Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Figure 8-11
​
  ​
-Refer to Figure 8-11. Suppose that Market A is characterized by Demand 1 and Supply 1, and Market B is characterized by Demand 2 and Supply 1. If an identical tax is imposed on each market, the tax will create a larger deadweight loss in which market? Explain.

Accepted Answer

The deadweight loss will be larger in Ma...

Question 3

Scenario 8-1
Erin would be willing to pay as much as $100 per week to have her house cleaned. Ernesto's opportunity cost of cleaning Erin's house is $70 per week.
-Refer to Scenario 8-1. If Erin pays Ernesto $90 to clean her house, Erin's consumer surplus is

Accepted Answer

A)  $80.
B)  $30.
C)  $20.
D)  $10.E) All of the above
F) A) and B)

Question 4

Figure 8-9
​
  ​
-Refer to Figure 8-9. What are the equilibrium price and equilibrium quantity in this market?

Accepted Answer

The equilibrium pric...

Question 5

Figure 8-3
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-3. Which of the following statements is correct?

Accepted Answer

A)  The loss of producer surplus that is associated with some sellers dropping out of the market as a result of the tax is $60.
B)  The loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is $120.
C)  The loss of consumer surplus caused by this tax exceeds the loss of producer surplus caused by this tax.
D)  This tax produces $320 in tax revenue for the government.E) None of the above
F) All of the above

Question 6

Taxes on labor taxes may distort labor markets greatly if

Accepted Answer

A)  labor supply is highly inelastic.
B)  many workers choose to work 40 hours per week regardless of their earnings.
C)  the number of hours many part-time workers want to work is very sensitive to the wage rate.
D)  "underground" workers do not respond to changes in the wages of legal jobs because they prefer not to pay taxes.E) A) and D)
F) All of the above

Question 7

Describe the Laffer curve.

Accepted Answer

The Laffer curve depicts the r...

Question 8

Figure 8-9
​
  ​
-Refer to Figure 8-9. Suppose the government places a $4 tax per unit on this good. What price will consumers pay for the good after the tax is imposed?

Accepted Answer

Consumers will pay $...

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

If the government imposes a $3 tax in a market, the equilibrium price will rise by $3.

Accepted Answer

A) True 
 B)False

Question 11

The elasticities of the supply and demand curves in the market for cigarettes affect how much a tax distorts that market.

Accepted Answer

A) True 
 B)False

Question 12

Figure 8-10
​
  ​
-Refer to Figure 8-10. Suppose the government places a $3 tax per unit on this good. How much tax revenue is collected after the tax is imposed?

Accepted Answer

Total tax revenue is...

Question 13

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 14

Figure 8-13
 
-Refer to Figure 8-13. 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 15

Figure 8-10
​
  ​
-Refer to Figure 8-10. How much is producer surplus at the market equilibrium?

Accepted Answer

Producer surplus is ...

Question 16

Tax revenues increase in direct proportion to increases in the size of the tax.

Accepted Answer

A) True 
 B)False

Question 17

Figure 8-9
​
  ​
-Refer to Figure 8-9. Suppose the government places a $4 tax per unit on this good. How much is total surplus after the tax is imposed?

Accepted Answer

Total surp...

Question 18

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 19

Figure 8-2
The vertical distance between points C and D 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 $6.
B)  increase by $6.
C)  decrease by $4.
D)  increase by $4.E) B) and C)
F) B) and D)

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 8: Applications: The Costs of Taxation

Tax revenues increase in direct proportion to increases in the size of the tax.

Correct AnswerverifiedShow Answer

Describe the Laffer curve.

Correct AnswerverifiedThe Laffer curve depicts the r...View AnswerShow Answer

Figure 8-11 ​ ​ -Refer to Figure 8-11. Suppose that Market A is characterized by Demand 1 and Supply 1, and Market B is characterized by Demand 2 and Supply 1. If an identical tax is imposed on each market, the tax will create a larger deadweight loss in which market? Explain.

Correct AnswerverifiedThe deadweight loss will be larger in Ma...View AnswerShow Answer

Figure 8-13 -Refer to Figure 8-13. 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

Figure 8-9 ​ ​ -Refer to Figure 8-9. What are the equilibrium price and equilibrium quantity in this market?

Correct AnswerverifiedThe equilibrium pric...View AnswerShow Answer

Figure 8-9 ​ ​ -Refer to Figure 8-9. Suppose the government places a $4 tax per unit on this good. What price will consumers pay for the good after the tax is imposed?

Correct AnswerverifiedConsumers will pay $...View AnswerShow Answer

Figure 8-10 ​ ​ -Refer to Figure 8-10. How much is producer surplus at the market equilibrium?

Correct AnswerverifiedProducer surplus is ...View AnswerShow Answer

Figure 8-3 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-3. Which of the following statements is correct?

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

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If the government imposes a $3 tax in a market, the equilibrium price will rise by $3.

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

Correct AnswerverifiedShow Answer

Taxes on labor taxes may distort labor markets greatly if

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

The elasticities of the supply and demand curves in the market for cigarettes affect how much a tax distorts that market.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Scenario 8-1 Erin would be willing to pay as much as $100 per week to have her house cleaned. Ernesto's opportunity cost of cleaning Erin's house is $70 per week. -Refer to Scenario 8-1. If Erin pays Ernesto $90 to clean her house, Erin's consumer surplus is

Correct AnswerverifiedShow Answer

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 8-10 ​ ​ -Refer to Figure 8-10. Suppose the government places a $3 tax per unit on this good. How much tax revenue is collected after the tax is imposed?

Correct AnswerverifiedTotal tax revenue is...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Figure 8-9 ​ ​ -Refer to Figure 8-9. Suppose the government places a $4 tax per unit on this good. How much is total surplus after the tax is imposed?

Correct AnswerverifiedTotal surp...View AnswerShow Answer

Correct Answer
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Correct Answer
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The Laffer curve depicts the r...
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Figure 8-11 -Refer to Figure 8-11. Suppose that Market A is characterized by Demand 1 and Supply 1, and Market B is characterized by Demand 2 and Supply 1. If an identical tax is imposed on each market, the tax will create a larger deadweight loss in which market? Explain.

Correct Answer
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The deadweight loss will be larger in Ma...
View Answer

Correct Answer
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When the tax is $3, deadweight loss is 0...
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Figure 8-9 -Refer to Figure 8-9. What are the equilibrium price and equilibrium quantity in this market?

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The equilibrium pric...
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Figure 8-9 -Refer to Figure 8-9. Suppose the government places a $4 tax per unit on this good. What price will consumers pay for the good after the tax is imposed?

Correct Answer
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Consumers will pay $...
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Figure 8-10 -Refer to Figure 8-10. How much is producer surplus at the market equilibrium?

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Producer surplus is ...
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Correct Answer
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Figure 8-2 The vertical distance between points C and D 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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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The deadwe...
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Some labor economists believe that most ...
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Figure 8-10 -Refer to Figure 8-10. Suppose the government places a $3 tax per unit on this good. How much tax revenue is collected after the tax is imposed?

Correct Answer
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Total tax revenue is...
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Correct Answer
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Figure 8-9 -Refer to Figure 8-9. Suppose the government places a $4 tax per unit on this good. How much is total surplus after the tax is imposed?

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Total surp...
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