Question 1

Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, the

Accepted Answer

A)   less elastic is the demand for the good.
B)   less elastic is the supply of the good.
C)   smaller is the amount of the tax.
D)   All of the above are correct.E) None of the above
F) C) and D)

Question 2

The decrease in total surplus that results from a market distortion, such as a tax, is called a

Accepted Answer

A)   wedge loss.
B)   revenue loss.
C)   deadweight loss.
D)   consumer surplus loss.E) A) and C)
F) A) and B)

Question 3

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 amount of deadweight loss as a result of the tax is

Accepted Answer

A)   $4,000.
B)   $5,000.
C)   $6,000.
D)   $10,000.E) None of the above
F) A) and D)

Question 4

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) C) and D)

Question 5

Figure 8-23. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. 
-Refer to Figure 8-23. The curve that is shown on the figure is called the

Accepted Answer

A)   deadweight-loss curve.
B)   tax-incidence curve.
C)   Laffer curve.
D)   Lorenz curve.E) B) and C)
F) None of the above

Question 6

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

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

Question 8

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

Question 9

Suppose a tax of $3 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 $3,900 and decreases producer surplus by $3,000. The tax generates tax revenue of $6,000. The tax decreased the equilibrium quantity of the good from

Accepted Answer

A)   2,000 to 1,500.
B)   2,400 to 2,000.
C)   2,600 to 2,000.
D)   3,000 to 2,400.E) All of the above
F) A) and B)

Question 10

A tax levied on the sellers of a good shifts the

Accepted Answer

A)   supply curve upward or to the left) .
B)   supply curve downward or to the right) .
C)   demand curve upward or to the right) .
D)   demand curve downward or to the left) .E) A) and C)
F) None of the above

Question 11

The government's benefit from a tax can be measured by

Accepted Answer

A)   consumer surplus.
B)   producer surplus.
C)   tax revenue.
D)   All of the above are correct.E) None of the above
F) C) and D)

Question 12

Figure 8-26 
-Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much is the deadweight loss from this tax?

Accepted Answer

The deadweight loss from this tax is 0.5...

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

The price elasticities of supply and demand affect

Accepted Answer

A)   both the size of the deadweight loss from a tax and the tax incidence.
B)   the size of the deadweight loss from a tax but not the tax incidence.
C)   the tax incidence but not the size of the deadweight loss from a tax.
D)   neither the size of the deadweight loss from a tax nor the tax incidence.E) A) and B)
F) A) and C)

Question 15

Figure 8-25 
-Refer to Figure 8-25. 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 16

When a tax is imposed on a good, the

Accepted Answer

A)   supply curve for the good always shifts.
B)   demand curve for the good always shifts.
C)   amount of the good that buyers are willing to buy at each price always remains unchanged.
D)   equilibrium quantity of the good always decreases.E) A) and B)
F) B) and C)

Question 17

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The equilibrium price and quantity before the imposition of the tax is

Accepted Answer

A)   P=$800 and Q=20.
B)   P=$600 and Q=20.
C)   P=$300 and Q=20.
D)   P=$600 and Q=40.E) B) and C)
F) A) and D)

Question 18

Assume the supply curve for diapers is a typical, upward-sloping straight line, and the demand curve for diapers is a typical, downward-sloping straight line. Suppose the equilibrium quantity in the market for diapers is 1,000 per month when there is no tax. Then a tax of $0.50 per diaper is imposed. The effective price paid by buyers increases from $1.50 to $1.90 and the effective price received by sellers falls from $1.50 to $1.40. The government's tax revenue amounts to $475 per month. Which of the following statements is correct?

Accepted Answer

A)   After the tax is imposed, the equilibrium quantity of diapers is 900 per month.
B)   The demand for diapers is more elastic than the supply of diapers.
C)   The deadweight loss of the tax is $12.50.
D)   The tax causes a decrease in consumer surplus of $380.E) None of the above
F) B) and C)

Question 19

Figure 8-25 
-Refer to Figure 8-25. Suppose the government places a $4 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 20

The more inelastic are demand and supply, the greater is the deadweight loss of a tax.

Accepted Answer

A) True 
 B)False

Exam 8: Application: the Costs of Taxation

When a tax is imposed on a good, the

Correct Answer
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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 the deadweight loss from this tax?

Correct Answer
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The deadweight loss from this tax is 0.5...
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Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, the

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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If the size of a tax increases, tax revenue

Correct Answer
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The more inelastic are demand and supply, the greater is the deadweight loss of a tax.

Correct Answer
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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
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Figure 8-25 -Refer to Figure 8-25. 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 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The amount of amount of deadweight loss as a result of the tax is

Correct Answer
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Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. What price will sellers receive for the good after the tax is imposed?

Correct Answer
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Sellers will receive...
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The government's benefit from a tax can be measured by

Correct Answer
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The price elasticities of supply and demand affect

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 equilibrium price and quantity before the imposition of the tax is

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

Correct Answer
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A tax levied on the sellers of a good shifts the

Correct Answer
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Figure 8-23. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-23. The curve that is shown on the figure is called the

Correct Answer
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The decrease in total surplus that results from a market distortion, such as a tax, is called a

Correct Answer
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Correct Answer
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Exam 8: Application: the Costs of Taxation

When a tax is imposed on a good, the

Correct AnswerverifiedShow Answer

Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much is the deadweight loss from this tax?

Correct AnswerverifiedThe deadweight loss from this tax is 0.5...View AnswerShow Answer

Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, the

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

If the size of a tax increases, tax revenue

Correct AnswerverifiedShow Answer

The more inelastic are demand and supply, the greater is the deadweight loss of a tax.

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

Correct AnswerverifiedShow Answer

Figure 8-25 -Refer to Figure 8-25. 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 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The amount of amount of deadweight loss as a result of the tax is

Correct AnswerverifiedShow Answer

Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 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

The government's benefit from a tax can be measured by

Correct AnswerverifiedShow Answer

The price elasticities of supply and demand affect

Correct AnswerverifiedShow Answer

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The equilibrium price and quantity before the imposition of the tax is

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

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

Correct AnswerverifiedShow Answer

A tax levied on the sellers of a good shifts the

Correct AnswerverifiedShow Answer

Figure 8-23. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-23. The curve that is shown on the figure is called the

Correct AnswerverifiedShow Answer

The decrease in total surplus that results from a market distortion, such as a tax, is called a

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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The deadweight loss from this tax is 0.5...
View Answer

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Consumers will pay $...
View Answer

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Sellers will receive...
View Answer

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