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Figure 8-17 The vertical distance between points A and B represents the original tax. Figure 8-17 The vertical distance between points A and B represents the original tax. -Refer to Figure 8-17.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? 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. -Refer to Figure 8-17.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?


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

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


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

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Figure 8-11 Figure 8-11 -Refer to Figure 8-11.The length of the line segment connecting points A and B represents A) the difference between the price paid by buyers after the tax is imposed and the price received by sellers after the tax is imposed. B) the size of the tax. C) the tax wedge. D) All of the above are correct. -Refer to Figure 8-11.The length of the line segment connecting points A and B represents


A) the difference between the price paid by buyers after the tax is imposed and the price received by sellers after the tax is imposed.
B) the size of the tax.
C) the "tax wedge."
D) All of the above are correct.

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

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Figure 8-2 The vertical distance between points A and B represents a tax in the market. Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2.The per-unit burden of the tax on buyers is A) $2. B) $3. C) $4. D) $5. -Refer to Figure 8-2.The per-unit burden of the tax on buyers is


A) $2.
B) $3.
C) $4.
D) $5.

E) All of the above
F) C) and D)

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Figure 8-1 Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The area measured by J represents A) consumer surplus after the tax. B) consumer surplus before the tax. C) producer surplus after the tax. D) producer surplus before the tax. -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The area measured by J represents


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

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If the government imposes a $3 tax in a market,the equilibrium price will rise by $3.

A) True
B) False

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Figure 8-5 Suppose that the government imposes a tax of P3 - P1. Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The equilibrium price before the tax is imposed is A) P1. B) P2. C) P3. D) P4. -Refer to Figure 8-5.The equilibrium price before the tax is imposed is


A) P1.
B) P2.
C) P3.
D) P4.

E) C) and D)
F) None of the above

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

A) True
B) False

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The decrease in total surplus that results from a market distortion,such as a tax,is called a


A) wedge loss.
B) revenue loss.
C) deadweight loss.
D) consumer surplus loss.

E) A) and D)
F) B) and C)

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


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) C) and D)

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Figure 8-5 Suppose that the government imposes a tax of P3 - P1. Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The price that sellers effectively receive after the tax is imposed is A) P1. B) P2. C) P3. D) P4. -Refer to Figure 8-5.The price that sellers effectively receive after the tax is imposed is


A) P1.
B) P2.
C) P3.
D) P4.

E) A) and B)
F) A) and D)

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Figure 8-7 The vertical distance between points A and B represents a tax in the market. 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? 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. -Refer to Figure 8-7.Which of the following statements is correct?


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) All of the above
F) C) and D)

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Figure 8-4 The vertical distance between points A and B represents a tax in the market. 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 A) $12. B) between $8 and $12. C) between $5 and $8. D) $5. -Refer to Figure 8-4.The price that sellers effectively receive after the tax is imposed is


A) $12.
B) between $8 and $12.
C) between $5 and $8.
D) $5.

E) B) and D)
F) All of the above

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When a tax is imposed on a good,the


A) supply curve for the good always shifts.
B) demand curve for the good always shifts.
C) amount of the good that buyers are willing to buy at each price always remains unchanged.
D) equilibrium quantity of the good always decreases.

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

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What happens to the total surplus in a market when the government imposes a tax?


A) Total surplus increases by the amount of the tax.
B) Total surplus increases but by less than the amount of the tax.
C) Total surplus decreases.
D) Total surplus is unaffected by the tax.

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

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Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8.The tax causes consumer surplus to decrease by the area A) A. B) B+C. C) A+B+C. D) A+B+C+D+F. -Refer to Figure 8-8.The tax causes consumer surplus to decrease by the area


A) A.
B) B+C.
C) A+B+C.
D) A+B+C+D+F.

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

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


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

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Figure 8-2 The vertical distance between points A and B represents a tax in the market. Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2.Total surplus without the tax is A) $10, and total surplus with the tax is $2.50. B) $10, and total surplus with the tax is $7.50. C) $20, and total surplus with the tax is $2.50. D) $20, and total surplus with the tax is $7.50. -Refer to Figure 8-2.Total surplus without the tax is


A) $10, and total surplus with the tax is $2.50.
B) $10, and total surplus with the tax is $7.50.
C) $20, and total surplus with the tax is $2.50.
D) $20, and total surplus with the tax is $7.50.

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

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


A) The price elasticity of demand is small, and the price elasticity of supply is large.
B) The price elasticity of demand is large, and the price elasticity of supply is small.
C) The price elasticity of demand and the price elasticity of supply are both small.
D) The price elasticity of demand and the price elasticity of supply are both large.

E) A) and D)
F) B) and C)

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Labor taxes may distort labor markets greatly if


A) labor supply is highly inelastic.
B) many workers choose to work 40 hours per week regardless of their earnings.
C) the number of hours many part-time workers want to work is very sensitive to the wage rate.
D) "underground" workers do not respond to changes in the wages of legal jobs because they prefer not to pay taxes.

E) A) and D)
F) B) and D)

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