Question 1

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

Accepted Answer

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

Question 2

The demand for energy drinks is more elastic than the demand for milk. Would a tax on energy drinks or a tax on milk have a larger deadweight loss? Explain.

Accepted Answer

A tax on energy drinks would have a larg...

Question 3

Provide several examples of important taxes on labor in the United States. For a typical worker, what is the marginal tax rate on labor income once all the labor taxes are summed?

Accepted Answer

*the Social Security tax
*the ...

Question 4

Suppose a tax is imposed on bananas. In which of the following cases will the tax cause the equilibrium quantity of bananas to shrink by the largest amount?

Accepted Answer

A)  The response of buyers to a change in the price of bananas is strong, and the response of sellers to a change in the price of bananas is weak.
B)  The response of sellers to a change in the price of bananas is strong, and the response of buyers to a change in the price of bananas is weak.
C)  The response of buyers and sellers to a change in the price of bananas is strong.
D)  The response of buyers and sellers to a change in the price of bananas is weak.E) A) and B)
F) C) and D)

Question 5

Figure 8-8
​
​
 Graph (a)

Graph (b)

Graph (c)

​
​
-Refer to Figure 8-8. Which graph correctly illustrates the relationship between the size of a tax and the size of the deadweight loss associated with the tax?

Accepted Answer

A)  Graph (a) 
B)  Graph (b) 
C)  Graph (c) 
D)  Graph (d) E) B) and C)
F) B) and D)

Question 6

Figure 8-10
​
  ​
-Refer to Figure 8-10. Suppose the government places a $3 tax per unit on this good. What price will sellers receive for the good after the tax is imposed?

Accepted Answer

Sellers will receive...

Question 7

Suppose that a university charges students a $100 "tax" to register for business classes. The next year the university raises the "tax" to $150. The deadweight loss from the "tax" triples.

Accepted Answer

A) True 
 B)False

Question 8

A tax affects

Accepted Answer

A)  buyers only.
B)  sellers only.
C)  buyers and sellers only.
D)  buyers, sellers, and the government.E) A) and C)
F) C) and D)

Question 9

Figure 8-3
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-3. The deadweight loss associated with this tax amounts to

Accepted Answer

A)  $80, and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses.
B)  $80, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers.
C)  $60, and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses.
D)  $60, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers.E) C) and D)
F) A) and B)

Question 10

Which of the following quantities decrease in response to a tax on a good?

Accepted Answer

A)  The equilibrium quantity in the market for the good, the effective price of the good paid by buyers, and consumer surplus
B)  The equilibrium quantity in the market for the good, producer surplus, and the well-being of buyers of the good
C)  The effective price received by sellers of the good, the wedge between the effective price paid by buyers and the effective price received by sellers, and consumer surplus
D)  It depends on whether the tax is levied on buyers or on sellers.E) B) and D)
F) A) and B) B

Question 11

When a tax is imposed, the loss of consumer surplus and producer surplus as a result of the tax exceeds the tax revenue collected by the government.

Accepted Answer

A) True 
 B)False

Question 12

Figure 8-3
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-3. 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)  Total surplus after the tax is imposed is $500.E) None of the above
F) All of the above

Question 13

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

Accepted Answer

A)  $4.
B)  $6.
C)  $16.
D)  $18.E) All of the above
F) None of the above A

Question 14

Refer to Scenario 8-3. Suppose that a tax of T is placed on buyers so that the demand curve becomes:
 $$Q ^ { D } = 200 - ( P + T )$$ If T = 40, how much is the burden of the tax on the buyers and on the sellers?

Accepted Answer

The burden of the ta...

Question 15

Using demand and supply diagrams, show the difference in deadweight loss between (a) a market with inelastic demand and supply and (b) a market with elastic demand and supply.

Accepted Answer

The answer of Using demand and supply diagrams, show the...

Question 16

Taxes drive a wedge into the market by raising the price that sellers receive and lowering the price that buyers pay.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False  False

Question 18

Suppose that the market for product X is characterized by a typical, downward-sloping, linear demand curve and a typical, upward-sloping, linear supply curve. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $6 tax per unit?

Accepted Answer

The deadweight loss will be $1...

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Figure 8-2
The vertical distance between points C and D represents a tax in the market.
​  ​
​
​
​
-Refer to Figure 8-2. The amount of the tax on each unit of the good is

Accepted Answer

A)  $1.
B)  $6.
C)  $10.
D)  $4.E) B) and C)
F) None of the above

Exam 8: Applications: The Costs of Taxation

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

Correct AnswerverifiedShow Answer

The demand for energy drinks is more elastic than the demand for milk. Would a tax on energy drinks or a tax on milk have a larger deadweight loss? Explain.

Correct AnswerverifiedA tax on energy drinks would have a larg...View AnswerShow Answer

Provide several examples of important taxes on labor in the United States. For a typical worker, what is the marginal tax rate on labor income once all the labor taxes are summed?

Correct Answerverified*the Social Security tax*the ...View AnswerShow Answer

Suppose a tax is imposed on bananas. In which of the following cases will the tax cause the equilibrium quantity of bananas to shrink by the largest amount?

Correct AnswerverifiedShow Answer

Figure 8-8 ​ ​ Graph (a) Graph (b) Graph (c) ​ ​ -Refer to Figure 8-8. Which graph correctly illustrates the relationship between the size of a tax and the size of the deadweight loss associated with the tax?

Correct AnswerverifiedShow Answer

Figure 8-10 ​ ​ -Refer to Figure 8-10. Suppose the government places a $3 tax per unit on this good. What price will sellers receive for the good after the tax is imposed?

Correct AnswerverifiedSellers will receive...View AnswerShow Answer

Suppose that a university charges students a $100 "tax" to register for business classes. The next year the university raises the "tax" to $150. The deadweight loss from the "tax" triples.

Correct AnswerverifiedShow Answer

A tax affects

Correct AnswerverifiedShow Answer

Figure 8-3 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-3. The deadweight loss associated with this tax amounts to

Correct AnswerverifiedShow Answer

Which of the following quantities decrease in response to a tax on a good?

Correct AnswerverifiedB

When a tax is imposed, the loss of consumer surplus and producer surplus as a result of the tax exceeds the tax revenue collected by the government.

Correct AnswerverifiedShow Answer

Figure 8-3 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-3. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedA

Refer to Scenario 8-3. Suppose that a tax of T is placed on buyers so that the demand curve becomes: QD=200−(P+T)Q ^ { D } = 200 - ( P + T )QD=200−(P+T) If T = 40, how much is the burden of the tax on the buyers and on the sellers?

Correct AnswerverifiedThe burden of the ta...View AnswerShow Answer

Using demand and supply diagrams, show the difference in deadweight loss between (a) a market with inelastic demand and supply and (b) a market with elastic demand and supply.

Correct AnswerverifiedShow Answer

Taxes drive a wedge into the market by raising the price that sellers receive and lowering the price that buyers pay.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedFalse

Suppose that the market for product X is characterized by a typical, downward-sloping, linear demand curve and a typical, upward-sloping, linear supply curve. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $6 tax per unit?

Correct AnswerverifiedThe deadweight loss will be $1...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Figure 8-2 The vertical distance between points C and D represents a tax in the market. ​ ​ ​ ​ ​ -Refer to Figure 8-2. The amount of the tax on each unit of the good is

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
A tax on energy drinks would have a larg...
View Answer

Correct Answer
verified
the Social Security tax
the ...
View Answer

Correct Answer
verified

Figure 8-8 Graph (a) Graph (b) Graph (c) -Refer to Figure 8-8. Which graph correctly illustrates the relationship between the size of a tax and the size of the deadweight loss associated with the tax?

Correct Answer
verified

Figure 8-10 -Refer to Figure 8-10. Suppose the government places a $3 tax per unit on this good. What price will sellers receive for the good after the tax is imposed?

Correct Answer
verified
Sellers will receive...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
B

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified
A

Refer to Scenario 8-3. Suppose that a tax of T is placed on buyers so that the demand curve becomes: $Q ^ { D } = 200 - ( P + T )$ If T = 40, how much is the burden of the tax on the buyers and on the sellers?

Correct Answer
verified
The burden of the ta...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
False

Correct Answer
verified
The deadweight loss will be $1...
View Answer

Correct Answer
verified

Figure 8-2 The vertical distance between points C and D represents a tax in the market. -Refer to Figure 8-2. The amount of the tax on each unit of the good is

Correct Answer
verified