Question 1

Figure 8-25 
-Refer to Figure 8-25. What are the equilibrium price and equilibrium quantity in this market?

Accepted Answer

The equilibrium price is $5 and the equilibrium quantity is 100 units.

Question 2

Figure 8-18 
-Refer to Figure 8-18. Suppose the government imposes a $1 tax in each of the four markets represented by supply curves S1, S2, S3, and S4. The deadweight will be the smallest in the market represented by

Accepted Answer

A)   S1.
B)   S2.
C)   S3.
D)   S4.E) B) and D)
F) All of the above

Question 3

Figure 8-5
Suppose that the government imposes a tax of P3 - P1. 
-Refer to Figure 8-5. The tax is levied on

Accepted Answer

A)   buyers only.
B)   sellers only.
C)   both buyers and sellers.
D)   This is impossible to determine from the figure.E) None of the above
F) B) and D)

Question 4

Figure 8-3
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-3. 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 B)
F) A) and C)

Question 5

Figure 8-6
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-6. When the tax is imposed in this market, buyers effectively pay what amount of the $10 tax?

Accepted Answer

A)   $0
B)   $4
C)   $6
D)   $10E) A) and B)
F) All of the above

Question 6

Figure 8-26 
-Refer to Figure 8-26. Suppose the government increases the size of the tax on this good from $3 per unit to $6 per unit. Will the tax revenue collected from the tax increase, decrease, or stay the same?

Accepted Answer

Total tax revenue will increas...

Question 7

The result of the large tax cuts in the first Reagan Administration demonstrated very convincingly that Arthur Laffer was correct when he asserted that cuts in tax rates would increase tax revenue.

Accepted Answer

A) True 
 B)False

Question 8

Figure 8-1 
-Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by M 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) B) and D)

Question 9

A tax on a good

Accepted Answer

A)   gives buyers an incentive to buy less of the good than they otherwise would buy.
B)   gives sellers an incentive to produce more of the good than they otherwise would produce.
C)   creates a benefit to the government, the size of which exceeds the loss in surplus to buyers and sellers.
D)   All of the above are correct.E) B) and C)
F) None of the above

Question 10

Figure 8-29 
-Refer to Figure 8-29. As the size of the tax increases from $3 to $6 to $9, what happens to the deadweight loss from the tax?

Accepted Answer

When the tax is $3, deadweight loss is 0...

Question 11

Figure 8-2
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-2. The imposition of the tax causes the quantity sold to

Accepted Answer

A)   increase by 1 unit.
B)   decrease by 1 unit.
C)   increase by 2 units.
D)   decrease by 2 units.E) A) and D)
F) A) and C) B

Question 12

As the tax on a good increases from $1 per unit to $2 per unit to $3 per unit and so on, the

Accepted Answer

A)   tax revenue increases at first, but it eventually peaks and then decreases.
B)   deadweight loss increases at first, but it eventually peaks and then decreases.
C)   tax revenue always increases, and the deadweight loss always increases.
D)   tax revenue always decreases, and the deadweight loss always increases.E) A) and C)
F) All of the above

Question 13

Suppose a tax of $1 per unit is imposed on a good. The more elastic the demand for the good, other things equal,

Accepted Answer

A)   the larger is the decrease in quantity demanded as a result of the tax.
B)   the smaller is the tax burden on buyers relative to the tax burden on sellers.
C)   the larger is the deadweight loss of the tax.
D)   All of the above are correct.E) A) and C)
F) A) and D)

Question 14

Scenario 8-3
Suppose the market demand and market supply curves are given by the equations: 
-Refer to Scenario 8-3. Suppose that a tax of T is placed on buyers so that the demand curve becomes:  How much tax revenue will be collected after this tax is imposed?

Accepted Answer

The tax re...

Question 15

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

Accepted Answer

A)   received by sellers before the tax is imposed.
B)   received by sellers after the tax is imposed.
C)   paid by buyers before the tax is imposed.
D)   paid by buyers after the tax is imposed.E) C) and D)
F) A) and B)

Question 16

Figure 8-4
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-4. The tax results in a loss of consumer surplus that amounts to

Accepted Answer

A)   $105.
B)   $140.
C)   $170.
D)   $210.E) A) and C)
F) A) and B)

Question 17

If the size of a tax doubles, the deadweight loss doubles.

Accepted Answer

A) True 
 B)False

Question 18

When a tax is placed on the buyers of a product, a result is that buyers effectively pay

Accepted Answer

A)   less than before the tax, and sellers effectively receive less than before the tax.
B)   less than before the tax, and sellers effectively receive more than before the tax.
C)   more than before the tax, and sellers effectively receive less than before the tax.
D)   more than before the tax, and sellers effectively receive more than before the tax.E) A) and B)
F) B) and D)

Question 19

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 tax revenue received by the government is equal to

Accepted Answer

A)   $245.
B)   $350.
C)   $490.
D)   $700.E) A) and B)
F) A) and C) A

Question 20

A tax

Accepted Answer

A)   lowers the price buyers pay and raises the price sellers receive.
B)   raises the price buyers pay and lowers the price sellers receive.
C)   places a wedge between the price buyers pay and the price sellers receive.
D)   Both b)  and c)  are correct.E) C) and D)
F) A) and B)

Exam 8: Application: the Costs of Taxation

Figure 8-25 -Refer to Figure 8-25. What are the equilibrium price and equilibrium quantity in this market?

Correct AnswerverifiedThe equilibrium price is $5 and the equilibrium quantity is 100 units.

Figure 8-18 -Refer to Figure 8-18. Suppose the government imposes a $1 tax in each of the four markets represented by supply curves S1, S2, S3, and S4. The deadweight will be the smallest in the market represented by

Correct AnswerverifiedShow Answer

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. The tax is levied on

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. The price that sellers effectively receive after the tax is imposed is

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Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. When the tax is imposed in this market, buyers effectively pay what amount of the $10 tax?

Correct AnswerverifiedShow Answer

Figure 8-26 -Refer to Figure 8-26. Suppose the government increases the size of the tax on this good from $3 per unit to $6 per unit. Will the tax revenue collected from the tax increase, decrease, or stay the same?

Correct AnswerverifiedTotal tax revenue will increas...View AnswerShow Answer

The result of the large tax cuts in the first Reagan Administration demonstrated very convincingly that Arthur Laffer was correct when he asserted that cuts in tax rates would increase tax revenue.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A tax on a good

Correct AnswerverifiedShow Answer

Figure 8-29 -Refer to Figure 8-29. As the size of the tax increases from $3 to $6 to $9, what happens to the deadweight loss from the tax?

Correct AnswerverifiedWhen the tax is $3, deadweight loss is 0...View AnswerShow Answer

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2. The imposition of the tax causes the quantity sold to

Correct AnswerverifiedB

As the tax on a good increases from $1 per unit to $2 per unit to $3 per unit and so on, the

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Suppose a tax of $1 per unit is imposed on a good. The more elastic the demand for the good, other things equal,

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Scenario 8-3 Suppose the market demand and market supply curves are given by the equations: -Refer to Scenario 8-3. Suppose that a tax of T is placed on buyers so that the demand curve becomes: How much tax revenue will be collected after this tax is imposed?

Correct AnswerverifiedThe tax re...View AnswerShow Answer

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

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Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4. The tax results in a loss of consumer surplus that amounts to

Correct AnswerverifiedShow Answer

If the size of a tax doubles, the deadweight loss doubles.

Correct AnswerverifiedShow Answer

When a tax is placed on the buyers of a product, a result is that buyers effectively pay

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 tax revenue received by the government is equal to

Correct AnswerverifiedA

A tax

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The equilibrium price is $5 and the equilibrium quantity is 100 units.

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Total tax revenue will increas...
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When the tax is $3, deadweight loss is 0...
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B

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The tax re...
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A

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