Question 1

The Social Security tax, and to a large extent, the federal income tax, are labor taxes.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following scenarios is consistent with the Laffer curve?

Accepted Answer

A)   The tax rate is 1 percent, and tax revenue is very low.
B)   The tax rate is 1 percent, and tax revenue is very high.
C)   The tax rate is 99 percent, and tax revenue is very high.
D)   The tax rate is moderate (between very high and very low) , and tax revenue is very low.E) A) and C)
F) C) and D)

Question 3

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

Accepted Answer

When the tax is $3, deadweight loss is 0...

Question 4

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The per-unit burden of the tax on buyers is

Accepted Answer

A)   $20.
B)   $200.
C)   $300.
D)   $500.E) B) and C)
F) C) and D)

Question 5

In the early 1980s, which of the following countries had a marginal tax rate of about 80 percent?

Accepted Answer

A)   United States
B)   Canada
C)   Japan
D)   SwedenE) B) and C)
F) None of the above

Question 6

For a good that is taxed, the area on the relevant supply­and­demand graph that represents government's tax revenue is

Accepted Answer

A)   smaller than the area that represents the loss of consumer surplus and producer surplus caused by the tax.
B)   bounded by the supply curve, the demand curve, the effective price paid by buyers, and the effective price received by sellers.
C)   a right triangle.
D)   a triangle, but not necessarily a right triangle.E) A) and B)
F) B) and C)

Question 7

Figure 8-22 
-Refer to Figure 8-22. Suppose the government initially imposes a $3 per-unit tax on this good. Now suppose the government is deciding whether to lower the tax to $1.50 or raise it to $4.50. Which of the following statements is not correct?

Accepted Answer

A)   Compared to the original tax, the larger tax will decrease tax revenue.
B)   Compared to the original tax, the smaller tax will decrease deadweight loss.
C)   Compared to the original tax, the smaller tax will decrease tax revenue.
D)   Compared to the original tax, the larger tax will increase deadweight loss.E) A) and D)
F) A) and C)

Question 8

Is the United States' labor supply more inelastic or more elastic? Briefly summarize the competing theories.

Accepted Answer

Some labor economists believe that most ...

Question 9

If the tax on a good is tripled, the deadweight loss of the tax

Accepted Answer

A)   remains constant.
B)   triples.
C)   increases by a factor of 9.
D)   increases by a factor of 12.E) B) and C)
F) All of the above

Question 10

If a tax did not induce buyers or sellers to change their behavior, it would not cause a deadweight loss.

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 deadweight loss as a result of the tax is

Accepted Answer

A)   $2.50.
B)   $5.
C)   $7.50.
D)   $10.E) None of the above
F) B) and C)

Question 12

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 13

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

Accepted Answer

A) True 
 B)False

Question 14

Figure 8-26 
-Refer to Figure 8-26. Suppose the government places a $3 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 15

Figure 8-11 
-Refer to Figure 8-11. The size of the tax is represented by the

Accepted Answer

A)   length of the line segment connecting points A and B.
B)   length of the line segment connecting points A and C.
C)   length of the line segment connecting points B and C.
D)   area of the triangle bounded by the points A, B, and C.E) A) and B)
F) All of the above

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

Question 17

When a tax is imposed on buyers, consumer surplus and producer surplus both decrease.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A)   The tax on airline tickets increases from $20 per ticket to $60 per ticket.
B)   The tax on airline tickets increases from $20 per ticket to $90 per ticket.
C)   The tax on airline tickets increases from $15 per ticket to $60 per ticket.
D)   The tax on airline tickets increases from $15 per ticket to $135 per ticket.E) B) and D)
F) All of the above

Question 19

When a tax is imposed on the buyers of a good, the demand curve shifts

Accepted Answer

A)   downward by the amount of the tax.
B)   upward by the amount of the tax.
C)   downward by less than the amount of the tax.
D)   upward by more than the amount of the tax.E) C) and D)
F) All of the above

Question 20

A decrease in the size of a tax is most likely to increase tax revenue in a market with

Accepted Answer

A)   elastic demand and elastic supply.
B)   elastic demand and inelastic supply.
C)   inelastic demand and elastic supply.
D)   inelastic demand and inelastic supply.E) B) and C)
F) A) and B)

Exam 8: Application: the Costs of Taxation

For a good that is taxed, the area on the relevant supply­and­demand graph that represents government's tax revenue is

Correct AnswerverifiedShow 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 price that sellers receive is

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If a tax did not induce buyers or sellers to change their behavior, it would not cause a deadweight loss.

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Is the United States' labor supply more inelastic or more elastic? Briefly summarize the competing theories.

Correct AnswerverifiedSome labor economists believe that most ...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 deadweight loss as a result of the tax is

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In the early 1980s, which of the following countries had a marginal tax rate of about 80 percent?

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Which of the following scenarios is consistent with the Laffer curve?

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

Correct AnswerverifiedWhen the tax is $3, deadweight loss is 0...View AnswerShow Answer

The Social Security tax, and to a large extent, the federal income tax, are labor taxes.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 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 8-11 -Refer to Figure 8-11. The size of the tax is represented by the

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

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When a tax is imposed on buyers, consumer surplus and producer surplus both decrease.

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A decrease in the size of a tax is most likely to increase tax revenue in a market with

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When a tax is imposed on the buyers of a good, the demand curve shifts

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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 per-unit burden of the tax on buyers is

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If the tax on a good is tripled, the deadweight loss of the tax

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Figure 8-22 -Refer to Figure 8-22. Suppose the government initially imposes a $3 per-unit tax on this good. Now suppose the government is deciding whether to lower the tax to $1.50 or raise it to $4.50. Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

For a good that is taxed, the area on the relevant supplyanddemand graph that represents government's tax revenue is

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Some labor economists believe that most ...
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When the tax is $3, deadweight loss is 0...
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60 units will be bou...
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