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Exam 8: Applications: the Costs of Taxation

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Question 81

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

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 C)

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Question 82

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

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

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

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Question 83

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Suppose a tax of $3 is imposed on each new garden hose that is sold, resulting in a deadweight loss of $22,500. The supply curve is a typical upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. Before the tax was imposed, the equilibrium quantity of garden hoses was 100,000. We can conclude that the equilibrium quantity of garden hoses after the tax is imposed is

Figure 8-12 -Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The per-unit burden of the tax on sellers is

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 consumer surplus is

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

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

If the tax on gasoline increases from $2 to $4 per gallon, the deadweight loss from the tax increases by a factor of

Figure 8-11 -Refer to Figure 8-11. The price labeled as P₃ on the vertical axis represents the price

Suppose a tax of $3 per unit is imposed on a good. The supply curve is a typical upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. The tax decreases consumer surplus by $3,900 and decreases producer surplus by $3,000. The tax generates tax revenue of $6,000. The tax decreased the equilibrium quantity of the good from

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 B on the curve, then an increase in the tax rate will

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

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The total surplus without the tax is

A tax levied on the sellers of a good shifts the

Figure 8-22 -Refer to Figure 8-22. Suppose the government initially imposes a $3 per-unit tax on this good. Now suppose the government is deciding whether to lower the tax to $1.50 or raise it to $4.50. Which of the following statements is correct?

In which of the following cases is it most likely that an increase in the size of a tax will decrease tax revenue?

Which of the following events always would increase the size of the deadweight loss that arises from the tax on gasoline?

The size of a tax and the deadweight loss that results from the tax are

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. After the tax is levied, consumer surplus is represented by area

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