Question 1

For good X,the supply curve is the typical upward-sloping straight line,and the demand curve is the typical downward-sloping straight line.A tax of $10 per unit is imposed on good X.The tax reduces the equilibrium quantity in the market by 200 units.The deadweight loss from the tax is

Accepted Answer

A)   $2,000.
B)   $1,000.
C)   $500.
D)   $250.E) All of the above
F) None of the above

Question 2

If the labor supply curve is nearly vertical,a tax on labor

Accepted Answer

A)   has a large deadweight loss.
B)   raises a small amount of tax revenue.
C)   has little impact on the amount of work that workers are willing to do.
D)   results in a large tax burden on the firms that hire labor.E) A) and B)
F) None of the above

Question 3

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 200 per month when there is no tax.Then a tax of $5 per widget is imposed.As a result,the government is able to raise $750 per month in tax revenue.We can conclude that the equilibrium quantity of widgets has fallen by

Accepted Answer

A)   25 per month.
B)   50 per month.
C)   75 per month.
D)   100 per month.E) All of the above
F) A) and B)

Question 4

As the size of a tax increases,the government's tax revenue rises,then falls.

Accepted Answer

A) True 
 B)False

Question 5

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 buyers effectively pay after the tax is imposed is

Accepted Answer

A)   P1.
B)   P2.
C)   P3.
D)   P4.E) C) and D)
F) B) and C)

Question 6

Figure 8-2
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-2.The amount of deadweight loss as a result of the tax is

Accepted Answer

A)   $2.50.
B)   $5.
C)   $7.50.
D)   $10.E) B) and C)
F) A) and C)

Question 7

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

Question 8

Economists use the government's tax revenue to measure the public benefit from a tax.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A)   smaller is the response of quantity supplied to the tax.
B)   larger is the tax burden on sellers relative to the tax burden on buyers.
C)   larger is the deadweight loss of the tax.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 10

Ronald Reagan believed that reducing income tax rates would

Accepted Answer

A)   do little,if anything,to encourage hard work.
B)   result in large increases in deadweight losses.
C)   raise economic well-being and perhaps even tax revenue.
D)   lower economic well-being,even though tax revenue could possibly increase.E) A) and D)
F) A) and C)

Question 11

A tax affects

Accepted Answer

A)   buyers only.
B)   sellers only.
C)   buyers and sellers only.
D)   buyers,sellers,and the government.E) A) and B)
F) All of the above

Question 12

Which of the following ideas is the most plausible?

Accepted Answer

A)   Tax revenue is more likely to increase when a low tax rate is increased than when a high tax rate is increased.
B)   Tax revenue is less likely to increase when a low tax rate is increased than when a high tax rate is increased.
C)   Tax revenue is likely to increase by the same amount when a low tax rate is increased and when a high tax rate is increased.
D)   Decreasing a tax rate can never increase tax revenue.E) All of the above
F) C) and D)

Question 13

Unlike the supply of raw land,the supply of improvements

Accepted Answer

A)   is perfectly inelastic.
B)   has an elasticity that is greater than zero.
C)   cannot be taxed,even if an attempt were made to tax it.
D)   is exempt from taxation under current law.E) B) and C)
F) A) and D)

Question 14

Which of the following statements is correct regarding the imposition of a tax on gasoline?

Accepted Answer

A)   The incidence of the tax depends upon whether the buyers or the sellers are required to remit tax payments to the government.
B)   The incidence of the tax depends upon the price elasticities of demand and supply.
C)   The amount of tax revenue raised by the tax depends upon whether the buyers or the sellers are required to remit tax payments to the government.
D)   The amount of tax revenue raised by the tax does not depend upon the amount of the tax per unit.E) A) and D)
F) B) and D)

Question 15

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)   less elastic is the demand for the good.
B)   less elastic is the supply of the good.
C)   smaller is the amount of the tax.
D)   All of the above are correct.E) All of the above
F) A) and B)

Question 16

If the size of a tax triples,the deadweight loss increases by a factor of six.

Accepted Answer

A) True 
 B)False

Question 17

The greater the elasticity of demand,the smaller the deadweight loss of a tax.

Accepted Answer

A) True 
 B)False

Question 18

If the labor supply curve is very elastic,a tax on labor

Accepted Answer

A)   has a large deadweight loss.
B)   raises enough tax revenue to offset the loss in welfare.
C)   has a relatively small impact on the number of hours that workers choose to work.
D)   results in a large tax burden on the firms that hire labor.E) B) and C)
F) A) and B)

Question 19

The Laffer curve illustrates how taxes in markets with greater elasticities of demand compare to taxes in markets with smaller elasticities of supply.

Accepted Answer

A) True 
 B)False

Question 20

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?

Accepted Answer

A)   The loss of producer surplus that is associated with some sellers dropping out of the market as a result of the tax is $30.
B)   The loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is $60.
C)   The loss of consumer surplus caused by this tax exceeds the loss of producer surplus caused by this tax.
D)   This tax produces $200 in tax revenue for the government.E) A) and D)
F) C) and D)

Exam 8: Application: The Costs of Taxation

A tax affects

Correct Answer
verified

Economists use the government's tax revenue to measure the public benefit from a tax.

Correct Answer
verified

As the size of a tax increases,the government's tax revenue rises,then falls.

Correct Answer
verified

Correct Answer
verified

Unlike the supply of raw land,the supply of improvements

Correct Answer
verified

If the size of a tax triples,the deadweight loss increases by a factor of six.

Correct Answer
verified

The greater the elasticity of demand,the smaller the deadweight loss of a tax.

Correct Answer
verified

If the labor supply curve is very elastic,a tax on labor

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.The amount of deadweight loss as a result of the tax is

Correct Answer
verified

Which of the following ideas is the most plausible?

Correct Answer
verified

The Laffer curve illustrates how taxes in markets with greater elasticities of demand compare to taxes in markets with smaller elasticities of supply.

Correct Answer
verified

Which of the following statements is correct regarding the imposition of a tax on gasoline?

Correct Answer
verified

For good X,the supply curve is the typical upward-sloping straight line,and the demand curve is the typical downward-sloping straight line.A tax of $10 per unit is imposed on good X.The tax reduces the equilibrium quantity in the market by 200 units.The deadweight loss from the tax is

Correct Answer
verified

If the labor supply curve is nearly vertical,a tax on labor

Correct Answer
verified

Ronald Reagan believed that reducing income tax rates would

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 8-7 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?

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.The price that buyers effectively pay after the tax is imposed is

Correct Answer
verified

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

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

Exam 8: Application: The Costs of Taxation

A tax affects

Correct AnswerverifiedShow Answer

Economists use the government's tax revenue to measure the public benefit from a tax.

Correct AnswerverifiedShow Answer

As the size of a tax increases,the government's tax revenue rises,then falls.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Unlike the supply of raw land,the supply of improvements

Correct AnswerverifiedShow Answer

If the size of a tax triples,the deadweight loss increases by a factor of six.

Correct AnswerverifiedShow Answer

The greater the elasticity of demand,the smaller the deadweight loss of a tax.

Correct AnswerverifiedShow Answer

If the labor supply curve is very elastic,a tax on labor

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.The amount of deadweight loss as a result of the tax is

Correct AnswerverifiedShow Answer

Which of the following ideas is the most plausible?

Correct AnswerverifiedShow Answer

The Laffer curve illustrates how taxes in markets with greater elasticities of demand compare to taxes in markets with smaller elasticities of supply.

Correct AnswerverifiedShow Answer

Which of the following statements is correct regarding the imposition of a tax on gasoline?

Correct AnswerverifiedShow Answer

For good X,the supply curve is the typical upward-sloping straight line,and the demand curve is the typical downward-sloping straight line.A tax of $10 per unit is imposed on good X.The tax reduces the equilibrium quantity in the market by 200 units.The deadweight loss from the tax is

Correct AnswerverifiedShow Answer

If the labor supply curve is nearly vertical,a tax on labor

Correct AnswerverifiedShow Answer

Ronald Reagan believed that reducing income tax rates would

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 8-7 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?

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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 buyers effectively pay after the tax is imposed is

Correct AnswerverifiedShow Answer

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

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

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