Question 1

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, the price sellers effectively receive is

Accepted Answer

A)  $4.
B)  $6.
C)  $10.
D)  $16.E) A) and C)
F) A) and D)

Question 2

Which of the following tools help us evaluate how taxes affect economic well-being?
(i) consumer surplus
(ii) producer surplus
(iii) tax revenue
(iv) deadweight loss

Accepted Answer

A)  (i)  and (ii)  only
B)  (i) , (ii) , and (iii)  only
C)  (iii)  and (iv)  only
D)  (i) , (ii) , (iii) , and (iv) E) B) and D)
F) A) and B)

Question 3

The Laffer curve is the curve showing how tax revenue varies as the size of the tax varies.

Accepted Answer

A) True 
 B)False

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 $500.
B)  After the tax is imposed, consumer surplus is 45 percent of its pre-tax value.
C)  After the tax is imposed, producer surplus is 45 percent of its pre-tax value.
D)  All of the above are correct.E) A) and D)
F) A) and C)

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The producer surplus with the tax is

Accepted Answer

A)  $3,000.
B)  $6,000.
C)  $9,000.
D)  $12,000.E) None of the above
F) B) and D)

Question 7

Figure 8-24. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. 
-Refer to Figure 8-24. For an economy that is currently at point D on the curve, a decrease in the tax rate would

Accepted Answer

A)  decrease consumer surplus.
B)  decrease producer surplus.
C)  increase tax revenue.
D)  increase the deadweight loss of the tax.E) A) and C)
F) A) and B)

Question 8

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, buyers effectively pay what amount of the $10 tax?

Accepted Answer

A)  $0
B)  $4
C)  $6
D)  $10E) A) and B)
F) C) and D)

Question 9

Economists dismiss the idea that lower tax rates can lead to higher tax revenue, because there is a consensus that the relevant elasticities of demand and supply are very low.

Accepted Answer

A) True 
 B)False

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 per-unit burden of the tax on sellers is

Accepted Answer

A)  $2.
B)  $3.
C)  $4.
D)  $5.E) None of the above
F) A) and B)

Question 11

As the size of a tax rises, the deadweight loss

Accepted Answer

A)  rises, and tax revenue first rises, then falls.
B)  rises as does tax revenue.
C)  falls, and tax revenue first rises, then falls.
D)  falls as does tax revenue.E) B) and D)
F) All of the above

Question 12

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

Question 13

Which of the following events is consistent with an increase in the deadweight loss of the gasoline tax from $30 million to $120 million?

Accepted Answer

A)  The tax on gasoline increases from $0.30 per gallon to $0.45 per gallon.
B)  The tax on gasoline increases from $0.30 per gallon to $0.60 per gallon.
C)  The tax on gasoline increases from $0.25 per gallon to $0.45 per gallon.
D)  The tax on gasoline increases from $0.25 per gallon to $1.00 per gallon.E) A) and C)
F) A) and B)

Question 14

Suppose the tax on gasoline is decreased from $0.60 per gallon to $0.40 per gallon. As a result,

Accepted Answer

A)  tax revenue necessarily decreases.
B)  the deadweight loss of the tax necessarily decreases.
C)  the demand curve for gasoline necessarily becomes steeper.
D)  the supply curve for gasoline necessarily becomes flatter.E) None of the above
F) All of the above

Question 15

The demand for beer is more elastic than the demand for milk, so a tax on beer would have a smaller deadweight loss than an equivalent tax on milk, all else equal.

Accepted Answer

A) True 
 B)False

Question 16

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

Question 17

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

Question 18

A tax places a wedge between the price buyers pay and the price sellers receive.

Accepted Answer

A) True 
 B)False

Question 19

Figure 8-11 
-Refer to Figure 8-11. The size of the tax is represented by the

Accepted Answer

A)  length of the line segment connecting points A and B.
B)  length of the line segment connecting points A and C.
C)  length of the line segment connecting points B and C.
D)  area of the triangle bounded by the points A, B, and C.E) All of the above
F) B) and C)

Question 20

Figure 8-11 
-Refer to Figure 8-11. The length of the line segment connecting points A and B represents

Accepted Answer

A)  the difference between the price paid by buyers after the tax is imposed and the price received by sellers after the tax is imposed.
B)  the size of the tax.
C)  the "tax wedge."
D)  All of the above are correct.E) None of the above
F) All of the above

Exam 8: Applications: the Costs of Taxation

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, the price sellers effectively receive is

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

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2. The per-unit burden of the tax on sellers is

Correct AnswerverifiedShow Answer

Economists dismiss the idea that lower tax rates can lead to higher tax revenue, because there is a consensus that the relevant elasticities of demand and supply are very low.

Correct AnswerverifiedShow Answer

Which of the following is a tax on labor?

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. When the tax is imposed in this market, buyers effectively pay what amount of the $10 tax?

Correct AnswerverifiedShow Answer

Figure 8-11 -Refer to Figure 8-11. The size of the tax is represented by the

Correct AnswerverifiedShow Answer

Which of the following tools help us evaluate how taxes affect economic well-being? (i) consumer surplus (ii) producer surplus (iii) tax revenue (iv) deadweight loss

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Figure 8-11 -Refer to Figure 8-11. The length of the line segment connecting points A and B represents

Correct AnswerverifiedShow Answer

As the size of a tax rises, the deadweight loss

Correct AnswerverifiedShow Answer

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The producer surplus with the tax is

Correct AnswerverifiedShow Answer

Which of the following events is consistent with an increase in the deadweight loss of the gasoline tax from $30 million to $120 million?

Correct AnswerverifiedShow Answer

Suppose the tax on gasoline is decreased from $0.60 per gallon to $0.40 per gallon. As a result,

Correct AnswerverifiedShow Answer

A tax levied on the buyers of a good shifts the

Correct AnswerverifiedShow Answer

The demand for beer is more elastic than the demand for milk, so a tax on beer would have a smaller deadweight loss than an equivalent tax on milk, all else equal.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 8-24. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-24. For an economy that is currently at point D on the curve, a decrease in the tax rate would

Correct AnswerverifiedShow Answer

The Laffer curve is the curve showing how tax revenue varies as the size of the tax varies.

Correct AnswerverifiedShow Answer

A tax places a wedge between the price buyers pay and the price sellers receive.

Correct AnswerverifiedShow 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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified