downward-sloping, linear demand curve and a typical, upward-sloping, linear supply curve. The market is initially in equilibrium with 1,000 soft drinks sold per day. The newly-elected Mayor of Pudgyville wants to tax 64-ounce soft drinks. She is considering either a $0.10 tax or a $0.30 tax. Her chief economic advisor estimates that the number of soft drinks sold after a $0.10 tax will be 900 and after a $0.30 tax will be 500. Which tax is better?

Accepted Answer

A)   The $0.10 tax is better because it raises more revenue and creates a lower deadweight loss than the $0.30 tax.
B)   The $0.30 tax is better because it raises more revenue and creates a lower deadweight loss than the $0.10 tax.
C)   It is not clear which tax is better because although the $0.30 tax raises more tax revenues, it creates a larger deadweight loss than the $0.10 tax.
D)   It is not clear which tax is better because although the $0.10 tax raises more tax revenues, it creates a larger deadweight loss than the $0.30 tax.E) B) and C)
F) A) and C)

Question 13

Figure 8-29 
-Refer to Figure 8-29. As the size of the tax increases from $3 to $6 to $9, what happens to tax revenues?

Accepted Answer

When the tax is $3, tax revenue is $3 x ...

Question 14

The supply curve for motor oil is the typical upward-sloping straight line, and the demand curve for motor oil is the typical downward-sloping straight line. When motor oil is taxed, the area on the relevant supply-and-demand graph that represents the deadweight loss is

Accepted Answer

A)   larger than the area that represents consumer surplus in the absence of the tax.
B)   larger than the area that represents government's tax revenue.
C)   a triangle.
D)   All of the above are correct.E) B) and C)
F) A) and B)

Question 15

Figure 8-26 
-Refer to Figure 8-26. How much is total surplus at the market equilibrium?

Accepted Answer

Total surplus is the sum of co...

Question 16

Suppose that the market for product X is characterized by a typical, downward-sloping, linear demand curve and a typical, upward-sloping, linear supply curve. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $4 tax per unit?

Accepted Answer

The deadweight loss will be $8...

Question 17

Figure 8-13 
-Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The per-unit burden of the tax on sellers is

Accepted Answer

A)   $1.
B)   $2.
C)   $3.
D)   $5.E) B) and D)
F) All of the above

Question 18

Figure 8-18 
-Refer to Figure 8-18. Suppose the government imposes a $1 tax in each of the four markets represented by supply curves S1, S2, S3, and S4. The deadweight will be the largest in the market represented by

Accepted Answer

A)   S1.
B)   S2.
C)   S3.
D)   S4.E) All of the above
F) None of the above

Question 19

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 B)
F) All of the above

Question 20

Figure 8-2
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-2. The imposition of the tax causes the price paid by buyers to

Accepted Answer

A)   decrease by $2.
B)   increase by $3.
C)   decrease by $4.
D)   increase by $5.E) All of the above
F) B) and C)

Exam 8: Application: the Costs of Taxation

The demand for energy drinks is more elastic than the demand for milk. Would a tax on energy drinks or a tax on milk have a larger deadweight loss? Explain.

Correct Answer
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A tax on energy drinks would have a larg...
View Answer

When a tax is levied on a good, the buyers and sellers of the good share the burden,

Correct Answer
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Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2. The imposition of the tax causes the price paid by buyers to

Correct Answer
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Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. The equilibrium price before the tax is imposed is

Correct Answer
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Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, the

Correct Answer
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Figure 8-29 -Refer to Figure 8-29. As the size of the tax increases from $3 to $6 to $9, what happens to tax revenues?

Correct Answer
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When the tax is $3, tax revenue is $3 x ...
View Answer

A tax on a good causes the size of the market to increase.

Correct Answer
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Figure 8-18 -Refer to Figure 8-18. Suppose the government imposes a $1 tax in each of the four markets represented by supply curves S1, S2, S3, and S4. The deadweight will be the largest in the market represented by

Correct Answer
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Figure 8-13 -Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The amount of tax revenue collected by the government is

Correct Answer
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Figure 8-13 -Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The per-unit burden of the tax on sellers is

Correct Answer
verified

Correct Answer
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Suppose that the market for product X is characterized by a typical, downward-sloping, linear demand curve and a typical, upward-sloping, linear supply curve. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $4 tax per unit?

Correct Answer
verified
The deadweight loss will be $8...
View Answer

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. The loss in producer surplus caused by the tax is measured by the area

Correct Answer
verified

Figure 8-26 -Refer to Figure 8-26. How much is total surplus at the market equilibrium?

Correct Answer
verified
Total surplus is the sum of co...
View Answer

Other things equal, the deadweight loss of a tax

Correct Answer
verified

A tax on a good

Correct Answer
verified

The supply curve for motor oil is the typical upward-sloping straight line, and the demand curve for motor oil is the typical downward-sloping straight line. When motor oil is taxed, the area on the relevant supply-and-demand graph that represents the deadweight loss is

Correct Answer
verified

In which of the following instances would the deadweight loss of the tax on cartons of cigarettes increase by a factor of 9?

Correct Answer
verified

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 buyers effectively pay is

Correct Answer
verified

The amount of deadweight loss from a tax depends upon the

Correct Answer
verified

Exam 8: Application: the Costs of Taxation

The demand for energy drinks is more elastic than the demand for milk. Would a tax on energy drinks or a tax on milk have a larger deadweight loss? Explain.

Correct AnswerverifiedA tax on energy drinks would have a larg...View AnswerShow Answer

When a tax is levied on a good, the buyers and sellers of the good share the burden,

Correct AnswerverifiedShow Answer

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2. The imposition of the tax causes the price paid by buyers to

Correct AnswerverifiedShow Answer

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. The equilibrium price before the tax is imposed is

Correct AnswerverifiedShow Answer

Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, the

Correct AnswerverifiedShow Answer

Figure 8-29 -Refer to Figure 8-29. As the size of the tax increases from $3 to $6 to $9, what happens to tax revenues?

Correct AnswerverifiedWhen the tax is $3, tax revenue is $3 x ...View AnswerShow Answer

A tax on a good causes the size of the market to increase.

Correct AnswerverifiedShow Answer

Figure 8-18 -Refer to Figure 8-18. Suppose the government imposes a $1 tax in each of the four markets represented by supply curves S1, S2, S3, and S4. The deadweight will be the largest in the market represented by

Correct AnswerverifiedShow Answer

Figure 8-13 -Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The amount of tax revenue collected by the government is

Correct AnswerverifiedShow Answer

Figure 8-13 -Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The per-unit burden of the tax on sellers is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose that the market for product X is characterized by a typical, downward-sloping, linear demand curve and a typical, upward-sloping, linear supply curve. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $4 tax per unit?

Correct AnswerverifiedThe deadweight loss will be $8...View AnswerShow Answer

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. The loss in producer surplus caused by the tax is measured by the area

Correct AnswerverifiedShow Answer

Figure 8-26 -Refer to Figure 8-26. How much is total surplus at the market equilibrium?

Correct AnswerverifiedTotal surplus is the sum of co...View AnswerShow Answer

Other things equal, the deadweight loss of a tax

Correct AnswerverifiedShow Answer

A tax on a good

Correct AnswerverifiedShow Answer

The supply curve for motor oil is the typical upward-sloping straight line, and the demand curve for motor oil is the typical downward-sloping straight line. When motor oil is taxed, the area on the relevant supply-and-demand graph that represents the deadweight loss is

Correct AnswerverifiedShow Answer

In which of the following instances would the deadweight loss of the tax on cartons of cigarettes increase by a factor of 9?

Correct AnswerverifiedShow Answer

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 buyers effectively pay is

Correct AnswerverifiedShow Answer

The amount of deadweight loss from a tax depends upon the

Correct AnswerverifiedShow Answer

Correct Answer
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A tax on energy drinks would have a larg...
View Answer

Correct Answer
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When the tax is $3, tax revenue is $3 x ...
View Answer

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The deadweight loss will be $8...
View Answer

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Correct Answer
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Total surplus is the sum of co...
View Answer

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Correct Answer
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Correct Answer
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