Question 1

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) A) and C)
F) None of the above

Question 2

The less freedom young mothers have to work outside the home, the

Accepted Answer

A)   more elastic the supply of labor will be.
B)   less elastic the supply of labor will be.
C)   more horizontal the labor supply curve will be.
D)   larger is the decrease in employment that will result from a tax on labor.E) None of the above
F) A) and D)

Question 3

Figure 8-25 
-Refer to Figure 8-25. How much is consumer surplus at the market equilibrium?

Accepted Answer

Consumer s...

Question 4

A decrease in the size of a tax is most likely to increase tax revenue in a market with

Accepted Answer

A)   elastic demand and elastic supply.
B)   elastic demand and inelastic supply.
C)   inelastic demand and elastic supply.
D)   inelastic demand and inelastic supply.E) B) and C)
F) All of the above

Question 5

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 6

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

Question 7

In which of the following instances would the deadweight loss of the tax on cartons of cigarettes increase by a factor of 9?

Accepted Answer

A)   The tax on cartons of cigarettes increases from $10 to $11.11.
B)   The tax on cartons of cigarettes increases from $10 to $20.
C)   The tax on cartons of cigarettes increases from $10 to $30.
D)   The tax on cartons of cigarettes increases from $10 to $90.E) A) and B)
F) None of the above

Question 8

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 the tax on each unit of the good is

Accepted Answer

A)   $1.
B)   $4.
C)   $5.
D)   $9.E) None of the above
F) A) and D)

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 consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is

Accepted Answer

A)   $0.
B)   $1.50.
C)   $3.
D)   $4.50.E) All of the above
F) A) and B)

Question 10

When a tax is levied on the sellers of a good, the

Accepted Answer

A)   supply curve shifts upward by the amount of the tax.
B)   quantity demanded decreases for all conceivable prices of the good.
C)   quantity supplied increases for all conceivable prices of the good.
D)   None of the above is correct.E) C) and D)
F) A) and B)

Question 11

The deadweight loss from a $3 tax will be largest in a market with

Accepted Answer

A)   inelastic supply and elastic demand.
B)   inelastic supply and inelastic demand.
C)   elastic supply and elastic demand.
D)   elastic supply and inelastic demand.E) All of the above
F) B) and C)

Question 12

The loss in total surplus resulting from a tax is called

Accepted Answer

A)   a deficit.
B)   economic loss.
C)   deadweight loss.
D)   inefficiency.E) B) and C)
F) A) and D)

Question 13

Figure 8-24. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. 
-Refer to Figure 8-24. Tax revenue would

Accepted Answer

A)   decrease if the economy began at point B and then the tax rate was decreased.
B)   increase if the economy began at point F and then the tax rate was decreased.
C)   decrease if the economy began at point C and then the tax rate was increased.
D)   All of the above are correct.E) A) and D)
F) C) and D)

Question 14

Taxes affect market participants by increasing the price paid by the buyer and received by the seller.

Accepted Answer

A) True 
 B)False

Question 15

A deadweight loss is a consequence of a tax on a good because the tax

Accepted Answer

A)   induces the government to increase its expenditures.
B)   induces buyers to consume less, and sellers to produce less.
C)   increases the equilibrium price in the market.
D)   imposes a loss on buyers that is greater than the loss to sellers.E) None of the above
F) B) and C)

Question 16

Suppose that the market for product X is characterized by a typical, downward-sloping, linear demand curve and a typical, upward-sloping, linear supply curve. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $4 tax per unit?

Accepted Answer

The deadweight loss will be $8...

Question 17

Figure 8-13 
-Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The loss of consumer surplus resulting from this tax is

Accepted Answer

A)   $80.
B)   $40.
C)   $30.
D)   $10.E) None of the above
F) B) and D)

Question 18

Taxes on labor tend to encourage the elderly to retire early.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A)   remains constant.
B)   triples.
C)   increases by a factor of 9.
D)   increases by a factor of 12.E) B) and D)
F) None of the above

Question 20

Taxes on labor encourage all of the following except

Accepted Answer

A)   older workers to take early retirement from the labor force.
B)   mothers to stay at home rather than work in the labor force.
C)   workers to work overtime.
D)   people to be paid "under the table."E) A) and D)
F) All of the above

Exam 8: Application: The Costs of Taxation

Figure 8-25 -Refer to Figure 8-25. How much is consumer surplus at the market equilibrium?

Correct AnswerverifiedConsumer s...View AnswerShow Answer

A deadweight loss is a consequence of a tax on a good because the tax

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Taxes on labor tend to encourage the elderly to retire early.

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The less freedom young mothers have to work outside the home, the

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

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Taxes on labor encourage all of the following except

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A decrease in the size of a tax is most likely to increase tax revenue in a market with

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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

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Taxes affect market participants by increasing the price paid by the buyer and received by the seller.

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

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The deadweight loss from a $3 tax will be largest in a market with

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When a tax is levied on the sellers of a good, the

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The loss in total surplus resulting from a tax is called

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Figure 8-13 -Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The loss of consumer surplus resulting from this tax is

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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 consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is

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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 sellers effectively receive after the tax is imposed is

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Figure 8-24. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-24. Tax revenue would

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In which of the following instances would the deadweight loss of the tax on cartons of cigarettes increase by a factor of 9?

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Suppose that the market for product X is characterized by a typical, downward-sloping, linear demand curve and a typical, upward-sloping, linear supply curve. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $4 tax per unit?

Correct AnswerverifiedThe deadweight loss will be $8...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 amount of the tax on each unit of the good is

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Consumer s...
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The deadweight loss will be $8...
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