Question 1

Figure 8-17
The vertical distance between points A and B represents the original tax. 
-Refer to Figure 8-17.The original tax can be represented by the vertical distance AB.Suppose the government is deciding whether to lower the tax to CD or raise it to FG.Which of the following statements is correct?

Accepted Answer

A)   Compared to the original tax,the larger tax will decrease both tax revenue and deadweight loss.
B)   Compared to the original tax,the smaller tax will increase both tax revenue and deadweight loss.
C)   Compared to the original tax,the larger tax will decrease tax revenue and increase deadweight loss.
D)   Both a and b are correct.E) A) and C)
F) B) and D)

Question 2

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

Question 3

The supply curve for liquor is the typical upward-sloping straight line,and the demand curve for liquor is the typical downward-sloping straight line.When liquor is taxed,the area on the relevant supply-and-demand graph that represents the deadweight loss is

Accepted Answer

A)   larger than the area that represents consumer surplus in the absence of the tax.
B)   larger than the area that represents government's tax revenue.
C)   a triangle.
D)   All of the above are correct.E) B) and C)
F) A) and D)

Question 4

Figure 8-18    
-Refer to Figure 8-18.Which graph correctly illustrates the relationship between the size of a tax and the size of the deadweight loss associated with the tax?

Accepted Answer

A)   Panel (a) 
B)   Panel (b) 
C)   Panel (c) 
D)   Panel (d) E) B) and C)
F) A) and B)

Question 5

Figure 8-3 
-Refer to Figure 8-3.Suppose the government places a $4 tax per unit on this good.How much is consumer surplus after the tax is imposed?

Accepted Answer

Consumer s...

Question 6

When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic,

Accepted Answer

A)   buyers of the good will bear most of the burden of the tax.
B)   sellers of the good will bear most of the burden of the tax.
C)   buyers and sellers will each bear 50 percent of the burden of the tax.
D)   both equilibrium price and quantity will increase.E) B) and D)
F) A) and B)

Question 7

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,consumer surplus is the area

Accepted Answer

A)   A.
B)   B+C.
C)   A+B+C.
D)   A+B+D+J+K.E) A) and B)
F) B) and C)

Question 8

Assume that for good X the supply curve for a good is a typical,upward-sloping straight line,and the demand curve is a typical downward-sloping straight line.If the good is taxed,and the tax is doubled,the

Accepted Answer

A)   base of the triangle that represents the deadweight loss quadruples.
B)   height of the triangle that represents the deadweight loss doubles.
C)   deadweight loss of the tax doubles.
D)   All of the above are correct.E) B) and D)
F) A) and D)

Question 9

Total surplus with a tax is equal to

Accepted Answer

A)   consumer surplus plus producer surplus.
B)   consumer surplus minus producer surplus.
C)   consumer surplus plus producer surplus minus tax revenue.
D)   consumer surplus plus producer surplus plus tax revenue.E) B) and C)
F) B) and D)

Question 10

When a good is taxed,the burden of the tax

Accepted Answer

A)   falls more heavily on the side of the market that is more elastic.
B)   falls more heavily on the side of the market that is more inelastic.
C)   falls more heavily on the side of the market that is closer to unit elastic.
D)   is distributed independently of relative elasticities of supply and demand.E) All of the above
F) A) and D)

Question 11

Figure 8-9
The vertical distance between points A and C represent 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) A) and B)
F) A) and C)

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

To fully understand how taxes affect economic well-being,we must compare the

Accepted Answer

A)   benefit to buyers with the loss to sellers.
B)   price paid by buyers to the price received by sellers.
C)   profits earned by firms to the losses incurred by consumers.
D)   decrease in total surplus to the increase in revenue raised by the government.E) None of the above
F) A) and D)

Question 14

Figure 8-3
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-3.The amount of tax revenue received by the government is equal to the area

Accepted Answer

A)   P3ACP1.
B)   ABC.
C)   P2DAP3.
D)   P1CDP2.E) A) and C)
F) C) and D)

Question 15

The amount of deadweight loss that results from a tax of a given size is determined by

Accepted Answer

A)   whether the tax is levied on buyers or sellers.
B)   the number of buyers in the market relative to the number of sellers.
C)   the price elasticities of demand and supply.
D)   the ratio of the tax per unit to the effective price received by sellers.E) All of the above
F) A) and C)

Question 16

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) None of the above

Question 17

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 received by sellers to

Accepted Answer

A)   decrease by $2.
B)   increase by $3.
C)   decrease by $4.
D)   increase by $5.E) All of the above
F) C) and D)

Question 18

Figure 8-19.The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. 
-Refer to Figure 8-19.According to a recent research paper published by the European Central Bank,the U.S.

Accepted Answer

A)   is more likely at a point such as point A rather than point B if the tax in question is the tax on capital income.
B)   is more likely at a point such as point B rather than point A if the tax in question is the tax on labor income.
C)   could increase tax revenues more by raising taxes on capital income than by raising taxes on labor income.
D)   All of the above are correct.E) B) and C)
F) B) and D)

Question 19

Figure 8-9
The vertical distance between points A and C represent a tax in the market. 
-Refer to Figure 8-9.The amount of the tax on each unit of the good is

Accepted Answer

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

Question 20

Figure 8-5
Suppose that the government imposes a tax of P3 - P1. 
-Refer to Figure 8-5.The price that buyers effectively pay after the tax is imposed is

Accepted Answer

A)   P1.
B)   P2.
C)   P3.
D)   P4.E) None of the above
F) A) and D)

Exam 8: Application: The Costs of Taxation

The amount of deadweight loss that results from a tax of a given size is determined by

Correct Answer
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Figure 8-18 -Refer to Figure 8-18.Which graph correctly illustrates the relationship between the size of a tax and the size of the deadweight loss associated with the tax?

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,consumer surplus is the area

Correct Answer
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The supply curve for liquor is the typical upward-sloping straight line,and the demand curve for liquor is the typical downward-sloping straight line.When liquor is taxed,the area on the relevant supply-and-demand graph that represents the deadweight loss is

Correct Answer
verified

Figure 8-19.The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-19.According to a recent research paper published by the European Central Bank,the U.S.

Correct Answer
verified

Correct Answer
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To fully understand how taxes affect economic well-being,we must compare the

Correct Answer
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Figure 8-3 -Refer to Figure 8-3.Suppose the government places a $4 tax per unit on this good.How much is consumer surplus after the tax is imposed?

Correct Answer
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Consumer s...
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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 received by sellers to

Correct Answer
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Assume that for good X the supply curve for a good is a typical,upward-sloping straight line,and the demand curve is a typical downward-sloping straight line.If the good is taxed,and the tax is doubled,the

Correct Answer
verified

Taxes cause deadweight losses because they

Correct Answer
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When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic,

Correct Answer
verified

When a good is taxed,the burden of the tax

Correct Answer
verified

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The price that buyers effectively pay after the tax is imposed is

Correct Answer
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Total surplus with a tax is equal to

Correct Answer
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Figure 8-9 The vertical distance between points A and C represent 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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Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3.The amount of tax revenue received by the government is equal to the area

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

Correct Answer
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Figure 8-9 The vertical distance between points A and C represent a tax in the market. -Refer to Figure 8-9.The amount of the tax on each unit of the good is

Correct Answer
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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
verified

Exam 8: Application: The Costs of Taxation

The amount of deadweight loss that results from a tax of a given size is determined by

Correct AnswerverifiedShow Answer

Figure 8-18 -Refer to Figure 8-18.Which graph correctly illustrates the relationship between the size of a tax and the size of the deadweight loss associated with the tax?

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,consumer surplus is the area

Correct AnswerverifiedShow Answer

The supply curve for liquor is the typical upward-sloping straight line,and the demand curve for liquor is the typical downward-sloping straight line.When liquor is taxed,the area on the relevant supply-and-demand graph that represents the deadweight loss is

Correct AnswerverifiedShow Answer

Figure 8-19.The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-19.According to a recent research paper published by the European Central Bank,the U.S.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

To fully understand how taxes affect economic well-being,we must compare the

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Figure 8-3 -Refer to Figure 8-3.Suppose the government places a $4 tax per unit on this good.How much is consumer surplus after the tax is imposed?

Correct AnswerverifiedConsumer s...View AnswerShow 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 received by sellers to

Correct AnswerverifiedShow Answer

Assume that for good X the supply curve for a good is a typical,upward-sloping straight line,and the demand curve is a typical downward-sloping straight line.If the good is taxed,and the tax is doubled,the

Correct AnswerverifiedShow Answer

Taxes cause deadweight losses because they

Correct AnswerverifiedShow Answer

When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic,

Correct AnswerverifiedShow Answer

When a good is taxed,the burden of the tax

Correct AnswerverifiedShow Answer

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The price that buyers effectively pay after the tax is imposed is

Correct AnswerverifiedShow Answer

Total surplus with a tax is equal to

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 loss of producer surplus as a result of the tax is

Correct AnswerverifiedShow Answer

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3.The amount of tax revenue received by the government is equal to the area

Correct AnswerverifiedShow Answer

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

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 amount of the tax on each unit of the good is

Correct AnswerverifiedShow 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

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Consumer s...
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