Question 1

Figure 8-13 
-Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The tax causes the price received by sellers to

Accepted Answer

A)   decrease by $5.
B)   decrease by $3.
C)   decrease by $2.
D)   increase by $5.E) B) and C)
F) All of the above

Question 2

Tom walks Bethany's dog once a day for $50 per week. Bethany values this service at $60 per week, while the opportunity cost of Tom's time is $30 per week. The government places a tax of $35 per week on dog walkers. After the tax, what is the loss in total surplus?

Accepted Answer

A)   $50
B)   $30
C)   $25
D)   $0E) None of the above
F) A) and B)

Question 3

The Social Security tax is a labor tax.

Accepted Answer

A) True 
 B)False

Question 4

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 deadweight loss of the tax is

Accepted Answer

A)   [1/2 x P0-P5)  x Q5] + [1/2 x P5-0)  x Q5].
B)   [1/2 x P0-P2)  x Q2] +[P2-P8)  x Q2] + [1/2 x P8-0)  x Q2].
C)   P2-P8)  x Q2.
D)   1/2 x P2-P8)  x Q5-Q2) .E) C) and D)
F) B) and C)

Question 5

Figure 8-26 
-Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. What price will sellers receive for the good after the tax is imposed?

Accepted Answer

Sellers will receive...

Question 6

Suppose the demand curve and the supply curve in a market are both linear, and suppose the price elasticity of supply is 0.5. Will the deadweight loss from a $3 tax per unit be larger if the price elasticity of demand is 0.3 or if the price elasticity of demand is 0.7?

Accepted Answer

The deadweight loss ...

Question 7

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

Accepted Answer

A)   consumer surplus decreases by $11.
B)   producer surplus decreases by $11.
C)   the deadweight loss amounts to $6.
D)   All of the above are correct.E) A) and B)
F) All of the above

Question 8

In 2012, in The Wall Street Journal, economists Peter Diamond and Emmanuel Saez asserted the following:

Accepted Answer

A)   Since World War II, higher tax rates on individuals with the highest incomes tend to be associated with higher rates of economic growth - not with lower rates of economic growth.
B)   The average federal income tax rate on the top 1 percent of income-earners in the United States more than doubled between 1970 and 2010.
C)   A "reasonable" increase in the tax rate on top income earners is all that is needed to solve long­term fiscal problems faced by the United States.
D)   All of the above are correct.E) A) and C)
F) A) and D)

Question 9

Sellers of a product will bear the larger part of the tax burden, and buyers will bear a smaller part of the tax burden, when the

Accepted Answer

A)   tax is placed on the sellers of the product.
B)   tax is placed on the buyers of the product.
C)   supply of the product is more elastic than the demand for the product.
D)   demand for the product is more elastic than the supply of the product.E) All of the above
F) A) and B)

Question 10

The Social Security tax is a tax on

Accepted Answer

A)   capital.
B)   labor.
C)   land.
D)   savings.E) C) and D)
F) A) and B)

Question 11

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 sellers is

Accepted Answer

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

Question 12

The more elastic the supply, the larger the deadweight loss from a tax, all else equal.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is a tax on labor?

Accepted Answer

A)   Medicare tax
B)   Social Security tax
C)   federal income tax
D)   All of the above are labor taxes.E) A) and C)
F) A) and B)

Question 14

Relative to a situation in which gasoline is not taxed, the imposition of a tax on gasoline causes the quantity of gasoline demanded to

Accepted Answer

A)   decrease and the quantity of gasoline supplied to decrease.
B)   decrease and the quantity of gasoline supplied to increase.
C)   increase and the quantity of gasoline supplied to decrease.
D)   increase and the quantity of gasoline supplied to increase.E) A) and B)
F) A) and C)

Question 15

Economists use the government's tax revenue to measure the public benefit from a tax.

Accepted Answer

A) True 
 B)False

Question 16

When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic.

Accepted Answer

A) True 
 B)False

Question 17

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

Question 18

Figure 8-26 
-Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much is consumer surplus after the tax is imposed?

Accepted Answer

Consumer surplus is ...

Question 19

The amount of deadweight loss from a tax depends upon the

Accepted Answer

A)   price elasticity of demand.
B)   price elasticity of supply.
C)   amount of the tax per unit.
D)   All of the above are correct.E) None of the above
F) A) and C)

Question 20

Figure 8-6
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-6. When the tax is imposed in this market, the price sellers effectively receive is

Accepted Answer

A)   $4.
B)   $6.
C)   $10.
D)   $16.E) All of the above
F) A) and B)

Exam 8: Application: The Costs of Taxation

Which of the following is a tax on labor?

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Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. When the tax is imposed in this market, the price sellers effectively receive is

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Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. What price will sellers receive for the good after the tax is imposed?

Correct AnswerverifiedSellers will receive...View AnswerShow Answer

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

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In 2012, in The Wall Street Journal, economists Peter Diamond and Emmanuel Saez asserted the following:

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Tom walks Bethany's dog once a day for $50 per week. Bethany values this service at $60 per week, while the opportunity cost of Tom's time is $30 per week. The government places a tax of $35 per week on dog walkers. After the tax, what is the loss in total surplus?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Relative to a situation in which gasoline is not taxed, the imposition of a tax on gasoline causes the quantity of gasoline demanded to

Correct AnswerverifiedShow Answer

Figure 8-13 -Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The tax causes the price received by sellers to

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Economists use the government's tax revenue to measure the public benefit from a tax.

Correct AnswerverifiedShow Answer

The Social Security tax is a tax on

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Suppose the demand curve and the supply curve in a market are both linear, and suppose the price elasticity of supply is 0.5. Will the deadweight loss from a $3 tax per unit be larger if the price elasticity of demand is 0.3 or if the price elasticity of demand is 0.7?

Correct AnswerverifiedThe deadweight loss ...View AnswerShow Answer

The more elastic the supply, the larger the deadweight loss from a tax, all else equal.

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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 deadweight loss of the tax is

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The amount of deadweight loss from a tax depends upon the

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When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic.

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Sellers of a product will bear the larger part of the tax burden, and buyers will bear a smaller part of the tax burden, when the

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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 sellers is

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Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much is consumer surplus after the tax is imposed?

Correct AnswerverifiedConsumer surplus is ...View AnswerShow Answer

The Social Security tax is a labor tax.

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Sellers will receive...
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The deadweight loss ...
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Consumer surplus is ...
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