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Exam 8: Application: the Costs of Taxation

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Question 171

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For a good that is taxed, the area on the relevant supply­and­demand graph that represents government's tax revenue is a

A) triangle.
B) rectangle.
C) trapezoid.
D) None of the above is correct; government's tax revenue is the area between the supply and demand curves, above the horizontal axis, and below the effective price to buyers

E) C) and D)
F) All of the above

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Question 172

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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. Consumer surplus without the tax is

A) $6, and consumer surplus with the tax is $1.50.
B) $6, and consumer surplus with the tax is $4.50.
C) $10, and consumer surplus with the tax is $1.50.
D) $10, and consumer surplus with the tax is $4.50.

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

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Question 173

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

The elasticities of the supply and demand curves in the market for cigarettes affect how much a tax distorts that market.

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

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2. Total surplus without the tax is

Figure 8-20 On the vertical axis of each graph, DWL is deadweight loss. -Refer to Figure 8-20. Which graph correctly illustrates the relationship between the size of a tax and the size of the deadweight loss associated with the tax?

Suppose a tax of $0.10 per unit on a good creates a deadweight loss of $100. If the tax is increased to $0.25 per unit, the deadweight loss from the new tax would be

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

Scenario 8-3 Suppose the market demand and market supply curves are given by the equations: -Refer to Scenario 8-3. What are the equilibrium price and equilibrium quantity in this market?

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 $6 tax per unit?

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. As a result, the government is able to raise $800 per month in tax revenue. We can conclude that the equilibrium quantity of widgets has fallen by

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 tax revenue received by the government is

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

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

Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is total surplus after the tax is imposed?

A tax levied on the buyers of a good shifts the

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The per-unit burden of the tax on sellers is

A deadweight loss is a consequence of a tax on a good because the tax

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