Question 1

The higher a country's tax rates, the more likely that country will be

Accepted Answer

A)   at the top of the Laffer curve.
B)   on the positively sloped part of the Laffer curve.
C)   on the negatively sloped part of the Laffer curve.
D)   experiencing small deadweight losses.E) B) and D)
F) B) and C)

Question 2

Figure 8-12 
-Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The tax causes the price received by sellers to

Accepted Answer

A)   decrease by $3.
B)   increase by $2.
C)   decrease by $1.
D)   increase by $6.E) A) and D)
F) None of the above

Question 3

Figure 8-5
Suppose that the government imposes a tax of P3 - P1. 
-Refer to Figure 8-5. The benefit to the government is measured by

Accepted Answer

A)   tax revenue and is represented by area A+B.
B)   tax revenue and is represented by area B+D.
C)   the net gain in total surplus and is represented by area B+D.
D)   the net gain in total surplus and is represented by area C+H.E) B) and C)
F) C) and D)

Question 4

Illustrate on three demand-and-supply graphs how the size of a tax (small, medium and large) can alter total revenue and deadweight loss.

Accepted Answer

The answer of Illustrate on three demand-and-supply graphs how the...

Question 5

In 2012, in The Wall Street Journal, economists Edward Prescott and Lee Ohanian asserted that

Accepted Answer

A)   in the United States, when the average worker earns $100 from additional work, he or she will be able to consume an additional $85 worth of goods and services.
B)   the typical American has always worked more hours per year than the typical Frenchman and the typical German, despite vastly different tax rates in those countries.
C)   raising tax rates from their 2012 levels would significantly reduce U.S. economic activity.
D)   raising tax rates from their 2012 levels would significantly increase the federal government's tax revenue.E) B) and D)
F) A) and B)

Question 6

Figure 8-28 
-Refer to Figure 8-28. Suppose that Market A is characterized by Demand 1 and Supply 1, and Market B is characterized by Demand 1 and Supply 2. 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 7

Figure 8-26 
-Refer to Figure 8-26. How much is consumer surplus at the market equilibrium?

Accepted Answer

Consumer surplus is ...

Question 8

Which of the following scenarios is not consistent with the Laffer curve?

Accepted Answer

A)   The tax rate is very low, and tax revenue is very low.
B)   The tax rate is very high, and tax revenue is very low.
C)   The tax rate is very high, and tax revenue is very high.
D)   The tax rate is moderate (between very high and very low) , and tax revenue is relatively high.E) None of the above
F) B) and C)

Question 9

Figure 8-7
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-7. Before the tax is imposed, the equilibrium price is

Accepted Answer

A)   $32, and the equilibrium quantity is 15.
B)   $24, and the equilibrium quantity is 15.
C)   $24, and the equilibrium quantity is 25.
D)   $16, and the equilibrium quantity is 15.E) A) and C)
F) C) and D)

Question 10

The benefit to buyers of participating in a market is measured by

Accepted Answer

A)   consumer surplus.
B)   producer surplus.
C)   total surplus.
D)   deadweight loss.E) All of the above
F) None of the above

Question 11

The less freedom young mothers have to work outside the home, the

Accepted Answer

A)   more elastic the supply of labor will be.
B)   less elastic the supply of labor will be.
C)   more horizontal the labor supply curve will be.
D)   larger is the decrease in employment that will result from a tax on labor.E) C) and D)
F) A) and B)

Question 12

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The imposition of the tax causes the price paid by buyers to

Accepted Answer

A)   increase from $600 to $800.
B)   increase from $300 to $800.
C)   decrease from $600 to $300.
D)   remain unchanged at $600.E) A) and C)
F) A) and B)

Question 13

Diana is a personal trainer whose client Charles pays $80 per hour-long session. Charles values this service at $100 per hour, while the opportunity cost of Diana's time is $75 per hour. The government places a tax of $10 per hour on personal trainers. Before the tax, what is the total surplus?

Accepted Answer

A)   $25
B)   $5
C)   $0
D)   $20E) B) and D)
F) None of the above

Question 14

Figure 8-14 
-Refer to Figure 8-14. Which of the following statements is correct?

Accepted Answer

A)   Supply 1 is more elastic than supply 2.
B)   Demand 2 is more elastic than demand 1.
C)   Demand 1 is more elastic than supply 1.
D)   All of the above are correct.E) B) and C)
F) A) and D)

Question 15

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. With the tax, the total surplus 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) None of the above
F) A) and B)

Question 16

For widgets, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. A tax of $15 per unit is imposed on widgets. The tax reduces the equilibrium quantity in the market by 300 units. The deadweight loss from the tax is

Accepted Answer

A)   $1,750.
B)   $2,250.
C)   $3,000.
D)   $4,500.E) None of the above
F) C) and D)

Question 17

If the labor supply curve is very elastic, a tax on labor

Accepted Answer

A)   has a large deadweight loss.
B)   raises enough tax revenue to offset the loss in welfare.
C)   has a relatively small impact on the number of hours that workers choose to work.
D)   results in a large tax burden on the firms that hire labor.E) None of the above
F) A) and D)

Question 18

Figure 8-26 
-Refer to Figure 8-26. What are the equilibrium price and equilibrium quantity in this market?

Accepted Answer

The equilibrium pric...

Question 19

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?

Accepted Answer

The deadwe...

Question 20

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

Accepted Answer

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

Exam 8: Application: The Costs of Taxation

Which of the following scenarios is not consistent with the Laffer curve?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 8-28 -Refer to Figure 8-28. Suppose that Market A is characterized by Demand 1 and Supply 1, and Market B is characterized by Demand 1 and Supply 2. 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 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. The benefit to the government is measured by

Correct AnswerverifiedShow Answer

Figure 8-26 -Refer to Figure 8-26. How much is consumer surplus at the market equilibrium?

Correct AnswerverifiedConsumer surplus is ...View AnswerShow Answer

For widgets, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. A tax of $15 per unit is imposed on widgets. The tax reduces the equilibrium quantity in the market by 300 units. The deadweight loss from the tax is

Correct AnswerverifiedShow Answer

Figure 8-26 -Refer to Figure 8-26. What are the equilibrium price and equilibrium quantity in this market?

Correct AnswerverifiedThe equilibrium pric...View AnswerShow Answer

The benefit to buyers of participating in a market is measured by

Correct AnswerverifiedShow Answer

The less freedom young mothers have to work outside the home, the

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 imposition of the tax causes the price paid by buyers to

Correct AnswerverifiedShow Answer

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. With the tax, the total surplus is

Correct AnswerverifiedShow Answer

Figure 8-12 -Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The tax causes the price received by sellers to

Correct AnswerverifiedShow Answer

If the labor supply curve is very elastic, a tax on labor

Correct AnswerverifiedShow Answer

Figure 8-14 -Refer to Figure 8-14. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedThe deadwe...View AnswerShow Answer

In 2012, in The Wall Street Journal, economists Edward Prescott and Lee Ohanian asserted that

Correct AnswerverifiedShow Answer

Illustrate on three demand-and-supply graphs how the size of a tax (small, medium and large) can alter total revenue and deadweight loss.

Correct AnswerverifiedShow Answer

Diana is a personal trainer whose client Charles pays $80 per hour-long session. Charles values this service at $100 per hour, while the opportunity cost of Diana's time is $75 per hour. The government places a tax of $10 per hour on personal trainers. Before the tax, what is the total surplus?

Correct AnswerverifiedShow Answer

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7. Before the tax is imposed, the equilibrium price is

Correct AnswerverifiedShow Answer

The higher a country's tax rates, the more likely that country will be

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified
Consumer surplus is ...
View Answer

Correct Answer
verified

Correct Answer
verified
The equilibrium pric...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The deadwe...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified