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Exam 8: Application: The Costs of Taxation

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Question 171

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

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

E) C) and D)
F) A) and D)

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Question 172

Multiple Choice

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

A) M.
B) L+M+N+Y+B.
C) L+M+Y.
D) J.

E) None of the above
F) A) and C)

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Question 173

Multiple Choice

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One result of a tax, regardless of whether the tax is placed on the buyers or the sellers, is that the

The result of the large tax cuts in the first Reagan Administration demonstrated very convincingly that Arthur Laffer was correct when he asserted that cuts in tax rates would increase tax revenue.

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. Without a tax, the equilibrium price and quantity are

Economists disagree on whether labor taxes cause small or large deadweight losses. This disagreement arises primarily because economists hold different views about

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. The tax causes consumer surplus to decrease by the area

In the market for widgets, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. The equilibrium quantity in the market for widgets is 200 per month when there is no tax. Then a tax of $5 per widget is imposed. The price paid by buyers increases by $2 and the after-tax price received by sellers falls by $3. The government is able to raise $750 per month in revenue from the tax. The deadweight loss from the tax is

Scenario 8-2 Roland mows Karla's lawn for $25. Roland's opportunity cost of mowing Karla's lawn is $20, and Karla's willingness to pay Roland to mow her lawn is $28. -Refer to Scenario 8-2. If Karla hires Roland to mow her lawn, Roland's producer surplus is

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. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $4 tax per unit?

Scenario 8-3 Suppose the market demand and market supply curves are given by the equations: -Refer to Scenario 8-3. Suppose that a tax of T is placed on buyers so that the demand curve becomes: What will be the deadweight loss from this tax?

Figure 8-25 -Refer to Figure 8-25. How much is producer surplus at the market equilibrium?

If the tax on gasoline increases from $2 to $4 per gallon, the deadweight loss from the tax increases by a factor of

The deadweight loss from a $3 tax will be largest in a market with

When a tax is placed on a product, the price paid by buyers

Suppose a tax is imposed on baseball bats. In which of the following cases will the tax cause the equilibrium quantity of baseball bats to shrink by the smallest amount?

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. If the economy is at point B on the curve, then a small decrease in the tax rate will

Figure 8-14 -Refer to Figure 8-14. Which of the following combinations will maximize the deadweight loss from a tax?

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. What happens to consumer surplus when the tax is imposed in this market?

Taxes cause deadweight losses because taxes