Question 1

Scenario 8-1
Erin would be willing to pay as much as $100 per week to have her house cleaned. Ernesto's opportunity cost of cleaning Erin's house is $70 per week.
-Refer to Scenario 8-1. Assume Erin is required to pay a tax of $40 when she hires someone to clean her house for a week. Which of the following is correct?

Accepted Answer

A)   Erin will now clean her own house.
B)   Ernesto will continue to clean Erin's house, but his producer surplus will decline.
C)   Total economic welfare consumer surplus plus producer surplus plus tax revenue)  will increase.
D)   Erin will continue to hire Ernesto to clean her house, but her consumer surplus will decline.E) None of the above
F) B) and D)

Question 2

Is the United States' labor supply more inelastic or more elastic? Briefly summarize the competing theories.

Accepted Answer

Some labor economists believe that most ...

Question 3

The less freedom people are given to choose the date of their retirement, the

Accepted Answer

A)   more elastic is the supply of labor.
B)   less elastic is the supply of labor.
C)   flatter is the labor supply curve.
D)   smaller is the decrease in employment that will result from a tax on labor.E) None of the above
F) A) and B)

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. 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) A) and D)
F) A) and C)

Question 5

Describe the Laffer curve.

Accepted Answer

The Laffer curve depicts the r...

Question 6

The loss in total surplus resulting from a tax is called

Accepted Answer

A)   a deficit.
B)   economic loss.
C)   deadweight loss.
D)   inefficiency.E) A) and C)
F) A) and B)

Question 7

Figure 8-2
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-2. The loss of producer surplus associated with some sellers dropping out of the market as a result of the tax is

Accepted Answer

A)   $0.
B)   $1.
C)   $2.
D)   $3.E) C) and D)
F) B) and C)

Question 8

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) B) and C)
F) None of the above

Question 9

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 consumer surplus is

Accepted Answer

A)   P0-P2)  x Q2.
B)   1/2 x P0-P2)  x Q2.
C)   P0-P5)  x Q5.
D)   1/2 x P0-P5)  x Q5.E) B) and C)
F) None of the above

Question 10

Economists generally agree that the most important tax in the U.S. economy is the

Accepted Answer

A)   investment tax.
B)   sales tax.
C)   property tax.
D)   labor tax.E) A) and B)
F) A) and C)

Question 11

The Laffer curve relates

Accepted Answer

A)   the tax rate to tax revenue raised by the tax.
B)   the tax rate to the deadweight loss of the tax.
C)   the price elasticity of supply to the deadweight loss of the tax.
D)   government welfare payments to the birth rate.E) C) and D)
F) A) and B)

Question 12

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 total surplus in this market when the tax is imposed?

Accepted Answer

A)   Total surplus increases by $1,500.
B)   Total surplus increases by $3,000.
C)   Total surplus decreases by $1,500.
D)   Total surplus decreases by $,3000.E) A) and B)
F) None of the above

Question 13

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 250 per month when there is no tax. Then a tax of $6 per widget is imposed. As a result, the government is able to raise $750 per month in tax revenue. We can conclude that the after-tax quantity of widgets is

Accepted Answer

A)   75 per month.
B)   100 per month.
C)   125 per month.
D)   150 per month.E) A) and B)
F) All of the above

Question 14

As more people become self-employed, which allows them to determine how many hours they work per week, we would expect the deadweight loss from the Social Security tax to

Accepted Answer

A)   increase, and the revenue generated from the tax to increase.
B)   increase, and the revenue generated from the tax to decrease.
C)   decrease, and the revenue generated from the tax to increase.
D)   decrease, and the revenue generated from the tax to decrease.E) A) and D)
F) A) and B)

Question 15

Figure 8-22 
-Refer to Figure 8-22. Suppose the government changed the per-unit tax on this good from $3.00 to $1.50. Compared to the original tax rate, this lower tax rate would

Accepted Answer

A)   increase tax revenue and increase the deadweight loss from the tax.
B)   increase tax revenue and decrease the deadweight loss from the tax.
C)   decrease tax revenue and increase the deadweight loss from the tax.
D)   decrease tax revenue and decrease the deadweight loss from the tax.E) A) and B)
F) A) and C)

Question 16

Figure 8-15
 
-Refer to Figure 8-15. Panel a)  and Panel b)  each illustrate a $4 tax placed on a market. In comparison to Panel b) , Panel a)  illustrates which of the following statements?

Accepted Answer

A)   When demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic.
B)   When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic.
C)   When supply is relatively inelastic, the deadweight loss of a tax is smaller than when supply is relatively elastic.
D)   When supply is relatively elastic, the deadweight loss of a tax is larger than when supply is relatively inelastic.E) A) and B)
F) All of the above

Question 17

For the purpose of analyzing the gains and losses from a tax on a good, we use tax revenue as a direct measure of the

Accepted Answer

A)   government's benefit from the tax.
B)   government's loss from the tax.
C)   deadweight loss of the tax.
D)   overall net gain to society of the tax.E) A) and D)
F) A) and C)

Question 18

Suppose the demand curve and the supply curve in a market are both linear. To begin, there was a $5 tax per unit, and the $5 tax resulted in a deadweight loss of $1,500. Now, the tax per unit is higher, with the higher tax resulting in a deadweight loss of $6,000. What is the amount of the new tax per unit?

Accepted Answer

The new tax per unit is $10. D...

Question 19

The marginal tax rate on labor income for many workers in the United States is almost

Accepted Answer

A)   30 percent.
B)   40 percent.
C)   50 percent.
D)   65 percent.E) A) and B)
F) A) and C)

Question 20

If a tax did not induce buyers or sellers to change their behavior, it would not cause a deadweight loss.

Accepted Answer

A) True 
 B)False

Exam 8: Application: the Costs of Taxation

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 Answer
verified

Describe the Laffer curve.

Correct Answer
verified
The Laffer curve depicts the r...
View Answer

Figure 8-15 -Refer to Figure 8-15. Panel a) and Panel b) each illustrate a $4 tax placed on a market. In comparison to Panel b) , Panel a) illustrates which of the following statements?

Correct Answer
verified

The amount of deadweight loss from a tax depends upon the

Correct Answer
verified

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 total surplus in this market when the tax is imposed?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

As more people become self-employed, which allows them to determine how many hours they work per week, we would expect the deadweight loss from the Social Security tax to

Correct Answer
verified

The marginal tax rate on labor income for many workers in the United States is almost

Correct Answer
verified

For the purpose of analyzing the gains and losses from a tax on a good, we use tax revenue as a direct measure of the

Correct Answer
verified

Economists generally agree that the most important tax in the U.S. economy is the

Correct Answer
verified

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 consumer surplus is

Correct Answer
verified

If a tax did not induce buyers or sellers to change their behavior, it would not cause a deadweight loss.

Correct Answer
verified

The loss in total surplus resulting from a tax is called

Correct Answer
verified

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2. The loss of producer surplus associated with some sellers dropping out of the market as a result of the tax is

Correct Answer
verified

Correct Answer
verified
The new tax per unit is $10. D...
View Answer

Figure 8-22 -Refer to Figure 8-22. Suppose the government changed the per-unit tax on this good from $3.00 to $1.50. Compared to the original tax rate, this lower tax rate would

Correct Answer
verified

The less freedom people are given to choose the date of their retirement, the

Correct Answer
verified

The Laffer curve relates

Correct Answer
verified

Is the United States' labor supply more inelastic or more elastic? Briefly summarize the competing theories.

Correct Answer
verified
Some labor economists believe that most ...
View Answer

Exam 8: Application: the Costs of Taxation

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

Describe the Laffer curve.

Correct AnswerverifiedThe Laffer curve depicts the r...View AnswerShow Answer

Figure 8-15 -Refer to Figure 8-15. Panel a) and Panel b) each illustrate a $4 tax placed on a market. In comparison to Panel b) , Panel a) illustrates which of the following statements?

Correct AnswerverifiedShow Answer

The amount of deadweight loss from a tax depends upon the

Correct AnswerverifiedShow Answer

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 total surplus in this market when the tax is imposed?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

As more people become self-employed, which allows them to determine how many hours they work per week, we would expect the deadweight loss from the Social Security tax to

Correct AnswerverifiedShow Answer

The marginal tax rate on labor income for many workers in the United States is almost

Correct AnswerverifiedShow Answer

For the purpose of analyzing the gains and losses from a tax on a good, we use tax revenue as a direct measure of the

Correct AnswerverifiedShow Answer

Economists generally agree that the most important tax in the U.S. economy is the

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 consumer surplus is

Correct AnswerverifiedShow Answer

If a tax did not induce buyers or sellers to change their behavior, it would not cause a deadweight loss.

Correct AnswerverifiedShow Answer

The loss in total surplus resulting from a tax is called

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 loss of producer surplus associated with some sellers dropping out of the market as a result of the tax is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe new tax per unit is $10. D...View AnswerShow Answer

Figure 8-22 -Refer to Figure 8-22. Suppose the government changed the per-unit tax on this good from $3.00 to $1.50. Compared to the original tax rate, this lower tax rate would

Correct AnswerverifiedShow Answer

The less freedom people are given to choose the date of their retirement, the

Correct AnswerverifiedShow Answer

The Laffer curve relates

Correct AnswerverifiedShow Answer

Is the United States' labor supply more inelastic or more elastic? Briefly summarize the competing theories.

Correct AnswerverifiedSome labor economists believe that most ...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified
The Laffer curve depicts the r...
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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The new tax per unit is $10. D...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Some labor economists believe that most ...
View Answer