Question 1

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. The price paid by buyers increases by $2 and the after-tax price received by sellers falls by $3. The government is able to raise $750 per month in revenue from the tax. The deadweight loss from the tax is

Accepted Answer

A)   $250.
B)   $125.
C)   $75.
D)   $50.E) A) and C)
F) B) and C)

Question 2

Economists disagree on whether labor taxes cause small or large deadweight losses. This disagreement arises primarily because economists hold different views about

Accepted Answer

A)   the size of labor taxes.
B)   the importance of labor taxes imposed by the federal government relative to the importance of labor taxes imposed by the various states.
C)   the elasticity of labor supply.
D)   the elasticity of labor demand.E) B) and D)
F) A) and D)

Question 3

If the tax on a good is doubled, the deadweight loss of the tax

Accepted Answer

A)   increases by 50 percent.
B)   doubles.
C)   triples.
D)   quadruples.E) B) and C)
F) All of the above

Question 4

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 d.E) A) and C)
F) B) and C)

Question 5

Suppose a tax of $0.10 per unit on a good creates a deadweight loss of $100. If the tax is increased to $0.25 per unit, the deadweight loss from the new tax would be

Accepted Answer

A)   $200.
B)   $250.
C)   $475.
D)   $625.E) A) and B)
F) None of the above

Question 6

Figure 8-10 
-Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. The price that sellers receive is

Accepted Answer

A)   P0.
B)   P2.
C)   P5.
D)   P8.E) A) and D)
F) A) and C)

Question 7

When a country is on the downward-sloping side of the Laffer curves, a cut in the tax rate will

Accepted Answer

A)   decrease tax revenue and decrease the deadweight loss.
B)   decrease tax revenue and increase the deadweight loss.
C)   increase tax revenue and decrease the deadweight loss.
D)   increase tax revenue and increase the deadweight loss.E) A) and B)
F) A) and C)

Question 8

Tax revenue equals the size of the tax multiplied by the quantity sold in the market after the tax is levied.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A)   $1.
B)   $2.
C)   $3.
D)   $4.E) All of the above
F) C) and D)

Question 10

Figure 8-11 
-Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then, when the tax is imposed,

Accepted Answer

A)   consumer surplus decreases by $13.
B)   producer surplus decreases by $13.
C)   the deadweight loss amounts to $6.
D)   the amount of the good that is sold remains unchanged.E) A) and B)
F) B) and C)

Question 11

Economists dismiss the idea that lower tax rates can lead to higher tax revenue, because there is a consensus that the relevant elasticities of demand and supply are very low.

Accepted Answer

A) True 
 B)False

Exam 8: Application: The Costs of Taxation

Economists dismiss the idea that lower tax rates can lead to higher tax revenue, because there is a consensus that the relevant elasticities of demand and supply are very low.

Correct Answer
verified

Economists disagree on whether labor taxes cause small or large deadweight losses. This disagreement arises primarily because economists hold different views about

Correct Answer
verified

Suppose a tax of $0.10 per unit on a good creates a deadweight loss of $100. If the tax is increased to $0.25 per unit, the deadweight loss from the new tax would be

Correct Answer
verified

If the tax on a good is doubled, the deadweight loss of the tax

Correct Answer
verified

Figure 8-11 -Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then, when the tax is imposed,

Correct Answer
verified

When a country is on the downward-sloping side of the Laffer curves, a cut in the tax rate will

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 loss of producer surplus as a result of the tax is

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Figure 8-10 -Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. The price that sellers receive is

Correct Answer
verified

Tax revenue equals the size of the tax multiplied by the quantity sold in the market after the tax is levied.

Correct Answer
verified

Exam 8: Application: The Costs of Taxation

Economists dismiss the idea that lower tax rates can lead to higher tax revenue, because there is a consensus that the relevant elasticities of demand and supply are very low.

Correct AnswerverifiedShow Answer

Economists disagree on whether labor taxes cause small or large deadweight losses. This disagreement arises primarily because economists hold different views about

Correct AnswerverifiedShow Answer

Suppose a tax of $0.10 per unit on a good creates a deadweight loss of $100. If the tax is increased to $0.25 per unit, the deadweight loss from the new tax would be

Correct AnswerverifiedShow Answer

If the tax on a good is doubled, the deadweight loss of the tax

Correct AnswerverifiedShow Answer

Figure 8-11 -Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then, when the tax is imposed,

Correct AnswerverifiedShow Answer

When a country is on the downward-sloping side of the Laffer curves, a cut in the tax rate will

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 loss of producer surplus as a result of the tax is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 8-10 -Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. The price that sellers receive is

Correct AnswerverifiedShow Answer

Tax revenue equals the size of the tax multiplied by the quantity sold in the market after the tax is levied.

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