Question 1

The deadweight loss from a tax

Accepted Answer

A)   does not vary in amount when the price elasticity of demand changes.
B)   does not vary in amount when the amount of the tax per unit changes.
C)   is larger,the larger is the amount of the tax per unit.
D)   is smaller,the larger is the amount of the tax per unit.E) All of the above
F) B) and C)

Question 2

When a tax is imposed on the sellers of a good,the

Accepted Answer

A)   demand curve shifts downward by less than the amount of the tax.
B)   demand curve shifts downward by the amount of the tax.
C)   supply curve shifts upward by less than the amount of the tax.
D)   supply curve shifts upward by the amount of the tax.E) All of the above
F) A) and B)

Question 3

The Social Security tax is a labor tax.

Accepted Answer

A) True 
 B)False

Question 4

Figure 8-19.The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. 
-Refer to Figure 8-19.The curve that is shown on the figure is called the

Accepted Answer

A)   deadweight-loss curve.
B)   tax-incidence curve.
C)   Laffer curve.
D)   Lorenz curve.E) None of the above
F) B) and D)

Question 5

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

Question 6

Andre walks Julia's dog once a day for $50 per week.Julia values this service at $60 per week,while the opportunity cost of Andre's time is $30 per week.The government places a tax of $35 per week on dog walkers.After the tax,what is the total surplus?

Accepted Answer

A)   $50
B)   $30
C)   $25
D)   $0E) B) and D)
F) None of the above

Question 7

Taxes on labor have the effect of encouraging

Accepted Answer

A)   workers to work more hours.
B)   the elderly to postpone retirement.
C)   second earners within a family to take a job.
D)   unscrupulous people to take part in the underground economy.E) None of the above
F) B) and D)

Question 8

The Laffer curve illustrates how taxes in markets with greater elasticities of demand compare to taxes in markets with smaller elasticities of supply.

Accepted Answer

A) True 
 B)False

Question 9

As the tax on a good increases from $1 per unit to $2 per unit to $3 per unit and so on,the

Accepted Answer

A)   tax revenue increases at first,but it eventually peaks and then decreases.
B)   deadweight loss increases at first,but it eventually peaks and then decreases.
C)   tax revenue always increases,and the deadweight loss always increases.
D)   tax revenue always decreases,and the deadweight loss always increases.E) B) and C)
F) A) and C)

Question 10

A tax levied on the buyers of a good shifts the

Accepted Answer

A)   supply curve upward (or to the left) .
B)   supply curve downward (or to the right) .
C)   demand curve downward (or to the left) .
D)   demand curve upward (or to the right) .E) A) and C)
F) A) and B)

Question 11

Figure 8-4
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-4.The amount of the tax on each unit of the good is

Accepted Answer

A)   $5.
B)   $7.
C)   $8.
D)   $12.E) A) and B)
F) None of the above

Question 12

Figure 8-19.The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. 
-Refer to Figure 8-19.If the economy is at point A on the curve,then a small increase in the tax rate will

Accepted Answer

A)   increase the deadweight loss of the tax and increase tax revenue.
B)   increase the deadweight loss of the tax and decrease tax revenue.
C)   decrease the deadweight loss of the tax and increase tax revenue.
D)   decrease the deadweight loss of the tax and decrease tax revenue.E) A) and B)
F) None of the above

Question 13

Which of the following is a tax on labor?

Accepted Answer

A)   Medicare tax
B)   Social Security tax
C)   federal income tax
D)   All of the above are labor taxes.E) All of the above
F) C) and D)

Question 14

Suppose a tax of $4 per unit is imposed on a good,and the tax causes the equilibrium quantity of the good to decrease from 2,000 units to 1,700 units.The tax decreases consumer surplus by $3,000 and decreases producer surplus by $4,400.The deadweight loss of the tax is

Accepted Answer

A)   $200.
B)   $400.
C)   $600.
D)   $1,200.E) A) and B)
F) A) and D)

Question 15

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

Accepted Answer

A)   $20.
B)   $200.
C)   $300.
D)   $500.E) A) and D)
F) All of the above

Question 16

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

Accepted Answer

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

Question 17

Ronald Reagan believed that reducing income tax rates would

Accepted Answer

A)   do little,if anything,to encourage hard work.
B)   result in large increases in deadweight losses.
C)   raise economic well-being and perhaps even tax revenue.
D)   lower economic well-being,even though tax revenue could possibly increase.E) All of the above
F) B) and D)

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) A) and B)
F) A) and C)

Question 19

Suppose the tax on liquor is increased so that the tax goes from being a "medium" tax to being a "large" tax.As a result,it is likely that

Accepted Answer

A)   tax revenue increases,and the deadweight loss increases.
B)   tax revenue increases,and the deadweight loss decreases.
C)   tax revenue decreases,and the deadweight loss increases.
D)   tax revenue decreases,and the deadweight loss decreases.E) A) and D)
F) A) and C)

Question 20

Total surplus is always equal to the sum of consumer surplus and producer surplus.

Accepted Answer

A) True 
 B)False

Exam 8: Application: the Costs of Taxation

Figure 8-19.The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-19.If the economy is at point A on the curve,then a small increase in the tax rate will

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The deadweight loss from a tax

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Figure 8-19.The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-19.The curve that is shown on the figure is called the

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

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Suppose a tax of $4 per unit is imposed on a good,and the tax causes the equilibrium quantity of the good to decrease from 2,000 units to 1,700 units.The tax decreases consumer surplus by $3,000 and decreases producer surplus by $4,400.The deadweight loss of the tax is

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Suppose the tax on liquor is increased so that the tax goes from being a "medium" tax to being a "large" tax.As a result,it is likely that

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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 amount of the tax on each unit of the good is

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Ronald Reagan believed that reducing income tax rates would

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The Social Security tax is a labor tax.

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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?

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Total surplus is always equal to the sum of consumer surplus and producer surplus.

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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

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Which of the following is a tax on labor?

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When a tax is imposed on the sellers of a good,the

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The Laffer curve illustrates how taxes in markets with greater elasticities of demand compare to taxes in markets with smaller elasticities of supply.

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As the tax on a good increases from $1 per unit to $2 per unit to $3 per unit and so on,the

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Andre walks Julia's dog once a day for $50 per week.Julia values this service at $60 per week,while the opportunity cost of Andre's time is $30 per week.The government places a tax of $35 per week on dog walkers.After the tax,what is the total surplus?

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A tax levied on the buyers of a good shifts the

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

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Taxes on labor have the effect of encouraging

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