Question 1

For a good that is taxed,the area on the relevant supply-and-demand graph that represents government's tax revenue is a

Accepted Answer

A)   triangle.
B)   rectangle.
C)   trapezoid.
D)   None of the above is correct; government's tax revenue is the area between the supply and demand curves,above the horizontal axis,and below the effective price to buyers.E) B) and D)
F) None of the above

Question 2

Figure 8-10 
-Refer to Figure 8-10.Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2.The price that sellers receive is

Accepted Answer

A)   P0.
B)   P2.
C)   P5.
D)   P8.E) A) and C)
F) None of the above

Question 3

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)   The loss of producer surplus that is associated with some sellers dropping out of the market as a result of the tax is $30.
B)   The loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is $60.
C)   The loss of consumer surplus caused by this tax exceeds the loss of producer surplus caused by this tax.
D)   This tax produces $200 in tax revenue for the government.E) A) and B)
F) C) and D)

Question 4

If a tax shifts the supply curve upward (or to the left) ,we can infer that the tax was levied on

Accepted Answer

A)   buyers of the good.
B)   sellers of the good.
C)   both buyers and sellers of the good.
D)   We cannot infer anything because the shift described is not consistent with a tax.E) A) and B)
F) A) and C)

Question 5

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

Accepted Answer

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

Question 6

Other things equal,the deadweight loss of a tax

Accepted Answer

A)   decreases as the size of the tax increases.
B)   increases as the size of the tax increases,but the increase in the deadweight loss is less rapid than the increase in the size of the tax.
C)   increases as the size of the tax increases,and the increase in the deadweight loss is more rapid than the increase in the size of the tax.
D)   increases as the price elasticities of demand and/or supply increase,but the deadweight loss does not change as the size of the tax increases.E) A) and D)
F) A) and C)

Question 7

Figure 8-3
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-3.The price that buyers effectively pay after the tax is imposed is

Accepted Answer

A)   P1.
B)   P2.
C)   P3.
D)   P4.E) A) and B)
F) C) and D)

Question 8

Figure 8-15 
-Refer to Figure 8-15.Suppose the government imposes a $1 tax in each of the four markets represented by demand curves D1,D2,D3,and D4.The deadweight will be the largest in the market represented by

Accepted Answer

A)   D1.
B)   D2.
C)   D3.
D)   D4.E) A) and B)
F) None of the above

Question 9

Suppose the federal government doubles the gasoline tax.The deadweight loss associated with the tax

Accepted Answer

A)   also doubles.
B)   triples.
C)   quadruples.
D)   rises by a factor of 8.E) None of the above
F) C) and D)

Question 10

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

Accepted Answer

A)   $4,000.
B)   $5,000.
C)   $6,000.
D)   $10,000.E) A) and C)
F) B) and C)

Question 11

Taxes are costly to market participants because they

Accepted Answer

A)   transfer resources from market participants to the government.
B)   alter incentives.
C)   distort market outcomes.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 12

If the size of a tax doubles,the deadweight loss doubles.

Accepted Answer

A) True 
 B)False

Question 13

Figure 8-6
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-6.Without a tax,total surplus in this market is

Accepted Answer

A)   $3,000.
B)   $4,800.
C)   $6,000.
D)   $7,200.E) C) and D)
F) A) and B)

Question 14

Figure 8-11 1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10.Then,when the tax is imposed, A)  consumer surplus decreases by $13. B)  producer surplus decreases by $13. C)  the deadweight loss amounts to $6. D)  the amount of the good that is sold remains unchanged." 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)   consumer surplus decreases by $13.
B)   producer surplus decreases by $13.
C)   the deadweight loss amounts to $6.
D)   the amount of the good that is sold remains unchanged.E) All of the above
F) A) and D)

Question 15

Scenario 8-1
Erin would be willing to pay as much as $100 per week to have her house cleaned.Ernesto's opportunity cost of cleaning Erin's house is $70 per week.
-Refer to Scenario 8-1.If Erin pays Ernesto $80 to clean her house,Erin's consumer surplus is

Accepted Answer

A)   $80.
B)   $30.
C)   $20.
D)   $10.E) All of the above
F) A) and B)

Question 16

When a good is taxed,the burden of the tax

Accepted Answer

A)   falls more heavily on the side of the market that is more elastic.
B)   falls more heavily on the side of the market that is more inelastic.
C)   falls more heavily on the side of the market that is closer to unit elastic.
D)   is distributed independently of relative elasticities of supply and demand.E) A) and B)
F) C) and D)

Question 17

In the early 1980s,which of the following countries had a marginal tax rate of about 80 percent?

Accepted Answer

A)   United States
B)   Canada
C)   Japan
D)   SwedenE) A) and D)
F) A) and B)

Question 18

Taxes affect market participants by increasing the price paid by the buyer and received by the seller.

Accepted Answer

A) True 
 B)False

Question 19

Figure 8-8
Suppose the government imposes a $10 per unit tax on a good. 
-Refer to Figure 8-8.The tax causes producer surplus to decrease by the area

Accepted Answer

A)   D+F.
B)   D+F+G.
C)   D+F+J.
D)   D+F+G+H.E) A) and B)
F) C) and D)

Question 20

Figure 8-15 
-Refer to Figure 8-15.Suppose the government imposes a $1 tax in each of the four markets represented by demand curves D1,D2,D3,and D4.The deadweight will be the smallest in the market represented by

Accepted Answer

A)   D1.
B)   D2.
C)   D3.
D)   D4.E) None of the above
F) A) and B)

Exam 8: Application: the Costs of Taxation

For a good that is taxed,the area on the relevant supply-and-demand graph that represents government's tax revenue is a

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Scenario 8-1 Erin would be willing to pay as much as $100 per week to have her house cleaned.Ernesto's opportunity cost of cleaning Erin's house is $70 per week. -Refer to Scenario 8-1.If Erin pays Ernesto $80 to clean her house,Erin's consumer surplus is

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

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In the early 1980s,which of the following countries had a marginal tax rate of about 80 percent?

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If the size of a tax doubles,the deadweight loss doubles.

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Taxes are costly to market participants because they

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Other things equal,the deadweight loss of a tax

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Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3.The price that buyers effectively pay after the tax is imposed is

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Figure 8-15 -Refer to Figure 8-15.Suppose the government imposes a $1 tax in each of the four markets represented by demand curves D1,D2,D3,and D4.The deadweight will be the smallest in the market represented by

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Figure 8-15 -Refer to Figure 8-15.Suppose the government imposes a $1 tax in each of the four markets represented by demand curves D1,D2,D3,and D4.The deadweight will be the largest in the market represented by

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Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8.The tax causes producer surplus to decrease by the area

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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 amount of amount of deadweight loss as a result of the tax is

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Taxes affect market participants by increasing the price paid by the buyer and received by the seller.

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When a good is taxed,the burden of the tax

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Suppose the federal government doubles the gasoline tax.The deadweight loss associated with the tax

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If a tax shifts the supply curve upward (or to the left) ,we can infer that the tax was levied on

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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 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.Without a tax,total surplus in this market is

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Figure 8-10 -Refer to Figure 8-10.Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2.The price that sellers receive 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 8-11 -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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