Question 1

Which of the following is a tax on labor?

Accepted Answer

A)   Medicare tax
B)   inheritance tax
C)   sales tax
D)   All of the above are labor taxes.E) None of the above
F) B) and D)

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. With the tax, the producer surplus is

Accepted Answer

A)   P5-0)  x Q5.
B)   1/2 x P5-0)  x Q5.
C)   P8-0)  x Q2.
D)   1/2 x P8-0)  x Q2.E) A) and B)
F) A) and C)

Question 3

If T represents the size of the tax on a good and Q represents the quantity of the good that is sold, total tax revenue received by government can be expressed as

Accepted Answer

A)   T/Q.
B)   T+Q.
C)   TxQ.
D)   TxQ) /Q.E) None of the above
F) A) and C)

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Figure 8-19
The vertical distance between points A and B represents the original tax. 
-Refer to Figure 8-19. The original tax can be represented by the vertical distance AB. Suppose the government is deciding whether to lower the tax to CD or raise it to FG. Which of the following statements is correct?

Accepted Answer

A)   Compared to the original tax, the larger tax will decrease both tax revenue and deadweight loss.
B)   Compared to the original tax, the smaller tax will increase both tax revenue and deadweight loss.
C)   Compared to the original tax, the larger tax will decrease tax revenue and increase deadweight loss.
D)   Both a and b are correct.E) None of the above
F) B) and D)

Question 6

The deadweight loss from a tax

Accepted Answer

A)   does not vary in amount when the price elasticity of demand changes.
B)   does not vary in amount when the amount of the tax per unit changes.
C)   is larger, the larger is the amount of the tax per unit.
D)   is smaller, the larger is the amount of the tax per unit.E) None of the above
F) A) and B)

Question 7

Figure 8-8
Suppose the government imposes a $10 per unit tax on a good. 
-Refer to Figure 8-8. One effect of the tax is to

Accepted Answer

A)   reduce consumer surplus from $180 to $72.
B)   reduce producer surplus from $96 to $24.
C)   create a deadweight loss of $72.
D)   All of the above are correct.E) None of the above
F) A) and B)

Question 8

Figure 8-23. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. 
-Refer to Figure 8-23. If the economy is at point A on the curve, then a decrease in the tax rate will

Accepted Answer

A)   increase the deadweight loss of the tax and increase tax revenue.
B)   increase the deadweight loss of the tax and decrease tax revenue.
C)   decrease the deadweight loss of the tax and increase tax revenue.
D)   decrease the deadweight loss of the tax and decrease tax revenue.E) B) and C)
F) A) and B)

Question 9

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,

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) None of the above
F) All of the above

Question 10

When the government places a tax on a product, the cost of the tax to buyers and sellers

Accepted Answer

A)   is less than the revenue raised from the tax by the government.
B)   is equal to the revenue raised from the tax by the government.
C)   exceeds the revenue raised from the tax by the government.
D)   Without additional information, such as the elasticity of demand for this product, it is impossible to compare the cost of a tax to buyers and sellers with tax revenue.E) A) and B)
F) A) and C)

Question 11

As the size of a tax rises, the deadweight loss

Accepted Answer

A)   rises, and tax revenue first rises, then falls.
B)   rises as does tax revenue.
C)   falls, and tax revenue first rises, then falls.
D)   falls as does tax revenue.E) All of the above
F) B) and C)

Question 12

Figure 8-29 
-Refer to Figure 8-29. If you were a policymaker choosing between a $3, $6, or $9 tax, which would you choose and why?

Accepted Answer

If the objective is to maximize tax reve...

Question 13

The amount of deadweight loss that results from a tax of a given size is determined by

Accepted Answer

A)   whether the tax is levied on buyers or sellers.
B)   the number of buyers in the market relative to the number of sellers.
C)   the price elasticities of demand and supply.
D)   the ratio of the tax per unit to the effective price received by sellers.E) All of the above
F) A) and D)

Question 14

Which of the following scenarios is not consistent with the Laffer curve?

Accepted Answer

A)   The tax rate is very low, and tax revenue is very low.
B)   The tax rate is very high, and tax revenue is very low.
C)   The tax rate is very high, and tax revenue is very high.
D)   The tax rate is moderate between very high and very low) , and tax revenue is relatively high.E) All of the above
F) B) and C)

Question 15

Figure 8-22 
-Refer to Figure 8-22. Suppose the government changed the per-unit tax from $3.00 to $4.50. Compared to the original tax rate, this higher tax rate would

Accepted Answer

A)   increase tax revenue and increase the deadweight loss from the tax.
B)   increase tax revenue and decrease the deadweight loss from the tax.
C)   decrease tax revenue and increase the deadweight loss from the tax.
D)   decrease tax revenue and decrease the deadweight loss from the tax.E) B) and D)
F) All of the above

Question 16

An increase 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 C)
F) A) and B)

Question 17

Figure 8-6
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-6. When the tax is imposed in this market, consumer surplus is

Accepted Answer

A)   $600.
B)   $900.
C)   $1,500.
D)   $3,000.E) None of the above
F) A) and D)

Question 18

Suppose a tax of $0.50 per unit on a good creates a deadweight loss of $100. If the tax is increased to $2.50 per unit, the deadweight loss from the new tax would be

Accepted Answer

A)   $200.
B)   $250.
C)   $500.
D)   $2,500.E) B) and D)
F) None of the above

Question 19

John has been in the habit of mowing Willa's lawn each week for $20. John's opportunity cost is $15, and Willa would be willing to pay $25 to have her lawn mowed. What is the maximum tax the government can impose on lawn mowing without discouraging John and Willa from continuing their mutually beneficial arrangement?

Accepted Answer

If the tax is less than $10, there will ...

Question 20

Figure 8-19
The vertical distance between points A and B represents the original tax. 
-Refer to Figure 8-19. The original tax can be represented by the vertical distance AB. Suppose the government is deciding whether to lower the tax to CD or raise it to FG. Which of the following statements is not correct?

Accepted Answer

A)   Compared to the original tax, the larger tax will increase tax revenue.
B)   Compared to the original tax, the smaller tax will decrease deadweight loss.
C)   Compared to the original tax, the smaller tax will decrease tax revenue.
D)   Compared to the original tax, the larger tax will increase deadweight loss.E) A) and B)
F) All of the above

Exam 8: Application: the Costs of Taxation

Suppose a tax of $0.50 per unit on a good creates a deadweight loss of $100. If the tax is increased to $2.50 per unit, the deadweight loss from the new tax would be

Correct Answer
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Which of the following scenarios is not consistent with the Laffer curve?

Correct Answer
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Figure 8-29 -Refer to Figure 8-29. If you were a policymaker choosing between a $3, $6, or $9 tax, which would you choose and why?

Correct Answer
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If the objective is to maximize tax reve...
View Answer

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. When the tax is imposed in this market, consumer surplus is

Correct Answer
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Correct Answer
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If T represents the size of the tax on a good and Q represents the quantity of the good that is sold, total tax revenue received by government can be expressed as

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
If the tax is less than $10, there will ...
View Answer

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

Correct Answer
verified

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. One effect of the tax is to

Correct Answer
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The deadweight loss from a tax

Correct Answer
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Which of the following is a tax on labor?

Correct Answer
verified

Figure 8-23. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-23. If the economy is at point A on the curve, then a decrease in the tax rate will

Correct Answer
verified

When the government places a tax on a product, the cost of the tax to buyers and sellers

Correct Answer
verified

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. With the tax, the producer surplus is

Correct Answer
verified

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

Correct Answer
verified

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,

Correct Answer
verified

The amount of deadweight loss that results from a tax of a given size is determined by

Correct Answer
verified

As the size of a tax rises, the deadweight loss

Correct Answer
verified

Figure 8-22 -Refer to Figure 8-22. Suppose the government changed the per-unit tax from $3.00 to $4.50. Compared to the original tax rate, this higher tax rate would

Correct Answer
verified

Exam 8: Application: the Costs of Taxation

Suppose a tax of $0.50 per unit on a good creates a deadweight loss of $100. If the tax is increased to $2.50 per unit, the deadweight loss from the new tax would be

Correct AnswerverifiedShow Answer

Which of the following scenarios is not consistent with the Laffer curve?

Correct AnswerverifiedShow Answer

Figure 8-29 -Refer to Figure 8-29. If you were a policymaker choosing between a $3, $6, or $9 tax, which would you choose and why?

Correct AnswerverifiedIf the objective is to maximize tax reve...View AnswerShow Answer

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. When the tax is imposed in this market, consumer surplus is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If T represents the size of the tax on a good and Q represents the quantity of the good that is sold, total tax revenue received by government can be expressed as

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedIf the tax is less than $10, there will ...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. One effect of the tax is to

Correct AnswerverifiedShow Answer

The deadweight loss from a tax

Correct AnswerverifiedShow Answer

Which of the following is a tax on labor?

Correct AnswerverifiedShow Answer

Figure 8-23. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-23. If the economy is at point A on the curve, then a decrease in the tax rate will

Correct AnswerverifiedShow Answer

When the government places a tax on a product, the cost of the tax to buyers and sellers

Correct AnswerverifiedShow Answer

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. With the tax, the producer surplus is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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,

Correct AnswerverifiedShow Answer

The amount of deadweight loss that results from a tax of a given size is determined by

Correct AnswerverifiedShow Answer

As the size of a tax rises, the deadweight loss

Correct AnswerverifiedShow Answer

Figure 8-22 -Refer to Figure 8-22. Suppose the government changed the per-unit tax from $3.00 to $4.50. Compared to the original tax rate, this higher tax rate would

Correct AnswerverifiedShow Answer

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If the objective is to maximize tax reve...
View Answer

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If the tax is less than $10, there will ...
View Answer

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