Question 1

Figure 8-5
Suppose that the government imposes a tax of P3 - P1. 
-Refer to Figure 8-5.The equilibrium price before the tax is imposed is

Accepted Answer

A)   P1.
B)   P2.
C)   P3.
D)   P4.E) A) and B)
F) All of the above

Question 2

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

Accepted Answer

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) All of the above
F) B) and C)

Question 3

Figure 8-1 
-Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The area measured by J represents

Accepted Answer

A)   consumer surplus after the tax.
B)   consumer surplus before the tax.
C)   producer surplus after the tax.
D)   producer surplus before the tax.E) B) and D)
F) A) and D)

Question 4

Figure 8-8
Suppose the government imposes a $10 per unit tax on a good. 
-Refer to Figure 8-8.One effect of the tax is to

Accepted Answer

A)   reduce consumer surplus by $36.
B)   reduce producer surplus by $24.
C)   create a deadweight loss of $20.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 5

The size of the deadweight loss generated from a tax is affected by the

Accepted Answer

A)   elasticities of both supply and demand.
B)   elasticity of demand only.
C)   elasticity of supply only.
D)   total revenue collected by the government.E) B) and C)
F) All of the above

Question 6

Taxes cause deadweight losses because they prevent buyers and sellers from realizing some of the gains from trade.

Accepted Answer

A) True 
 B)False

Question 7

Taxes on labor tend to encourage second earners to stay at home rather than work in the labor force.

Accepted Answer

A) True 
 B)False

Question 8

Table 8-1
 
-Refer to Table 8-1.Suppose the government is considering levying a tax in one or more of the markets described in the table.Which of the markets will allow the government to minimize the deadweight loss(es) from the tax?

Accepted Answer

A)   market A only
B)   markets A and C only
C)   markets B and D only
D)   market C onlyE) B) and D)
F) A) and D)

Question 9

Figure 8-1 
-Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The area measured by J+K+L+M represents

Accepted Answer

A)   total surplus after the tax.
B)   total surplus before the tax.
C)   deadweight loss from the tax.
D)   tax revenue.E) All of the above
F) None of the above

Question 10

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 consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is

Accepted Answer

A)   $0.
B)   $1.50.
C)   $3.
D)   $4.50.E) A) and D)
F) B) and C)

Question 11

Assume the supply curve for cigars is a typical,upward-sloping straight line,and the demand curve for cigars is a typical,downward-sloping straight line.Suppose the equilibrium quantity in the market for cigars is 1,000 per month when there is no tax.Then a tax of $0.50 per cigar is imposed.The effective price paid by buyers increases from $1.50 to $1.90 and the effective price received by sellers falls from $1.50 to $1.40.The government's tax revenue amounts to $475 per month.Which of the following statements is correct?

Accepted Answer

A)   After the tax is imposed,the equilibrium quantity of cigars is 900 per month.
B)   The demand for cigars is more elastic than the supply of cigars.
C)   The deadweight loss of the tax is $12.50.
D)   The tax causes a decrease in consumer surplus of $380.E) C) and D)
F) All of the above

Question 12

Deadweight loss measures the loss

Accepted Answer

A)   in a market to buyers and sellers that is not offset by an increase in government revenue.
B)   in revenue to the government when buyers choose to buy less of the product because of the tax.
C)   of equality in a market due to government intervention.
D)   of total revenue to business firms due to the price wedge caused by the tax.E) None of the above
F) A) and B)

Question 13

Anger over British taxes played a significant role in bringing about the

Accepted Answer

A)   election of John Adams as the second American president.
B)   American Revolution.
C)   War of 1812.
D)   "no new taxes" clause in the U.S.Constitution.E) A) and B)
F) All of the above

Question 14

Figure 8-6
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-6.When the tax is imposed in this market,producer surplus is

Accepted Answer

A)   $450.
B)   $600.
C)   $900.
D)   $1,500.E) A) and D)
F) A) and C)

Question 15

Suppose the tax on gasoline is raised from $0.50 per gallon to $2.50 per gallon.As a result,

Accepted Answer

A)   tax revenue necessarily increases.
B)   the deadweight loss of the tax necessarily increases.
C)   the supply curve for gasoline necessarily becomes steeper.
D)   All of the above are correct.E) A) and C)
F) None of the above

Question 16

If the supply of land is fixed,the burden of a tax on land falls

Accepted Answer

A)   partly on landowners and partly on users of land.
B)   entirely on the renters or users of land.
C)   entirely on workers.
D)   entirely on landowners.E) B) and C)
F) A) and D)

Question 17

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

Accepted Answer

A)   inelastic supply and elastic demand.
B)   inelastic supply and inelastic demand.
C)   elastic supply and elastic demand.
D)   elastic supply and inelastic demand.E) All of the above
F) None of the above

Question 18

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

Accepted Answer

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

Question 19

Figure 8-4
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-4.The tax results in a loss of consumer surplus that amounts to

Accepted Answer

A)   $120.
B)   $240.
C)   $560.
D)   $680.E) A) and B)
F) None of the above

Question 20

In which of the following cases is it most likely that an increase in the size of a tax will decrease tax revenue?

Accepted Answer

A)   The price elasticity of demand is small,and the price elasticity of supply is large.
B)   The price elasticity of demand is large,and the price elasticity of supply is small.
C)   The price elasticity of demand and the price elasticity of supply are both small.
D)   The price elasticity of demand and the price elasticity of supply are both large.E) A) and C)
F) B) and C)

Exam 8: Application: The Costs of Taxation

Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The area measured by J represents

Correct Answer
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Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The area measured by J+K+L+M represents

Correct Answer
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Deadweight loss measures the loss

Correct Answer
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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 loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is

Correct Answer
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Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.When the tax is imposed in this market,producer surplus is

Correct Answer
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The size of the deadweight loss generated from a tax is affected by the

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

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.One effect of the tax is to

Correct Answer
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Taxes on labor tend to encourage second earners to stay at home rather than work in the labor force.

Correct Answer
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Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4.The tax results in a loss of consumer surplus that amounts to

Correct Answer
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Table 8-1 -Refer to Table 8-1.Suppose the government is considering levying a tax in one or more of the markets described in the table.Which of the markets will allow the government to minimize the deadweight loss(es) from the tax?

Correct Answer
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Anger over British taxes played a significant role in bringing about the

Correct Answer
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Suppose the tax on gasoline is raised from $0.50 per gallon to $2.50 per gallon.As a result,

Correct Answer
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Correct Answer
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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

Correct Answer
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If the supply of land is fixed,the burden of a tax on land falls

Correct Answer
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In which of the following cases is it most likely that an increase in the size of a tax will decrease tax revenue?

Correct Answer
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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

Correct Answer
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Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The equilibrium price before the tax is imposed is

Correct Answer
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Taxes cause deadweight losses because they prevent buyers and sellers from realizing some of the gains from trade.

Correct Answer
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Exam 8: Application: The Costs of Taxation

Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The area measured by J represents

Correct AnswerverifiedShow Answer

Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The area measured by J+K+L+M represents

Correct AnswerverifiedShow Answer

Deadweight loss measures the loss

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 consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is

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Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.When the tax is imposed in this market,producer surplus is

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The size of the deadweight loss generated from a tax is affected by the

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

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Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8.One effect of the tax is to

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Taxes on labor tend to encourage second earners to stay at home rather than work in the labor force.

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Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4.The tax results in a loss of consumer surplus that amounts to

Correct AnswerverifiedShow Answer

Table 8-1 -Refer to Table 8-1.Suppose the government is considering levying a tax in one or more of the markets described in the table.Which of the markets will allow the government to minimize the deadweight loss(es) from the tax?

Correct AnswerverifiedShow Answer

Anger over British taxes played a significant role in bringing about the

Correct AnswerverifiedShow Answer

Suppose the tax on gasoline is raised from $0.50 per gallon to $2.50 per gallon.As a result,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the supply of land is fixed,the burden of a tax on land falls

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In which of the following cases is it most likely that an increase in the size of a tax will decrease tax revenue?

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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

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Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The equilibrium price before the tax is imposed is

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Taxes cause deadweight losses because they prevent buyers and sellers from realizing some of the gains from trade.

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