Question 1

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 inelastid.E) A) and D)
F) All of the above

Question 2

Taxes affect market participants by increasing the price paid by the buyer and received by the seller.

Accepted Answer

A) True 
 B)False

Question 3

Figure 8-12 
-Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The amount of deadweight loss resulting from this tax is

Accepted Answer

A)   $7.50.
B)   $15.00.
C)   $22.50.
D)   $45.00.E) None of the above
F) B) and C)

Question 4

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 $6 tax per unit?

Accepted Answer

The deadweight loss will be $1...

Question 5

Figure 8-19
The vertical distance between points A and B represents the original tax. 
-Refer to Figure 8-19. If the government changed the per-unit tax from $5.00 to $7.50, then the price paid by buyers would be $10.50, the price received by sellers would be $3, and the quantity sold in the market would be 0.5 units. Compared to the original tax rate, this higher tax rate would

Accepted Answer

A)   increase government revenue and increase the deadweight loss from the tax.
B)   increase government revenue and decrease the deadweight loss from the tax.
C)   decrease government revenue and increase the deadweight loss from the tax.
D)   decrease government revenue and decrease the deadweight loss from the tax.E) None of the above
F) B) and C)

Question 6

Which of the following ideas is the most plausible?

Accepted Answer

A)   Tax revenue is more likely to increase when a low tax rate is increased than when a high tax rate is increased.
B)   Tax revenue is less likely to increase when a low tax rate is increased than when a high tax rate is increased.
C)   Tax revenue is likely to increase by the same amount when a low tax rate is increased and when a high tax rate is increased.
D)   Decreasing a tax rate can never increase tax revenue.E) B) and C)
F) A) and C)

Question 7

Assume the price of gasoline is $2.00 per gallon, and the equilibrium quantity of gasoline is 10 million gallons per day with no tax on gasoline. Starting from this initial situation, which of the following scenarios would result in the largest deadweight loss?

Accepted Answer

A)   The price elasticity of demand for gasoline is 0.1; the price elasticity of supply for gasoline is 0.6; and the gasoline tax amounts to $0.20 per gallon.
B)   The price elasticity of demand for gasoline is 0.1; the price elasticity of supply for gasoline is 0.4; and the gasoline tax amounts to $0.20 per gallon.
C)   The price elasticity of demand for gasoline is 0.2; the price elasticity of supply for gasoline is 0.6; and the gasoline tax amounts to $0.30 per gallon.
D)   There is insufficient information to make this determination.E) A) and B)
F) A) and C)

Question 8

Normally, both buyers and sellers of a good become worse off when the good is taxed.

Accepted Answer

A) True 
 B)False

Question 9

Who once said that taxes are the price we pay for a civilized society?

Accepted Answer

A)   Milton Friedman
B)   Theodore Roosevelt
C)   Arthur Laffer
D)   Oliver Wendell Holmes, Jr.E) None of the above
F) All of the above

Question 10

The benefit that government receives from a tax is measured by

Accepted Answer

A)   the change in the equilibrium quantity of the good.
B)   the change in the equilibrium price of the good.
C)   tax revenue.
D)   total surplus.E) All of the above
F) None of the above

Question 11

Which of the following statements is correct?

Accepted Answer

A)   A decrease in the size of a tax always decreases the tax revenue raised by that tax.
B)   A decrease in the size of a tax always decreases the deadweight loss of that tax.
C)   Tax revenue decreases when there is a small decrease in the tax rate and the economy is on the downward- sloping part of the Laffer curve.
D)   An increase in the size of a tax leads to an increase in the deadweight loss of the tax only if the economy is on the upward-sloping part of the Laffer curve.E) A) and B)
F) All of the above

Question 12

Figure 8-15
 
-Refer to Figure 8-15. Panel (a)  and Panel (b)  each illustrate a $4 tax placed on a market. In comparison to Panel (a) , Panel (b)  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 inelastid.E) All of the above
F) A) and B)

Question 13

The result of the large tax cuts in the first Reagan Administration demonstrated very convincingly that Arthur Laffer was correct when he asserted that cuts in tax rates would increase tax revenue.

Accepted Answer

A) True 
 B)False

Question 14

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The amount of tax revenue received by the government is

Accepted Answer

A)   $4,000.
B)   $6,000.
C)   $10,000.
D)   $24,000.E) B) and D)
F) B) and C)

Question 15

Suppose the demand curve and the supply curve in a market are both linear. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $3 tax per unit?

Accepted Answer

The deadwe...

Question 16

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

Accepted Answer

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

Question 17

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 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) A) and C)
F) C) and D)

Question 19

If T represents the size of the tax on a good and Q represents the quantity of the good that is sold, total tax revenue received by government can be expressed as

Accepted Answer

A)   T/Q.
B)   T+Q.
C)   TxQ.
D)   (TxQ) /Q.E) A) and B)
F) None 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. Consumer surplus without the tax is

Accepted Answer

A)   $6, and consumer surplus with the tax is $1.50.
B)   $6, and consumer surplus with the tax is $4.50.
C)   $10, and consumer surplus with the tax is $1.50.
D)   $10, and consumer surplus with the tax is $4.50.E) C) and D)
F) B) and D)

Exam 8: Application: The Costs of Taxation

The result of the large tax cuts in the first Reagan Administration demonstrated very convincingly that Arthur Laffer was correct when he asserted that cuts in tax rates would increase tax revenue.

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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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 $6 tax per unit?

Correct Answer
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The deadweight loss will be $1...
View Answer

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The amount of tax revenue received by the government is

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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Who once said that taxes are the price we pay for a civilized society?

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

Correct Answer
verified

Normally, both buyers and sellers of a good become worse off when the good is taxed.

Correct Answer
verified

Figure 8-15 -Refer to Figure 8-15. Panel (a) and Panel (b) each illustrate a $4 tax placed on a market. In comparison to Panel (a) , Panel (b) illustrates which of the following statements?

Correct Answer
verified

The benefit that government receives from a tax is measured by

Correct Answer
verified

Figure 8-12 -Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The amount of deadweight loss resulting from this tax is

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. Consumer surplus without the tax is

Correct Answer
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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 M represents

Correct Answer
verified

Assume the price of gasoline is $2.00 per gallon, and the equilibrium quantity of gasoline is 10 million gallons per day with no tax on gasoline. Starting from this initial situation, which of the following scenarios would result in the largest deadweight loss?

Correct Answer
verified

Taxes affect market participants by increasing the price paid by the buyer and received by the seller.

Correct Answer
verified

Suppose the demand curve and the supply curve in a market are both linear. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $3 tax per unit?

Correct Answer
verified
The deadwe...
View Answer

If T represents the size of the tax on a good and Q represents the quantity of the good that is sold, total tax revenue received by government can be expressed as

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

Which of the following ideas is the most plausible?

Correct Answer
verified

Exam 8: Application: The Costs of Taxation

The result of the large tax cuts in the first Reagan Administration demonstrated very convincingly that Arthur Laffer was correct when he asserted that cuts in tax rates would increase tax revenue.

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 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 $6 tax per unit?

Correct AnswerverifiedThe deadweight loss will be $1...View AnswerShow Answer

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The amount of tax revenue received by the government is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Who once said that taxes are the price we pay for a civilized society?

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

Correct AnswerverifiedShow Answer

Normally, both buyers and sellers of a good become worse off when the good is taxed.

Correct AnswerverifiedShow Answer

Figure 8-15 -Refer to Figure 8-15. Panel (a) and Panel (b) each illustrate a $4 tax placed on a market. In comparison to Panel (a) , Panel (b) illustrates which of the following statements?

Correct AnswerverifiedShow Answer

The benefit that government receives from a tax is measured by

Correct AnswerverifiedShow Answer

Figure 8-12 -Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The amount of deadweight loss resulting from this tax is

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. Consumer surplus without the tax is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Assume the price of gasoline is $2.00 per gallon, and the equilibrium quantity of gasoline is 10 million gallons per day with no tax on gasoline. Starting from this initial situation, which of the following scenarios would result in the largest deadweight loss?

Correct AnswerverifiedShow Answer

Taxes affect market participants by increasing the price paid by the buyer and received by the seller.

Correct AnswerverifiedShow Answer

Suppose the demand curve and the supply curve in a market are both linear. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $3 tax per unit?

Correct AnswerverifiedThe deadwe...View AnswerShow Answer

If T represents the size of the tax on a good and Q represents the quantity of the good that is sold, total tax revenue received by government can be expressed as

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Which of the following ideas is the most plausible?

Correct AnswerverifiedShow Answer

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The deadweight loss will be $1...
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The deadwe...
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