Question 1

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The loss of producer surplus as a result of the tax is

Accepted Answer

A)  $3,000.
B)  $6,000.
C)  $9,000.
D)  $12,000.E) C) and D)
F) A) and B)

Question 2

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

Question 3

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) B) and C)

Question 4

A tax is imposed on a certain good. The tax produces revenue of $5,000 for the government. The tax reduces consumer surplus by $3,000 and it reduces producer surplus by $4,000. What is the amount of the deadweight loss of the tax?

Accepted Answer

The deadweight loss ...

Question 5

Suppose a tax of $5 per unit is imposed on a good. The supply curve is a typical upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. The tax decreases consumer surplus by $10,000 and decreases producer surplus by $15,000. The deadweight loss of the tax is $2,500. The tax decreased the equilibrium quantity of the good from

Accepted Answer

A)  6,500 to 5,500.
B)  5,500 to 4,500.
C)  5,000 to 3,000.
D)  6,000 to 4,000.E) All of the above
F) A) and B)

Question 6

What happens to the total surplus in a market when the government imposes a tax?

Accepted Answer

A)  Total surplus increases by the amount of the tax.
B)  Total surplus increases but by less than the amount of the tax.
C)  Total surplus decreases.
D)  Total surplus is unaffected by the tax.E) A) and B)
F) C) and D)

Question 7

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

Accepted Answer

Producer surplus is ...

Question 8

With linear demand and supply curves in a market, suppose a tax of $0.20 per unit on a good creates a deadweight loss of $40. If the tax is increased to $0.50 per unit, the deadweight loss from the new tax will be

Accepted Answer

A)  $200.
B)  $250.
C)  $475.
D)  $625.E) B) and C)
F) A) and D)

Question 9

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

Question 10

Figure 8-1 
-Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. Total surplus before the tax is measured by the area

Accepted Answer

A)  I+Y.
B)  J+K+L+M.
C)  L+M+Y.
D)  I+J+K+L+M+Y.E) B) and D)
F) A) and D)

Question 11

It does not matter whether a tax is levied on the buyers or the sellers of a good because

Accepted Answer

A)  sellers always bear the full burden of the tax.
B)  buyers always bear the full burden of the tax.
C)  buyers and sellers will share the burden of the tax.
D)  None of the above is correct; the incidence of the tax does depend on whether the buyers or the sellers are required to pay the tax.E) All of the above
F) A) and D)

Question 12

Which of the following scenarios is not consistent with the Laffer curve?

Accepted Answer

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

Question 13

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. Suppose the price elasticity of supply is 0.7. Will the deadweight loss from a $3 tax per unit be smaller if the absolute value of the price elasticity of demand is 0.6 or if the absolute value of the price elasticity of demand is 1.5?

Accepted Answer

The deadweight loss will be smaller if t...

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 imposition of the tax causes the price paid by buyers to increase by

Accepted Answer

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

Question 15

Figure 8-7
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-7. The deadweight loss associated with this tax amounts to

Accepted Answer

A)  $80, and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses.
B)  $80, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers.
C)  $60, and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses.
D)  $60, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers.E) None of the above
F) B) and D)

Question 16

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 D)
F) None of the above

Question 17

Deadweight loss is the

Accepted Answer

A)  decline in total surplus that results from a tax.
B)  decline in government revenue when taxes are reduced in a market.
C)  decline in consumer surplus when a tax is placed on buyers.
D)  loss of profits to business firms when a tax is imposed.E) B) and D)
F) B) and C)

Question 18

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

Question 19

Taxes cause deadweight losses because they

Accepted Answer

A)  lead to losses in surplus for consumers and for producers that, when taken together, exceed tax revenue collected by the government.
B)  distort incentives to both buyers and sellers.
C)  prevent buyers and sellers from realizing some of the gains from trade.
D)  All of the above are correct.E) B) and C)
F) A) and D)

Question 20

Figure 8-22 
-Refer to Figure 8-22. Suppose the government changed the per-unit tax from $3.00 to $4.50. Compared to the original tax rate, this higher tax rate would

Accepted Answer

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

Exam 8: Application: The Costs of Taxation

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

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

Correct Answer
verified

It does not matter whether a tax is levied on the buyers or the sellers of a good because

Correct Answer
verified

With linear demand and supply curves in a market, suppose a tax of $0.20 per unit on a good creates a deadweight loss of $40. If the tax is increased to $0.50 per unit, the deadweight loss from the new tax will be

Correct Answer
verified

Which of the following scenarios is not consistent with the Laffer curve?

Correct Answer
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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. The deadweight loss associated with this tax amounts to

Correct Answer
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The benefit that government receives from a tax is measured by

Correct Answer
verified

Correct Answer
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Figure 8-1 -Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. Total surplus before the tax is measured by the area

Correct Answer
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Taxes cause deadweight losses because they

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

Correct Answer
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Producer surplus is ...
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A tax is imposed on a certain good. The tax produces revenue of $5,000 for the government. The tax reduces consumer surplus by $3,000 and it reduces producer surplus by $4,000. What is the amount of the deadweight loss of the tax?

Correct Answer
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The deadweight loss ...
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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 imposition of the tax causes the price paid by buyers to increase by

Correct Answer
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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 loss of producer surplus as a result of the tax is

Correct Answer
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Deadweight loss is the

Correct Answer
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What happens to the total surplus in a market when the government imposes a tax?

Correct Answer
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Figure 8-22 -Refer to Figure 8-22. Suppose the government changed the per-unit tax from $3.00 to $4.50. Compared to the original tax rate, this higher tax rate would

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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Correct Answer
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The deadweight loss will be smaller if t...
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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
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Exam 8: Application: The Costs of Taxation

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

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

Correct AnswerverifiedShow Answer

It does not matter whether a tax is levied on the buyers or the sellers of a good because

Correct AnswerverifiedShow Answer

With linear demand and supply curves in a market, suppose a tax of $0.20 per unit on a good creates a deadweight loss of $40. If the tax is increased to $0.50 per unit, the deadweight loss from the new tax will be

Correct AnswerverifiedShow Answer

Which of the following scenarios is not consistent with the Laffer curve?

Correct AnswerverifiedShow Answer

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7. The deadweight loss associated with this tax amounts to

Correct AnswerverifiedShow Answer

The benefit that government receives from a tax is measured by

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 8-1 -Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. Total surplus before the tax is measured by the area

Correct AnswerverifiedShow Answer

Taxes cause deadweight losses because they

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

Correct AnswerverifiedProducer surplus is ...View AnswerShow Answer

A tax is imposed on a certain good. The tax produces revenue of $5,000 for the government. The tax reduces consumer surplus by $3,000 and it reduces producer surplus by $4,000. What is the amount of the deadweight loss of the tax?

Correct AnswerverifiedThe deadweight loss ...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 imposition of the tax causes the price paid by buyers to increase by

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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 loss of producer surplus as a result of the tax is

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Deadweight loss is the

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What happens to the total surplus in a market when the government imposes a tax?

Correct AnswerverifiedShow Answer

Figure 8-22 -Refer to Figure 8-22. Suppose the government changed the per-unit tax from $3.00 to $4.50. Compared to the original tax rate, this higher tax rate would

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe deadweight loss will be smaller if t...View AnswerShow 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

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Producer surplus is ...
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The deadweight loss ...
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The deadweight loss will be smaller if t...
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