Question 1

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

Question 2

Figure 8-7
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-7.The deadweight loss associated with this tax amounts to

Accepted Answer

A)   $60,and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses.
B)   $60,and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers.
C)   $40,and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses.
D)   $40,and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers.E) A) and C)
F) None of the above

Question 3

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

Accepted Answer

A)   one-half.
B)   two.
C)   four.
D)   six.E) A) and B)
F) B) and D)

Question 4

The greater the elasticity of demand,the smaller the deadweight loss of a tax.

Accepted Answer

A) True 
 B)False

Question 5

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

Question 6

When a country is on the downward-sloping side of the Laffer curves,a cut in the tax rate will

Accepted Answer

A)   decrease tax revenue and decrease the deadweight loss.
B)   decrease tax revenue and increase the deadweight loss.
C)   increase tax revenue and decrease the deadweight loss.
D)   increase tax revenue and increase the deadweight loss.E) All of the above
F) C) and D)

Question 7

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 $750 per month in tax revenue.We can conclude that the equilibrium quantity of widgets has fallen by

Accepted Answer

A)   25 per month.
B)   50 per month.
C)   75 per month.
D)   100 per month.E) C) and D)
F) A) and B)

Question 8

When a tax is levied on a good,the buyers and sellers of the good share the burden,

Accepted Answer

A)   provided the tax is levied on the sellers.
B)   provided the tax is levied on the buyers.
C)   provided a portion of the tax is levied on the buyers,with the remaining portion levied on the sellers.
D)   regardless of how the tax is levied.E) A) and B)
F) B) and C)

Question 9

Economists disagree on whether labor taxes cause small or large deadweight losses.This disagreement arises primarily because economists hold different views about

Accepted Answer

A)   the size of labor taxes.
B)   the importance of labor taxes imposed by the federal government relative to the importance of labor taxes imposed by the various states.
C)   the elasticity of labor supply.
D)   the elasticity of labor demand.E) All of the above
F) A) and D)

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

Question 11

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) B) and C)

Question 12

For good X,the supply curve is the typical upward-sloping straight line,and the demand curve is the typical downward-sloping straight line.A tax of $15 per unit is imposed on good X.The tax reduces the equilibrium quantity in the market by 300 units.The deadweight loss from the tax is

Accepted Answer

A)   $1,750.
B)   $2,250.
C)   $3,000.
D)   $4,500.E) All of the above
F) A) and C)

Question 13

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

Question 14

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

Accepted Answer

A)   $10,and total surplus with the tax is $2.50.
B)   $10,and total surplus with the tax is $7.50.
C)   $20,and total surplus with the tax is $2.50.
D)   $20,and total surplus with the tax is $7.50.E) A) and B)
F) C) and D)

Question 15

Figure 8-6
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-6.The amount of the tax on each unit of the good is

Accepted Answer

A)   $6.
B)   $8.
C)   $10.
D)   $12.E) A) and C)
F) C) and D)

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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 D)
F) A) and C)

Question 18

Assume that for good X the supply curve for a good is a typical,upward-sloping straight line,and the demand curve is a typical downward-sloping straight line.If the good is taxed,and the tax is doubled,the

Accepted Answer

A)   base of the triangle that represents the deadweight loss doubles.
B)   height of the triangle that represents the deadweight loss doubles.
C)   deadweight loss of the tax quadruples.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 19

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)   The demand for cigars is less elastic than the supply of cigars.
B)   The tax causes a decrease in consumer surplus of $390 and a decrease in producer surplus of $97.50.
C)   The deadweight loss of the tax is $12.50.
D)   All of the above are correct.E) B) and C)
F) B) and D)

Question 20

Deadweight loss is the

Accepted Answer

A)   decline in total surplus that results from a tax.
B)   decline in government revenue when taxes are reduced in a market.
C)   decline in consumer surplus when a tax is placed on buyers.
D)   loss of profits to business firms when a tax is imposed.E) A) and C)
F) All of the above

Exam 8: Application: the Costs of Taxation

Deadweight loss is the

Correct Answer
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Assume that for good X the supply curve for a good is a typical,upward-sloping straight line,and the demand curve is a typical downward-sloping straight line.If the good is taxed,and the tax is doubled,the

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

Correct Answer
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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 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 per-unit burden of the tax on sellers 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.The amount of the tax on each unit of the good is

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.Total surplus without the tax is

Correct Answer
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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.The deadweight loss associated with this tax amounts to

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

Correct Answer
verified

When a country is on the downward-sloping side of the Laffer curves,a cut in the tax rate will

Correct Answer
verified

Economists disagree on whether labor taxes cause small or large deadweight losses.This disagreement arises primarily because economists hold different views about

Correct Answer
verified

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

Correct Answer
verified

For good X,the supply curve is the typical upward-sloping straight line,and the demand curve is the typical downward-sloping straight line.A tax of $15 per unit is imposed on good X.The tax reduces the equilibrium quantity in the market by 300 units.The deadweight loss from the tax is

Correct Answer
verified

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

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

Correct Answer
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The greater the elasticity of demand,the smaller the deadweight loss of a tax.

Correct Answer
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When a tax is levied on a good,the buyers and sellers of the good share the burden,

Correct Answer
verified

Exam 8: Application: the Costs of Taxation

Deadweight loss is the

Correct AnswerverifiedShow Answer

Assume that for good X the supply curve for a good is a typical,upward-sloping straight line,and the demand curve is a typical downward-sloping straight line.If the good is taxed,and the tax is doubled,the

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

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

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

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.The amount of the tax on each unit of the good is

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.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.The deadweight loss associated with this tax amounts to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When a country is on the downward-sloping side of the Laffer curves,a cut in the tax rate will

Correct AnswerverifiedShow Answer

Economists disagree on whether labor taxes cause small or large deadweight losses.This disagreement arises primarily because economists hold different views about

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

For good X,the supply curve is the typical upward-sloping straight line,and the demand curve is the typical downward-sloping straight line.A tax of $15 per unit is imposed on good X.The tax reduces the equilibrium quantity in the market by 300 units.The deadweight loss from the tax is

Correct AnswerverifiedShow Answer

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

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.Consumer surplus without the tax is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The greater the elasticity of demand,the smaller the deadweight loss of a tax.

Correct AnswerverifiedShow Answer

When a tax is levied on a good,the buyers and sellers of the good share the burden,

Correct AnswerverifiedShow Answer

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