Question 1

Figure 8-13 
-Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The tax causes the price paid by buyers to

Accepted Answer

A)   decrease by $5.
B)   increase by $5.
C)   increase by $3.
D)   increase by $2.E) B) and C)
F) A) and C)

Question 2

A decrease in the size of a tax is most likely to increase tax revenue in a market with

Accepted Answer

A)   elastic demand and elastic supply.
B)   elastic demand and inelastic supply.
C)   inelastic demand and elastic supply.
D)   inelastic demand and inelastic supply.E) A) and B)
F) All of the above

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)   $35.00.
B)   $45.25.
C)   $52.50.
D)   $105.00.E) A) and B)
F) B) and C)

Question 4

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 buyers pay is

Accepted Answer

A)   P0.
B)   P2.
C)   P5.
D)   P8.E) A) and B)
F) All of the above

Question 5

Figure 8-5
Suppose that the government imposes a tax of P3 - P1. 
-Refer to Figure 8-5. Consumer surplus before the tax was levied is represented by area

Accepted Answer

A)   A.
B)   A+B+C.
C)   D+H+F.
D)   F.E) B) and C)
F) All of the above

Question 6

Figure 8-3
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-3. The amount of the tax on each unit of the good is

Accepted Answer

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

Question 7

Figure 8-25 
-Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is consumer surplus after the tax is imposed?

Accepted Answer

Consumer s...

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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 10

Figure 8-1 
-Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by I+Y represents the

Accepted Answer

A)   deadweight loss due to the tax.
B)   loss in consumer surplus due to the tax.
C)   loss in producer surplus due to the tax.
D)   total surplus before the tax.E) A) and D)
F) B) and C)

Question 11

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. Without the tax, the total surplus is

Accepted Answer

A)   [1/2 x P0-P5)  x Q5] + [1/2 x P5-0)  x Q5].
B)   [1/2 x P0-P2)  x Q2] +[P2-P8)  x Q2] + [1/2 x P8-0)  x Q2].
C)   P2-P8)  x Q2.
D)   1/2 x P2-P8)  x Q5-Q2) .E) C) and D)
F) All of the above

Question 12

If a tax shifts the demand curve downward 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) All of the above
F) A) and B)

Question 13

Figure 8-3
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-3. The equilibrium price before the tax is imposed is

Accepted Answer

A)   P1.
B)   P2.
C)   P3.
D)   P4.E) B) and D)
F) None of the above

Question 14

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) None of the above
F) All of the above

Question 15

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

Question 16

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) All of the above
F) None of the above

Question 17

A tax placed on a good

Accepted Answer

A)   causes the effective price to sellers to increase.
B)   affects the welfare of buyers of the good but not the welfare of sellers.
C)   causes the equilibrium quantity of the good to decrease.
D)   creates a burden that is usually borne entirely by the sellers of the good.E) B) and C)
F) A) and B)

Question 18

Scenario 8-3
Suppose the market demand and market supply curves are given by the equations: 
-Refer to Scenario 8-3. Suppose that a tax of T is placed on buyers so that the demand curve becomes:  What price will sellers receive and what price will buyers pay after the tax is imposed?

Accepted Answer

Buyers wil...

Question 19

Figure 8-2
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-2. The amount of tax revenue received by the government is

Accepted Answer

A)   $2.50.
B)   $4.
C)   $5.
D)   $9.E) A) and B)
F) A) and C)

Question 20

The size of the deadweight loss generated from a tax is affected by the

Accepted Answer

A)   elasticities of both supply and demand.
B)   elasticity of demand only.
C)   elasticity of supply only.
D)   total revenue collected by the government.E) A) and B)
F) A) and C)

Exam 8: Application: the Costs of Taxation

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

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

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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 amount of tax revenue received by the government is

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A tax placed on a good

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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

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

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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 8-10 -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 buyers pay is

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Figure 8-1 -Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by I+Y represents the

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Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is consumer surplus after the tax is imposed?

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Figure 8-13 -Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The tax causes the price paid by buyers to

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Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. Consumer surplus before the tax was levied is represented by area

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If a tax shifts the demand curve downward or to the left) , we can infer that the tax was levied on

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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. Without the tax, the total surplus is

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A decrease in the size of a tax is most likely to increase tax revenue in a market with

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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 amount of the tax on each unit of the good is

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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 equilibrium price before the tax is imposed is

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Scenario 8-3 Suppose the market demand and market supply curves are given by the equations: -Refer to Scenario 8-3. Suppose that a tax of T is placed on buyers so that the demand curve becomes: What price will sellers receive and what price will buyers pay after the tax is imposed?

Correct AnswerverifiedBuyers wil...View AnswerShow Answer

The size of the deadweight loss generated from a tax is affected by the

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the Social Security tax
the ...
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Consumer s...
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Buyers wil...
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