Question 1

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) C) and D)
F) B) and D)

Question 2

Figure 8-9
The vertical distance between points A and C represent a tax in the market. 
-Refer to Figure 8-9.The total surplus without the tax is

Accepted Answer

A)   $8,000.
B)   $12,000.
C)   $20,000.
D)   $40,000.E) C) and D)
F) A) and B)

Question 3

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 deadweight loss as a result of the tax is

Accepted Answer

A)   $105.
B)   $210.
C)   $490.
D)   $600.E) A) and C)
F) None of the above

Question 4

Figure 8-7
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-7.Which of the following statements is correct?

Accepted Answer

A)   Total surplus before the tax is imposed is $45.
B)   After the tax is imposed,consumer surplus is 25 percent of its pre-tax value.
C)   After the tax is imposed,producer surplus is 36 percent of its pre-tax value.
D)   All of the above are correct.E) A) and B)
F) C) and D)

Question 5

When a good is taxed,the deadweight loss is larger the more elastic are demand and supply.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following events always would increase the size of the deadweight loss that arises from the tax on gasoline?

Accepted Answer

A)   The demand for gasoline becomes more inelastic.
B)   The slope of the supply curve for gasoline becomes steeper.
C)   The amount of the tax per gallon of gasoline increases.
D)   All of the above are correct.E) A) and C)
F) A) and D)

Question 7

Figure 8-9
The vertical distance between points A and C represent a tax in the market. 
-Refer to Figure 8-9.The loss of consumer surplus as a result of the tax is

Accepted Answer

A)   $2,000.
B)   $4,000.
C)   $6,000.
D)   $8,000.E) None of the above
F) All of the above

Question 8

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 loss in total surplus?

Accepted Answer

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

Question 9

Figure 8-11 1 = 4;Q2 = 7;P1 = $6;P2 = $8;and P3 = $10.Then,when the tax is imposed, A)  the government collects $28 in tax revenue. B)  producer surplus decreases by $13. C)  consumer surplus decreases by $11. D)  the deadweight loss amounts to $9." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 8-11.Suppose Q1 = 4;Q2 = 7;P1 = $6;P2 = $8;and P3 = $10.Then,when the tax is imposed,

Accepted Answer

A)   the government collects $28 in tax revenue.
B)   producer surplus decreases by $13.
C)   consumer surplus decreases by $11.
D)   the deadweight loss amounts to $9.E) A) and B)
F) C) and D)

Question 10

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

Accepted Answer

A)   I+Y.
B)   J+K+L+M.
C)   L+M+Y.
D)   I+J+K+L+M+Y.E) None of the above
F) B) and D)

Question 11

Figure 8-1 
-Refer to Figure 8-1.Suppose a $3 per-unit tax is placed on this good.The loss of consumer surplus resulting from this tax is

Accepted Answer

A)   $35.
B)   $45.
C)   $70.
D)   $80.E) A) and C)
F) All of the above

Question 12

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) B) and C)

Question 13

Sellers of a product will bear the larger part of the tax burden,and buyers will bear a smaller part of the tax burden,when the

Accepted Answer

A)   tax is placed on the sellers of the product.
B)   tax is placed on the buyers of the product.
C)   supply of the product is more elastic than the demand for the product.
D)   demand for the product is more elastic than the supply of the product.E) B) and C)
F) A) and C)

Question 14

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) All of the above
F) A) and D)

Question 15

One result of a tax,regardless of whether the tax is placed on the buyers or the sellers,is that the

Accepted Answer

A)   size of the market is unchanged.
B)   price the seller effectively receives is higher.
C)   supply curve for the good shifts upward by the amount of the tax.
D)   tax reduces the welfare of both buyers and sellers.E) All of the above
F) C) and D)

Question 16

A tax on a good

Accepted Answer

A)   raises the price that buyers effectively pay and raises the price that sellers effectively receive.
B)   raises the price that buyers effectively pay and lowers the price that sellers effectively receive.
C)   lowers the price that buyers effectively pay and raises the price that sellers effectively receive.
D)   lowers the price that buyers effectively pay and lowers the price that sellers effectively receive.E) B) and C)
F) None of the above

Question 17

Which of the following statements is true for markets in which the demand curve slopes downward and the supply curve slopes upward?

Accepted Answer

A)   As the size of the tax increases,tax revenue continually rises and deadweight loss continually falls.
B)   As the size of the tax increases,tax revenue and deadweight loss rise initially,but both eventually begin to fall.
C)   As the size of the tax increases,tax revenue rises initially,but it eventually begins to fall;deadweight loss continually rises.
D)   As the size of the tax increases,tax revenue rises initially,but it eventually begins to fall;deadweight loss falls initially,but eventually it begins to rise.E) A) and B)
F) B) and C)

Question 18

Assume the price of gasoline is $2.00 per gallon,and the equilibrium quantity of gasoline is 10 million gallons per day with no tax on gasoline.Starting from this initial situation,which of the following scenarios would result in the largest deadweight loss?

Accepted Answer

A)   The price elasticity of demand for gasoline is 0.1;the price elasticity of supply for gasoline is 0.6;and the gasoline tax amounts to $0.20 per gallon.
B)   The price elasticity of demand for gasoline is 0.1;the price elasticity of supply for gasoline is 0.4;and the gasoline tax amounts to $0.20 per gallon.
C)   The price elasticity of demand for gasoline is 0.2;the price elasticity of supply for gasoline is 0.6;and the gasoline tax amounts to $0.30 per gallon.
D)   There is insufficient information to make this determination.E) C) and D)
F) A) and B)

Question 19

Economist Arthur Laffer made the argument that tax rates in the United States were so high that reducing the rates would increase tax revenue.

Accepted Answer

A) True 
 B)False

Question 20

Taxes on labor tend to increase the number of hours that people choose to work.

Accepted Answer

A) True 
 B)False

Exam 8: Application: The Costs of Taxation

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 deadweight loss as a result of the tax is

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

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Taxes on labor tend to increase the number of hours that people choose to work.

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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 loss in total surplus?

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Which of the following events always would increase the size of the deadweight loss that arises from the tax on gasoline?

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When a good is taxed,the deadweight loss is larger the more elastic are demand and supply.

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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 total surplus without the tax is

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Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7.Which of the following statements is correct?

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

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Sellers of a product will bear the larger part of the tax burden,and buyers will bear a smaller part of the tax burden,when the

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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.What happens to total surplus in this market when the tax is imposed?

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One result of a tax,regardless of whether the tax is placed on the buyers or the sellers,is that the

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

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Figure 8-1 -Refer to Figure 8-1.Suppose a $3 per-unit tax is placed on this good.The loss of consumer surplus resulting from this tax is

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Which of the following statements is true for markets in which the demand curve slopes downward and the supply curve slopes upward?

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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 loss of consumer surplus as a result of the tax is

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Economist Arthur Laffer made the argument that tax rates in the United States were so high that reducing the rates would increase tax revenue.

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A tax on a good

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Assume the price of gasoline is $2.00 per gallon,and the equilibrium quantity of gasoline is 10 million gallons per day with no tax on gasoline.Starting from this initial situation,which of the following scenarios would result in the largest deadweight loss?

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Figure 8-11 -Refer to Figure 8-11.Suppose Q1 = 4;Q2 = 7;P1 = $6;P2 = $8;and P3 = $10.Then,when the tax is imposed,

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Figure 8-11 -Refer to Figure 8-11.Suppose Q₁ = 4;Q₂ = 7;P₁ = $6;P₂ = $8;and P₃= $10.Then,when the tax is imposed,

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