Question 1

The benefit to sellers of participating in a market is measured by the

Accepted Answer

A)   amount of taxes collected on sales of the good.
B)   producer surplus.
C)   amount sellers receive for their product.
D)   sellers' willingness to sell.E) A) and C)
F) A) and B)

Question 2

It does not matter whether a tax is levied on the buyers or the sellers of a good because

Accepted Answer

A)   sellers always bear the full burden of the tax.
B)   buyers always bear the full burden of the tax.
C)   buyers and sellers will share the burden of the tax.
D)   None of the above is correct; the incidence of the tax does depend on whether the buyers or the sellers are required to pay the tax.E) All of the above
F) C) and D)

Question 3

When a tax is imposed on a good for which both demand and supply are very elastic,

Accepted Answer

A)   sellers effectively pay the majority of the tax.
B)   buyers effectively pay the majority of the tax.
C)   the tax burden is equally divided between buyers and sellers.
D)   None of the above is correct; further information would be required to determine how the burden of the tax is distributed between buyers and sellers.E) A) and C)
F) B) and C)

Question 4

When a tax is placed on a product,the price paid by buyers

Accepted Answer

A)   rises,and the price received by sellers rises.
B)   rises,and the price received by sellers falls.
C)   falls,and the price received by sellers rises.
D)   falls,and the price received by sellers falls.E) C) and D)
F) None of the above

Question 5

In the market for widgets,the supply curve is the typical upward-sloping straight line,and the demand curve is the typical downward-sloping straight line.The equilibrium quantity in the market for widgets is 250 per month when there is no tax.Then a tax of $6 per widget is imposed.As a result,the government is able to raise $750 per month in tax revenue.We can conclude that the after-tax quantity of widgets is

Accepted Answer

A)   75 per month.
B)   100 per month.
C)   125 per month.
D)   150 per month.E) A) and B)
F) None of the above

Question 6

Normally,both buyers and sellers of a good become worse off when the good is taxed.

Accepted Answer

A) True 
 B)False

Question 7

The idea that tax cuts would increase the quantity of labor supplied,thus increasing tax revenue,became know as supply-side economics.

Accepted Answer

A) True 
 B)False

Question 8

Figure 8-7
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-7.As a result of the tax,

Accepted Answer

A)   consumer surplus decreases from $150 to $60.
B)   producer surplus decreases from $125 to $45.
C)   the market experiences a deadweight loss of $45.
D)   All of the above are correct.E) None of the above
F) A) and B)

Question 9

Figure 8-5
Suppose that the government imposes a tax of P3 - P1. 
-Refer to Figure 8-5.The loss in total welfare that results from the tax is represented by area

Accepted Answer

A)   A+B+D+F.
B)   A+B+C.
C)   D+H+F.
D)   C+H.E) None of the above
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 D)
F) All of the above

Question 11

Figure 8-12 
-Refer to Figure 8-12.Which of the following combinations will maximize the deadweight loss from a tax?

Accepted Answer

A)   supply 1 and demand 1
B)   supply 2 and demand 2
C)   supply 1 and demand 2
D)   supply 2 and demand 1E) A) and B)
F) A) and C)

Question 12

Taxes cause deadweight losses because they

Accepted Answer

A)   lead to losses in surplus for consumers and for producers that,when taken together,exceed tax revenue collected by the government.
B)   distort incentives to both buyers and sellers.
C)   prevent buyers and sellers from realizing some of the gains from trade.
D)   All of the above are correct.E) B) and D)
F) B) and C)

Question 13

The supply curve for liquor is the typical upward-sloping straight line,and the demand curve for liquor is the typical downward-sloping straight line.When liquor is taxed,the area on the relevant supply-and-demand graph that represents the deadweight loss is

Accepted Answer

A)   larger than the area that represents consumer surplus in the absence of the tax.
B)   larger than the area that represents government's tax revenue.
C)   a triangle.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 14

Figure 8-5
Suppose that the government imposes a tax of P3 - P1. 
-Refer to Figure 8-5.The total surplus with the tax is represented by area

Accepted Answer

A)   C+H.
B)   A+B+C.
C)   D+H+F.
D)   A+B+D+F.E) A) and B)
F) None of the above

Question 15

Taxes drive a wedge into the market by raising the price that sellers receive and lowering the price that buyers pay.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

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 B)
F) A) and C)

Question 17

Assume the price of gasoline is $2.00 per gallon,and the equilibrium quantity of gasoline is 10 million gallons per day with no tax on gasoline.Starting from this initial situation,which of the following scenarios would result in the largest deadweight loss?

Accepted Answer

A)   The price elasticity of demand for gasoline is 0.1; the price elasticity of supply for gasoline is 0.6; and the gasoline tax amounts to $0.20 per gallon.
B)   The price elasticity of demand for gasoline is 0.1; the price elasticity of supply for gasoline is 0.4; and the gasoline tax amounts to $0.20 per gallon.
C)   The price elasticity of demand for gasoline is 0.2; the price elasticity of supply for gasoline is 0.6; and the gasoline tax amounts to $0.30 per gallon.
D)   There is insufficient information to make this determination.E) B) and D)
F) A) and D)

Question 18

Figure 8-1 
-Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.Total surplus after the tax is measured by the area

Accepted Answer

A)   I+Y.
B)   J+K+L+M.
C)   I+Y+B.
D)   I+J+K+L+M+Y.E) None of the above
F) A) and B)

Question 19

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

Accepted Answer

A)   tax revenue.
B)   consumer surplus before the tax.
C)   producer surplus after the tax.
D)   total surplus before the tax.E) A) and D)
F) A) and C)

Question 20

Figure 8-4
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-4.The amount of deadweight loss as a result of the tax is

Accepted Answer

A)   $105.
B)   $210.
C)   $490.
D)   $600.E) A) and B)
F) None of the above

Exam 8: Application: the Costs of Taxation

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The total surplus with the tax is represented by area

Correct Answer
verified

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

Correct Answer
verified

The idea that tax cuts would increase the quantity of labor supplied,thus increasing tax revenue,became know as supply-side economics.

Correct Answer
verified

Taxes cause deadweight losses because they

Correct Answer
verified

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

Correct Answer
verified

Normally,both buyers and sellers of a good become worse off when the good is taxed.

Correct Answer
verified

The supply curve for liquor is the typical upward-sloping straight line,and the demand curve for liquor is the typical downward-sloping straight line.When liquor is taxed,the area on the relevant supply-and-demand graph that represents the deadweight loss is

Correct Answer
verified

Figure 8-12 -Refer to Figure 8-12.Which of the following combinations will maximize 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

When a tax is imposed on a good for which both demand and supply are very elastic,

Correct Answer
verified

When a tax is placed on a product,the price paid by buyers

Correct Answer
verified

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4.The amount of deadweight loss as a result of the tax is

Correct Answer
verified

It does not matter whether a tax is levied on the buyers or the sellers of a good because

Correct Answer
verified

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The loss in total welfare that results from the tax is represented by area

Correct Answer
verified

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7.As a result of the tax,

Correct Answer
verified

Correct Answer
verified

The benefit to sellers of participating in a market is measured by the

Correct Answer
verified

Assume the price of gasoline is $2.00 per gallon,and the equilibrium quantity of gasoline is 10 million gallons per day with no tax on gasoline.Starting from this initial situation,which of the following scenarios would result in the largest deadweight loss?

Correct Answer
verified

Taxes drive a wedge into the market by raising the price that sellers receive and lowering the price that buyers pay.

Correct Answer
verified

Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.Total surplus after the tax is measured by the area

Correct Answer
verified

Exam 8: Application: the Costs of Taxation

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The total surplus with the tax is represented by area

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The idea that tax cuts would increase the quantity of labor supplied,thus increasing tax revenue,became know as supply-side economics.

Correct AnswerverifiedShow Answer

Taxes cause deadweight losses because they

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Normally,both buyers and sellers of a good become worse off when the good is taxed.

Correct AnswerverifiedShow Answer

The supply curve for liquor is the typical upward-sloping straight line,and the demand curve for liquor is the typical downward-sloping straight line.When liquor is taxed,the area on the relevant supply-and-demand graph that represents the deadweight loss is

Correct AnswerverifiedShow Answer

Figure 8-12 -Refer to Figure 8-12.Which of the following combinations will maximize 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

When a tax is imposed on a good for which both demand and supply are very elastic,

Correct AnswerverifiedShow Answer

When a tax is placed on a product,the price paid by buyers

Correct AnswerverifiedShow Answer

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4.The amount of deadweight loss as a result of the tax is

Correct AnswerverifiedShow Answer

It does not matter whether a tax is levied on the buyers or the sellers of a good because

Correct AnswerverifiedShow Answer

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The loss in total welfare that results from the tax is represented by area

Correct AnswerverifiedShow Answer

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7.As a result of the tax,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The benefit to sellers of participating in a market is measured by the

Correct AnswerverifiedShow Answer

Assume the price of gasoline is $2.00 per gallon,and the equilibrium quantity of gasoline is 10 million gallons per day with no tax on gasoline.Starting from this initial situation,which of the following scenarios would result in the largest deadweight loss?

Correct AnswerverifiedShow Answer

Taxes drive a wedge into the market by raising the price that sellers receive and lowering the price that buyers pay.

Correct AnswerverifiedShow Answer

Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.Total surplus after the tax is measured by the area

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