Question 1

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

Question 2

Tax revenue equals the size of the tax multiplied by the quantity sold in the market after the tax is levied.

Accepted Answer

A) True 
 B)False

Question 3

If a tax shifts the supply curve downward (or to the right) , 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 4

Figure 8-4
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-4. The price that sellers effectively receive after the tax is imposed is

Accepted Answer

A)  $12.
B)  between $8 and $12.
C)  between $5 and $8.
D)  $5.E) None of the above
F) All of the above

Question 5

Figure 8-8
Suppose the government imposes a $10 per unit tax on a good. 
-Refer to Figure 8-8. The decrease in consumer and producer surpluses that is not offset by tax revenue is the area

Accepted Answer

A)  C.
B)  F.
C)  G.
D)  C+F.E) A) and B)
F) None of the above

Question 6

The demand for potted plants is more elastic than the demand for wallpaper. Suppose the government levies an equivalent tax on potted plants and wallpaper. The deadweight loss would be larger in the market for

Accepted Answer

A)  potted plants than in the market for wallpaper because the quantity of potted plants would fall by more than the quantity of wallpaper.
B)  potted plants than in the market for wallpaper because the quantity of wallpaper would fall by more than the quantity of potted plants.
C)  wallpaper than in the market for potted plants because the quantity of potted plants would fall by more than the quantity of wallpaper.
D)  wallpaper than in the market for potted plants because the quantity of wallpaper would fall by more than the quantity of potted plants.E) B) and D)
F) A) and C)

Question 7

To measure the gains and losses from a tax on a good, economists use the tools of

Accepted Answer

A)  macroeconomics.
B)  welfare economics.
C)  international-trade theory.
D)  circular-flow analysis.E) B) and C)
F) All of the above

Question 8

A tax levied on the buyers of a good shifts the

Accepted Answer

A)  supply curve upward (or to the left) .
B)  supply curve downward (or to the right) .
C)  demand curve downward (or to the left) .
D)  demand curve upward (or to the right) .E) B) and D)
F) All of the above

Question 9

Taxes create deadweight losses.

Accepted Answer

A) True 
 B)False

Question 10

A tax on a good

Accepted Answer

A)  raises the price that buyers effectively pay and raises the price that sellers effectively receive.
B)  raises the price that buyers effectively pay and lowers the price that sellers effectively receive.
C)  lowers the price that buyers effectively pay and raises the price that sellers effectively receive.
D)  lowers the price that buyers effectively pay and lowers the price that sellers effectively receive.E) A) and C)
F) A) and B)

Question 11

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 12

In 1776, the American Revolution was sparked by anger over

Accepted Answer

A)  the extravagant lifestyle of British royalty.
B)  the crimes of British soldiers stationed in the American colonies.
C)  British taxes imposed on the American colonies.
D)  the failure of the British to protect American colonists from attack by hostile Native Americans.E) B) and C)
F) None of the above

Question 13

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 the tax on each unit of the good is

Accepted Answer

A)  $20.
B)  $200.
C)  $300.
D)  $500.E) A) and C)
F) B) and D)

Question 14

The deadweight loss of a tax rises even more rapidly than the size of the tax.

Accepted Answer

A) True 
 B)False

Question 15

Figure 8-8
Suppose the government imposes a $10 per unit tax on a good. 
-Refer to Figure 8-8. After the tax goes into effect, producer surplus is the area

Accepted Answer

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

Question 16

Figure 8-9
The vertical distance between points A and C represent a tax in the market. 
-Refer to Figure 8-9. The equilibrium price and quantity before the imposition of the tax is

Accepted Answer

A)  P=$800 and Q=20.
B)  P=$600 and Q=20.
C)  P=$300 and Q=20.
D)  P=$600 and Q=40.E) A) and B)
F) A) and C)

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) C) and D)
F) A) and D)

Question 18

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

Question 19

The benefit to buyers of participating in a market is measured by

Accepted Answer

A)  consumer surplus.
B)  producer surplus.
C)  total surplus.
D)  deadweight loss.E) A) and B)
F) All of the above

Question 20

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

Accepted Answer

A)  consumer surplus after the tax.
B)  consumer surplus before the tax.
C)  producer surplus after the tax.
D)  producer surplus before the tax.E) B) and C)
F) A) and D)

Exam 8: Application: The Costs of Taxation

The benefit to buyers of participating in a market is measured by

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In 1776, the American Revolution was sparked by anger over

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Taxes create deadweight losses.

Correct AnswerverifiedShow Answer

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 the tax on each unit of the good is

Correct AnswerverifiedShow Answer

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. After the tax goes into effect, producer surplus is the area

Correct AnswerverifiedShow Answer

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 AnswerverifiedShow Answer

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4. The price that sellers effectively receive after the tax is imposed is

Correct AnswerverifiedShow Answer

A tax levied on the buyers of a good shifts the

Correct AnswerverifiedShow Answer

The demand for potted plants is more elastic than the demand for wallpaper. Suppose the government levies an equivalent tax on potted plants and wallpaper. The deadweight loss would be larger in the market for

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

Taxes are costly to market participants because they

Correct AnswerverifiedShow Answer

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. The decrease in consumer and producer surpluses that is not offset by tax revenue is the area

Correct AnswerverifiedShow Answer

To measure the gains and losses from a tax on a good, economists use the tools of

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Tax revenue equals the size of the tax multiplied by the quantity sold in the market after the tax is levied.

Correct AnswerverifiedShow Answer

The deadweight loss of a tax rises even more rapidly than the size of the tax.

Correct AnswerverifiedShow Answer

A tax on a good

Correct AnswerverifiedShow Answer

Figure 8-9 The vertical distance between points A and C represent a tax in the market. -Refer to Figure 8-9. The equilibrium price and quantity before the imposition of the tax is

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified