Question 1

Figure 8-5
Suppose that the government imposes a tax of P3 - P1. 
-Refer to Figure 8-5.The benefit to the government is measured by

Accepted Answer

A)   tax revenue and is represented by area A+B.
B)   tax revenue and is represented by area B+D.
C)   the net gain in total surplus and is represented by area B+D.
D)   the net gain in total surplus and is represented by area C+H.E) A) and D)
F) C) and D)

Question 2

Figure 8-5
Suppose that the government imposes a tax of P3 - P1. 
-Refer to Figure 8-5.The tax causes a reduction in producer surplus that is represented by area

Accepted Answer

A)   A.
B)   C+H.
C)   D+H.
D)   F.E) B) and D)
F) A) and D)

Question 3

Figure 8-8
Suppose the government imposes a $10 per unit tax on a good. 
-Refer to Figure 8-8.After the tax goes into effect,producer surplus is the area

Accepted Answer

A)   D+F+G+H+J.
B)   D+F+G+H.
C)   D+F+J.
D)   J.E) A) and B)
F) A) and D)

Question 4

Figure 8-11 1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10.Then the deadweight loss of the tax is A)  $6. B)  $8. C)  $9. D)  $12." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 8-11.Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10.Then the deadweight loss of the tax is

Accepted Answer

A)   $6.
B)   $8.
C)   $9.
D)   $12.E) All of the above
F) B) and D)

Question 5

Which of the following tools help us evaluate how taxes affect economic well-being? (i) consumer surplus
(ii) producer surplus
(iii) tax revenue
(iv) 
Deadweight loss

Accepted Answer

A)   (i) and (ii) only
B)   (i) ,(ii) ,and (iii) only
C)   (iii) and (iv) only
D)   (i) ,(ii) ,(iii) ,and (iv) E) A) and D)
F) All of the above

Question 6

Figure 8-9
The vertical distance between points A and C represent a tax in the market. 
-Refer to Figure 8-9.The consumer surplus without the tax is

Accepted Answer

A)   $2,000.
B)   $5,000.
C)   $8,000.
D)   $16,000.E) A) and D)
F) None of the above

Question 7

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

Accepted Answer

A)   Aristotle
B)   George Washington
C)   Oliver Wendell Holmes,Jr.
D)   Ronald ReaganE) A) and D)
F) A) and B)

Question 8

Taxes cause deadweight losses because taxes

Accepted Answer

A)   reduce the sum of producer and consumer surpluses by more than the amount of tax revenue.
B)   prevent buyers and sellers from realizing some of the gains from trade.
C)   cause marginal buyers and marginal sellers to leave the market,causing the quantity sold to fall.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 9

The optimal tax is difficult to determine because although revenues rise and fall as the size of the tax increases,deadweight loss continues to increase.

Accepted Answer

A) True 
 B)False

Question 10

Suppose that instead of a supply-demand diagram,you are given the following information:
Qs = 100 + 3P
Qd = 400 - 2P
From this information compute equilibrium price and quantity.Now suppose that a tax is placed on buyers so that
Qd = 400 - 2(P + T).
If T = 15,solve for the new equilibrium price and quantity.(Note: P is the price received by sellers and P + T is the price paid by buyers.)Compare these answers for equilibrium price and quantity with your first answers.What does this show you?

Accepted Answer

Prior to the tax,the equilibrium price w...

Question 11

The demand for potted plants is more elastic than the demand for wallpaper.Suppose the government levies an equivalent tax on potted plants and wallpaper.The deadweight loss would be larger in the market for

Accepted Answer

A)   potted plants than in the market for wallpaper because the quantity of potted plants would fall by more than the quantity of wallpaper.
B)   potted plants than in the market for wallpaper because the quantity of wallpaper would fall by more than the quantity of potted plants.
C)   wallpaper than in the market for potted plants because the quantity of potted plants would fall by more than the quantity of wallpaper.
D)   wallpaper than in the market for potted plants because the quantity of wallpaper would fall by more than the quantity of potted plants.E) B) and C)
F) C) and D)

Question 12

For a good that is taxed,the area on the relevant supply-and-demand 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 C)
F) All of the above

Question 13

Scenario 8-2
Tom mows Stephanie's lawn for $25.Tom's opportunity cost of mowing Stephanie's lawn is $20,and Stephanie's willingness to pay Tom to mow her lawn is $28.
-Refer to Scenario 8-2.Assume Tom is required to pay a tax of $10 each time he mows a lawn.Which of the following results is most likely?

Accepted Answer

A)   Stephanie now will decide to mow her own lawn,and Tom will decide it is no longer in his interest to mow Stephanie's lawn.
B)   Stephanie still is willing to pay Tom to mow her lawn,but Tom will decline her offer.
C)   Tom still is willing to mow Stephanie's lawn,but Stephanie will decide to mow her own lawn.
D)   Tom and Stephanie still can engage in a mutually-agreeable trade.E) A) and B)
F) B) and C)

Question 14

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

Question 15

Which of the following quantities decrease in response to a tax on a good?

Accepted Answer

A)   the equilibrium quantity in the market for the good,the effective price of the good paid by buyers,and consumer surplus
B)   the equilibrium quantity in the market for the good,producer surplus,and the well-being of buyers of the good
C)   the effective price received by sellers of the good,the wedge between the effective price paid by buyers and the effective price received by sellers,and consumer surplus
D)   None of the above is necessarily correct unless we know whether the tax is levied on buyers or on sellers.E) A) and B)
F) All of the above

Question 16

Figure 8-14  
-Refer to Figure 8-14.Panel (a) and Panel (b) each illustrate a $2 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 inelastic.E) B) and D)
F) B) and C)

Question 17

When a tax is imposed on sellers,producer surplus decreases but consumer surplus increases.

Accepted Answer

A) True 
 B)False

Question 18

Taxes on labor encourage all of the following except

Accepted Answer

A)   older workers to take early retirement from the labor force.
B)   mothers to stay at home rather than work in the labor force.
C)   workers to work overtime.
D)   people to be paid "under the table."E) B) and C)
F) B) and D)

Question 19

When a tax is placed on the buyers of a product,a result is that buyers effectively pay

Accepted Answer

A)   less than before the tax,and sellers effectively receive less than before the tax.
B)   less than before the tax,and sellers effectively receive more than before the tax.
C)   more than before the tax,and sellers effectively receive less than before the tax.
D)   more than before the tax,and sellers effectively receive more than before the tax.E) A) and B)
F) None of the above

Question 20

If the size of a tax increases,tax revenue

Accepted Answer

A)   increases.
B)   decreases.
C)   remains the same.
D)   may increase,decrease,or remain the same.E) None of the above
F) A) and C)

Exam 8: Application: the Costs of Taxation

Figure 8-14 -Refer to Figure 8-14.Panel (a) and Panel (b) each illustrate a $2 tax placed on a market.In comparison to Panel (a) ,Panel (b) illustrates which of the following statements?

Correct Answer
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Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8.After the tax goes into effect,producer surplus is the area

Correct Answer
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Which of the following quantities decrease in response to a tax on a good?

Correct Answer
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When a tax is imposed on sellers,producer surplus decreases but consumer surplus increases.

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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The optimal tax is difficult to determine because although revenues rise and fall as the size of the tax increases,deadweight loss continues to increase.

Correct Answer
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Correct Answer
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Prior to the tax,the equilibrium price w...
View Answer

Which of the following tools help us evaluate how taxes affect economic well-being? (i) consumer surplus (ii) producer surplus (iii) tax revenue (iv) Deadweight loss

Correct Answer
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Figure 8-11 -Refer to Figure 8-11.Suppose Q₁ = 4; Q₂ = 7; P₁ = $6; P₂ = $8; and P₃= $10.Then the deadweight loss of the tax is

Correct Answer
verified

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

Correct Answer
verified

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The benefit to the government is measured by

Correct Answer
verified

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

Correct Answer
verified

The demand for potted plants is more elastic than the demand for wallpaper.Suppose the government levies an equivalent tax on potted plants and wallpaper.The deadweight loss would be larger in the market for

Correct Answer
verified

Taxes on labor encourage all of the following except

Correct Answer
verified

Taxes cause deadweight losses because taxes

Correct Answer
verified

Figure 8-9 The vertical distance between points A and C represent a tax in the market. -Refer to Figure 8-9.The consumer surplus without the tax is

Correct Answer
verified

Correct Answer
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If the size of a tax increases,tax revenue

Correct Answer
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When a tax is placed on the buyers of a product,a result is that buyers effectively pay

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 tax causes a reduction in producer surplus that is represented by area

Correct Answer
verified

Exam 8: Application: the Costs of Taxation

Figure 8-14 -Refer to Figure 8-14.Panel (a) and Panel (b) each illustrate a $2 tax placed on a market.In comparison to Panel (a) ,Panel (b) illustrates which of the following statements?

Correct AnswerverifiedShow Answer

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8.After the tax goes into effect,producer surplus is the area

Correct AnswerverifiedShow Answer

Which of the following quantities decrease in response to a tax on a good?

Correct AnswerverifiedShow Answer

When a tax is imposed on sellers,producer surplus decreases but consumer surplus increases.

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

The optimal tax is difficult to determine because although revenues rise and fall as the size of the tax increases,deadweight loss continues to increase.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedPrior to the tax,the equilibrium price w...View AnswerShow Answer

Which of the following tools help us evaluate how taxes affect economic well-being? (i) consumer surplus (ii) producer surplus (iii) tax revenue (iv) Deadweight loss

Correct AnswerverifiedShow Answer

Figure 8-11 -Refer to Figure 8-11.Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10.Then the deadweight loss of the tax is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The benefit to the government is measured by

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The demand for potted plants is more elastic than the demand for wallpaper.Suppose the government levies an equivalent tax on potted plants and wallpaper.The deadweight loss would be larger in the market for

Correct AnswerverifiedShow Answer

Taxes on labor encourage all of the following except

Correct AnswerverifiedShow Answer

Taxes cause deadweight losses because taxes

Correct AnswerverifiedShow Answer

Figure 8-9 The vertical distance between points A and C represent a tax in the market. -Refer to Figure 8-9.The consumer surplus without the tax is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the size of a tax increases,tax revenue

Correct AnswerverifiedShow Answer

When a tax is placed on the buyers of a product,a result is that buyers effectively pay

Correct AnswerverifiedShow Answer

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The tax causes a reduction in producer surplus that is represented by area

Correct AnswerverifiedShow Answer

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Prior to the tax,the equilibrium price w...
View Answer

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Figure 8-11 -Refer to Figure 8-11.Suppose Q₁ = 4; Q₂ = 7; P₁ = $6; P₂ = $8; and P₃= $10.Then the deadweight loss of the tax is

Correct Answer
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