Question 1

Suppose the tax on gasoline is raised from $0.50 per gallon to $2.50 per gallon. As a result,

Accepted Answer

A)  tax revenue necessarily increases.
B)  the deadweight loss of the tax necessarily increases.
C)  the demand curve for gasoline necessarily becomes steeper.
D)  All of the above are correct.E) A) and D)
F) C) and D)

Question 2

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

Question 3

The higher a country's tax rates, the more likely that country will be

Accepted Answer

A)  at the top of the Laffer curve.
B)  on the positively sloped part of the Laffer curve.
C)  on the negatively sloped part of the Laffer curve.
D)  experiencing small deadweight losses.E) A) and C)
F) A) and D)

Question 4

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

Accepted Answer

A)  P1.
B)  P2.
C)  P3.
D)  P4.E) A) and D)
F) All of the above

Question 5

Anger over British taxes played a significant role in bringing about the

Accepted Answer

A)  election of John Adams as the second American president.
B)  American Revolution.
C)  War of 1812.
D)  "no new taxes" clause in the U.S. Constitution.E) A) and B)
F) C) and D)

Question 6

Figure 8-6
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-6. Total surplus with the tax in place is

Accepted Answer

A)  $1,500.
B)  $3,600.
C)  $4,500.
D)  $6,000.E) All of the above
F) A) and D)

Question 7

Figure 8-12 
-Refer to Figure 8-12. Which of the following statements is correct?

Accepted Answer

A)  Supply 1 is more elastic than supply 2.
B)  Demand 2 is more elastic than demand 1.
C)  Demand 1 is more elastic than supply 1.
D)  All of the above are correct.E) None of the above
F) A) and D)

Question 8

Total surplus with a tax is equal to

Accepted Answer

A)  consumer surplus plus producer surplus.
B)  consumer surplus minus producer surplus.
C)  consumer surplus plus producer surplus minus tax revenue.
D)  consumer surplus plus producer surplus plus tax revenue.E) All of the above
F) B) and C)

Question 9

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

Accepted Answer

A)  positively related.
B)  negatively related.
C)  independent of each other.
D)  equal to each other.E) B) and C)
F) A) and D)

Question 10

Figure 8-18 
-Refer to Figure 8-18. Which graph correctly illustrates the relationship between the size of a tax and the size of the deadweight loss associated with the tax?

Accepted Answer

A)  Panel (a) 
B)  Panel (b) 
C)  Panel (c) 
D)  Panel (d) E) B) and C)
F) B) and D)

Question 11

Scenario 8-1
Erin would be willing to pay as much as $100 per week to have her house cleaned. Ernesto's opportunity cost of cleaning Erin's house is $70 per week.
-Refer to Scenario 8-1. Assume Erin is required to pay a tax of $40 when she hires someone to clean her house for a week. Which of the following is correct?

Accepted Answer

A)  Erin will now clean her own house.
B)  Ernesto will continue to clean Erin's house, but his producer surplus will decline.
C)  Total economic welfare (consumer surplus plus producer surplus plus tax revenue)  will increase.
D)  Erin will continue to hire Ernesto to clean her house, but her consumer surplus will decline.E) A) and B)
F) A) and C)

Question 12

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

Accepted Answer

A)  $600.
B)  $900.
C)  $1,500.
D)  $3,000.E) A) and C)
F) B) and C)

Question 13

Figure 8-3
The vertical distance between points A and C represents a tax in the market.  + Q1)  C) Deadweight loss = (1/2) (P3 - P2) (Q2 - Q1)  D) Deadweight loss = (1/2) (P3 - P1) (Q2 - Q1) " class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 8-3. Which of the following equations is valid for the deadweight loss of the tax?

Accepted Answer

A)  Deadweight loss = (1/2) (P2 - P1) (Q2 + Q1) 
B)  Deadweight loss = (1/2) (P3 - P1) (Q2  + Q1) 
C)  Deadweight loss = (1/2) (P3 - P2) (Q2 - Q1) 
D)  Deadweight loss = (1/2) (P3 - P1) (Q2 - Q1) E) A) and B)
F) A) and C)

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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

Question 16

Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, the

Accepted Answer

A)  larger is the price elasticity of demand.
B)  smaller is the price elasticity of supply.
C)  larger is the amount of the tax.
D)  All of the above are correct.E) A) and B)
F) A) and C)

Question 17

Suppose a tax is imposed on the sellers of fast-food French fries. The burden of the tax will

Accepted Answer

A)  fall entirely on the buyers of fast-food French fries.
B)  fall entirely on the sellers of fast-food French fries.
C)  be shared equally by the buyers and sellers of fast-food French fries.
D)  be shared by the buyers and sellers of fast-food French fries but not necessarily equally.E) A) and D)
F) B) and C)

Question 18

Taxes on labor tend to increase the number of hours that people choose to work.

Accepted Answer

A) True 
 B)False

Question 19

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) A) and C)
F) None 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 J+K+L+M represents

Accepted Answer

A)  total surplus after the tax.
B)  total surplus before the tax.
C)  deadweight loss from the tax.
D)  tax revenue.E) A) and D)
F) B) and C)

Exam 8: Application: The Costs of Taxation

Correct Answer
verified

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

Correct Answer
verified

Suppose a tax is imposed on the sellers of fast-food French fries. The burden of the tax will

Correct Answer
verified

Total surplus with a tax is equal to

Correct Answer
verified

The deadweight loss from a tax

Correct Answer
verified

Figure 8-18 -Refer to Figure 8-18. Which graph correctly illustrates the relationship between the size of a tax and the size of the deadweight loss associated with the tax?

Correct Answer
verified

Suppose the tax on gasoline is raised from $0.50 per gallon to $2.50 per gallon. As a result,

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Figure 8-12 -Refer to Figure 8-12. Which of the following statements is correct?

Correct Answer
verified

Anger over British taxes played a significant role in bringing about the

Correct Answer
verified

Taxes on labor tend to increase the number of hours that people choose to work.

Correct Answer
verified

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

Correct Answer
verified

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. Total surplus with the tax in place is

Correct Answer
verified

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

Correct Answer
verified

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
verified

The higher a country's tax rates, the more likely that country will be

Correct Answer
verified

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. Which of the following equations is valid for the deadweight loss of the tax?

Correct Answer
verified

Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, the

Correct Answer
verified

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

Correct Answer
verified

Exam 8: Application: The Costs of Taxation

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose a tax is imposed on the sellers of fast-food French fries. The burden of the tax will

Correct AnswerverifiedShow Answer

Total surplus with a tax is equal to

Correct AnswerverifiedShow Answer

The deadweight loss from a tax

Correct AnswerverifiedShow Answer

Figure 8-18 -Refer to Figure 8-18. Which graph correctly illustrates the relationship between the size of a tax and the size of the deadweight loss associated with the tax?

Correct AnswerverifiedShow Answer

Suppose the tax on gasoline is raised from $0.50 per gallon to $2.50 per gallon. As a result,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 8-12 -Refer to Figure 8-12. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Anger over British taxes played a significant role in bringing about the

Correct AnswerverifiedShow Answer

Taxes on labor tend to increase the number of hours that people choose to work.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. Total surplus with the tax in place is

Correct AnswerverifiedShow 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 government imposes the tax in this market, tax revenue is

Correct AnswerverifiedShow Answer

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

The higher a country's tax rates, the more likely that country will be

Correct AnswerverifiedShow Answer

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. Which of the following equations is valid for the deadweight loss of the tax?

Correct AnswerverifiedShow Answer

Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, the

Correct AnswerverifiedShow Answer

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

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