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Exam 8: Application: The Costs of Taxation

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Question 161

Multiple Choice

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

A) remains constant.
B) triples.
C) increases by a factor of 9.
D) increases by a factor of 12.

E) C) and D)
F) None of the above

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Question 162

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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 as a result of the tax is

A) $1.50.
B) $3.
C) $4.50.
D) $6.

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

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Question 163

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If a tax shifts the supply curve upward (or to the left) , we can infer that the tax was levied on

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, the price buyers effectively pay is

Figure 8-17 The vertical distance between points A and B represents the original tax. -Refer to Figure 8-17. If the government changed the per-unit tax from $5.00 to $2.50, then the price paid by buyers would be $7.50, the price received by sellers would be $5, and the quantity sold in the market would be 1.5 units. Compared to the original tax rate, this lower tax rate would

Economists disagree on whether labor taxes have a small or large deadweight loss.

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?

A tax on a good

Assume the supply curve for cigars is a typical, upward-sloping straight line, and the demand curve for cigars is a typical, downward-sloping straight line. Suppose the equilibrium quantity in the market for cigars is 1,000 per month when there is no tax. Then a tax of $0.50 per cigar is imposed. The effective price paid by buyers increases from $1.50 to $1.90 and the effective price received by sellers falls from $1.50 to $1.40. The government's tax revenue amounts to $475 per month. Which of the following statements is correct?

Figure 8-9 The vertical distance between points A and C represent a tax in the market. -Refer to Figure 8-9. The consumer surplus with the tax is

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. One effect of the tax is to

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

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

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. The tax causes a reduction in consumer surplus that is represented by area

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. Without a tax, consumer surplus in this market is

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. After the tax is levied, consumer surplus is represented by area

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. The equilibrium price before the tax is imposed is

The government's benefit from a tax can be measured by

The most important tax in the U.S. economy is the tax on corporations' profits.

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. Without the tax, the producer surplus is