Question 1

Figure 8-5
Suppose that the government imposes a tax of P3 - P1. 
-Refer to Figure 8-5.Producer 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) All of the above
F) A) and D)

Question 2

When a tax is imposed on a good,the resulting decrease in consumer surplus is always larger than the resulting decrease in producer surplus.

Accepted Answer

A) True 
 B)False

Question 3

Figure 8-1 
-Refer to Figure 8-1.Suppose a $3 per-unit tax is placed on this good.The amount of deadweight loss resulting from this tax is

Accepted Answer

A)   $7.50.
B)   $15.00.
C)   $22.50.
D)   $45.00.E) None of the above
F) C) and D)

Question 4

To fully understand how taxes affect economic well-being,we must compare the

Accepted Answer

A)   consumer surplus to the producer surplus.
B)   price paid by buyers to the price received by sellers.
C)   reduced welfare of buyers and sellers to the revenue raised by the government.
D)   consumer surplus to the deadweight loss.E) B) and C)
F) A) and D)

Question 5

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) None of the above
F) All of the above

Question 6

Suppose that the government imposes a tax on dairy products.The deadweight loss from this tax will likely be greater in the

Accepted Answer

A)   first year after it is imposed than in the fifth year after it is imposed because demand and supply will be more elastic in the first year than in the fifth year.
B)   first year after it is imposed than in the fifth year after it is imposed because demand and supply will be less elastic in the first year than in the fifth year.
C)   fifth year after it is imposed than in the first year after it is imposed because demand and supply will be more elastic in the first year than in the fifth year.
D)   fifth year after it is imposed than in the first year after it is imposed because demand and supply will be less elastic in the first year than in the fifth year.E) A) and D)
F) B) and C)

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 250 per month when there is no tax.Then a tax of $6 per widget is imposed.As a result,the government is able to raise $750 per month in tax revenue.We can conclude that the after-tax quantity of widgets is

Accepted Answer

A)   75 per month.
B)   100 per month.
C)   125 per month.
D)   150 per month.E) C) and D)
F) None of the above

Question 8

Taxes on labor encourage which of the following?

Accepted Answer

A)   labor demand to be more inelastic
B)   mothers to stay at home rather than work in the labor force
C)   workers to work overtime
D)   fathers to take on second jobsE) B) and C)
F) A) and B)

Question 9

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 $250.
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 C)
F) B) and D)

Question 10

Suppose Ashley needs a dog sitter so that she can travel to her sister's wedding.Ashley values dog sitting for the weekend at $200.Cami is willing to dog sit for Ashley so long as she receives at least $175.Ashley and Cami agree on a price of $185.Suppose the government imposes a tax of $30 on dog sitting.What is the deadweight loss of the tax?

Accepted Answer

A)   the maximum value that Ashley would pay for dog sitting
B)   the $30 tax
C)   the lost benefit to Ashley and Cami because after the tax,Cami will not dog sit for Ashley
D)   the lost benefit to Ashley of being unable to hire a dog sitter because Ashley is the one who would pay the taxE) A) and D)
F) A) and C)

Question 11

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) All of the above
F) A) and B)

Question 12

Suppose a tax of $1 per unit is imposed on a good.The more elastic the demand for the good,other things equal,

Accepted Answer

A)   the larger is the decrease in quantity demanded as a result of the tax.
B)   the smaller is the tax burden on buyers relative to the tax burden on sellers.
C)   the larger is the deadweight loss of the tax.
D)   All of the above are correct.E) B) and D)
F) All of the above

Question 13

Scenario 8-1
Suppose the market demand and market supply curves are given by the equations: 
-Refer to Scenario 8-1.Suppose that a tax of T is placed on buyers so that the demand curve becomes:  If T = 40,what price will buyers pay and what price will sellers receive?

Accepted Answer

Buyers will pay $80 ...

Question 14

Figure 8-11 
-Refer to Figure 8-11.The deadweight loss 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) None of the above
F) A) and B)

Question 15

When a tax is imposed on sellers,consumer surplus and producer surplus both decrease.

Accepted Answer

A) True 
 B)False

Question 16

A deadweight loss is a consequence of a tax on a good because the tax

Accepted Answer

A)   induces the government to increase its expenditures.
B)   induces buyers to consume less,and sellers to produce less.
C)   increases the equilibrium price in the market.
D)   imposes a loss on buyers that is greater than the loss to sellers.E) B) and D)
F) B) and C)

Question 17

Figure 8-9
The vertical distance between points A and C represent 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) A) and C)
F) All of the above

Question 18

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 B)
F) C) and D)

Question 19

Suppose Ashley needs a dog sitter so that she can travel to her sister's wedding.Ashley values dog sitting for the weekend at $200.Cami is willing to dog sit for Ashley so long as she receives at least $175.Ashley and Cami agree on a price of $185.Suppose the government imposes a tax of $30 on dog sitting.The tax has made Ashley and Cami worse off by a total of

Accepted Answer

A)   $30.
B)   $25.
C)   $10.
D)   $5.E) C) and D)
F) B) and D)

Question 20

The Laffer curve relates

Accepted Answer

A)   the tax rate to tax revenue raised by the tax.
B)   the tax rate to the deadweight loss of the tax.
C)   the price elasticity of supply to the deadweight loss of the tax.
D)   government welfare payments to the birth rate.E) None of the above
F) A) and D)

Exam 8: Application: The Costs of Taxation

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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Correct Answer
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To fully understand how taxes affect economic well-being,we must compare the

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Suppose a tax of $1 per unit is imposed on a good.The more elastic the demand for the good,other things equal,

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Scenario 8-1 Suppose the market demand and market supply curves are given by the equations: -Refer to Scenario 8-1.Suppose that a tax of T is placed on buyers so that the demand curve becomes: If T = 40,what price will buyers pay and what price will sellers receive?

Correct Answer
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Buyers will pay $80 ...
View Answer

A deadweight loss is a consequence of a tax on a good because the tax

Correct Answer
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The Laffer curve relates

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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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When a tax is imposed on a good,the resulting decrease in consumer surplus is always larger than the resulting decrease in producer surplus.

Correct Answer
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Figure 8-1 -Refer to Figure 8-1.Suppose a $3 per-unit tax is placed on this good.The amount of deadweight loss resulting from this tax is

Correct Answer
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Suppose that the government imposes a tax on dairy products.The deadweight loss from this tax will likely be greater in the

Correct Answer
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When a tax is imposed on sellers,consumer surplus and producer surplus both decrease.

Correct Answer
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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

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

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

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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 producer surplus with the tax is

Correct Answer
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Taxes on labor encourage which of the following?

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Exam 8: Application: The Costs of Taxation

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

Correct AnswerverifiedShow Answer

To fully understand how taxes affect economic well-being,we must compare the

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Suppose a tax of $1 per unit is imposed on a good.The more elastic the demand for the good,other things equal,

Correct AnswerverifiedShow Answer

Scenario 8-1 Suppose the market demand and market supply curves are given by the equations: -Refer to Scenario 8-1.Suppose that a tax of T is placed on buyers so that the demand curve becomes: If T = 40,what price will buyers pay and what price will sellers receive?

Correct AnswerverifiedBuyers will pay $80 ...View AnswerShow Answer

A deadweight loss is a consequence of a tax on a good because the tax

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The Laffer curve relates

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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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When a tax is imposed on a good,the resulting decrease in consumer surplus is always larger than the resulting decrease in producer surplus.

Correct AnswerverifiedShow Answer

Figure 8-1 -Refer to Figure 8-1.Suppose a $3 per-unit tax is placed on this good.The amount of deadweight loss resulting from this tax is

Correct AnswerverifiedShow Answer

Suppose that the government imposes a tax on dairy products.The deadweight loss from this tax will likely be greater in the

Correct AnswerverifiedShow Answer

When a tax is imposed on sellers,consumer surplus and producer surplus both decrease.

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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 8-9 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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Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.Producer surplus before the tax was levied is represented by area

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

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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 producer surplus with the tax is

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Taxes on labor encourage which of the following?

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Buyers will pay $80 ...
View Answer

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