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Exam 8: Application: the Costs of Taxation

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Question 51

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Graph 8-3 -According to Graph 8-3, the amount of deadweight loss in this market resulting from the levying of the tax is:

A) $1500
B) $1125
C) $375
D) $750

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

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Question 52

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A tax levied on the buyers of a product shifts the:

A) supply curve upwards or to the left
B) supply curve downwards or to the right
C) demand curve upwards or to the right
D) demand curve downwards or to the left

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

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Question 53

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Graph 8-3 -According to Graph 8-3, the total surplus (consumer, producer and government) with the tax is:

Taxes cause inefficiencies only when government revenue is less than the deadweight loss.

Graph 8-1 -According to Graph 8-1, the price buyers pay after the tax is:

A tax on luxuries will create a smaller deadweight loss than will the same tax on necessities, ceteris paribus.

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

The less freedom people are given to choose the date of their retirement the:

When a tax is levied on a good buyers are worse off but not sellers.

Economists disagree on the issue of how much labour taxes distort the outcome in labour markets and create deadweight loss.What characteristic of labour supply is at the heart of the disagreement?

Sachin has agreed to mow his sister Darien's lawn each week, for $35.Sachin's opportunity cost is $22, and Darien would be willing to pay $27 to have her lawn mown.What is the maximum tax the government can impose on lawn mowing without discouraging Sachin and Darien from continuing their mutually beneficial arrangement?

The marginal tax rate on labour income for many workers in Australia is almost:

According to the information provided, the total gain in welfare due to the transaction described here is:

Since the amount of land is fixed, the total supply of land is:

Graph 8-2 This graph shows supply and demand in a free market. -According to Graph 8-2, if the market is in equilibrium, consumer surplus is represented by area:

The benefit received by the government from a tax is measured by:

Graph 8-1 -According to Graph 8-1, after the tax is levied, producer surplus is represented by area:

Often the tax revenue collected by the government equals the reduced welfare of buyers and sellers caused by the tax.

Because taxes distort incentives, they cause markets to allocate resources inefficiently.

Graph 8-3 -According to Graph 8-3, after the tax is levied, producer surplus is: