Question 1

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

Question 2

Table 8-1
 
-Refer to Table 8-1. Suppose the government is considering levying a tax in one or more of the markets described in the table. Which of the markets will allow the government to minimize the deadweight loss(es)  from the tax?

Accepted Answer

A)   market A only
B)   markets A and C only
C)   markets B and D only
D)   market C onlyE) B) and C)
F) All of the above

Question 3

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

Question 4

Figure 8-7
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-7. As a result of the tax, consumer surplus decreases by

Accepted Answer

A)   $130, producer surplus decreases by $170, tax revenue is $240, and deadweight loss is $60.
B)   $150, producer surplus decreases by $150, tax revenue is $240, and deadweight loss is $60.
C)   $160, producer surplus decreases by $160, tax revenue is $240, and deadweight loss is $80.
D)   $240, producer surplus decreases by $240, tax revenue is $400, and deadweight loss is $80.E) A) and D)
F) None of the above

Question 5

The deadweight loss from a tax

Accepted Answer

A)   does not vary in amount when the price elasticity of demand changes.
B)   does not vary in amount when the amount of the tax per unit changes.
C)   is larger, the larger is the amount of the tax per unit.
D)   is smaller, the larger is the amount of the tax per unit.E) B) and D)
F) A) and B)

Question 6

The more elastic are supply and demand in a market, the greater are the distortions caused by a tax on that market, and the more likely it is that a tax cut in that market will raise tax revenue.

Accepted Answer

A) True 
 B)False

Question 7

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

Question 8

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 size of the tax is

Accepted Answer

A)   P0-P2.
B)   P2-P8.
C)   P2-P5.
D)   P5-P8.E) B) and C)
F) None of the above

Question 9

Suppose a tax of $3 per unit is imposed on a good. The supply curve is a typical upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. The tax decreases consumer surplus by $3,900 and decreases producer surplus by $3,000. The tax generates tax revenue of $6,000. The tax decreased the equilibrium quantity of the good from

Accepted Answer

A)   2,000 to 1,500.
B)   2,400 to 2,000.
C)   2,600 to 2,000.
D)   3,000 to 2,400.E) A) and C)
F) A) and B)

Question 10

Kate is a personal trainer whose client William pays $80 per hour-long session. William values this service at $100 per hour, while the opportunity cost of Kate's time is $75 per hour. The government places a tax of $10 per hour on personal trainers. After the tax, what is likely to happen in the market for personal training?

Accepted Answer

A)   Kate and William will agree to a new price somewhere between $85 and $100.
B)   Kate and William will agree to a new price somewhere between $70 and $110.
C)   Kate will no longer offer personal training services to William because she must charge more than $100 in order to cover her opportunity costs and pay the tax.
D)   The price will remain at $80, and Kate will pay the $10 tax.E) A) and D)
F) A) and C)

Question 11

Figure 8-8
Suppose the government imposes a $10 per unit tax on a good. 
-Refer to Figure 8-8. The government collects tax revenue that is the area

Accepted Answer

A)   L.
B)   B+D.
C)   C+F.
D)   F+G+L.E) B) and C)
F) None of the above

Question 12

Figure 8-25 
-Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is total surplus after the tax is imposed?

Accepted Answer

Total surp...

Question 13

The size of a tax and the deadweight loss that results from the tax are

Accepted Answer

A)   positively related.
B)   negatively related.
C)   independent of each other.
D)   equal to each other.E) A) and B)
F) All of the above

Question 14

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The imposition of the tax causes the price received by sellers to decrease by

Accepted Answer

A)   $20.
B)   $200.
C)   $300.
D)   $500.E) B) and C)
F) B) and D)

Question 15

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 16

Figure 8-2
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-2. The per-unit burden of the tax on sellers is

Accepted Answer

A)   $2.B $3.
C)   $4.
D)   $5.E) A) and C)
F) All of the above

Question 17

Suppose the price of milk is $2.39 per gallon, and the equilibrium quantity of milk is 100 thousand gallons per day with no tax on milk. Starting from this initial situation, which of the following scenarios would result in the smallest deadweight loss?

Accepted Answer

A)   The price elasticity of demand for milk is 0.3, the price elasticity of supply for milk is 0.7, and the milk tax amounts to $0.40 per gallon.
B)   The price elasticity of demand for milk is 0.2, the price elasticity of supply for milk is 0.5, and the milk tax amounts to $0.30 per gallon.
C)   The price elasticity of demand for milk is 0.2, the price elasticity of supply for milk is 0.7, and the milk tax amounts to $0.30 per gallon.
D)   The price elasticity of demand for milk is 0.1, the price elasticity of supply for milk is 0.5, and the milk tax amounts to $0.20 per gallon.E) None of the above
F) B) and C)

Question 18

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The producer surplus without the tax is

Accepted Answer

A)   $3,000.
B)   $8,000.
C)   $12,000.
D)   $24,000.E) A) and D)
F) B) and C)

Question 19

To measure the gains and losses from a tax on a good, economists use the tools of

Accepted Answer

A)   macroeconomics.
B)   welfare economics.
C)   international-trade theory.
D)   circular-flow analysis.E) B) and D)
F) B) and C)

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 8: Application: The Costs of Taxation

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The imposition of the tax causes the price received by sellers to decrease by

Correct Answer
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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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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?

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

Correct Answer
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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 per-unit burden of the tax on sellers is

Correct Answer
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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

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

Correct Answer
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Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7. As a result of the tax, consumer surplus decreases by

Correct Answer
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To measure the gains and losses from a tax on a good, economists use the tools of

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Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is total surplus after the tax is imposed?

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Total surp...
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The more elastic are supply and demand in a market, the greater are the distortions caused by a tax on that market, and the more likely it is that a tax cut in that market will raise tax revenue.

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Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The producer surplus without the tax is

Correct Answer
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Correct Answer
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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 size of the tax is

Correct Answer
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The size of a tax and the deadweight loss that results from the tax are

Correct Answer
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Suppose the price of milk is $2.39 per gallon, and the equilibrium quantity of milk is 100 thousand gallons per day with no tax on milk. Starting from this initial situation, which of the following scenarios would result in the smallest deadweight loss?

Correct Answer
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Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. The government collects tax revenue that is the area

Correct Answer
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The deadweight loss from a tax

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Table 8-1 -Refer to Table 8-1. Suppose the government is considering levying a tax in one or more of the markets described in the table. Which of the markets will allow the government to minimize the deadweight loss(es) from the tax?

Correct Answer
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Exam 8: Application: The Costs of Taxation

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The imposition of the tax causes the price received by sellers to decrease by

Correct AnswerverifiedShow Answer

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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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

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

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 per-unit burden of the tax on sellers 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

Correct AnswerverifiedShow Answer

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

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. As a result of the tax, consumer surplus decreases by

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

To measure the gains and losses from a tax on a good, economists use the tools of

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Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is total surplus after the tax is imposed?

Correct AnswerverifiedTotal surp...View AnswerShow Answer

The more elastic are supply and demand in a market, the greater are the distortions caused by a tax on that market, and the more likely it is that a tax cut in that market will raise tax revenue.

Correct AnswerverifiedShow Answer

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The producer surplus without the tax is

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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 size of the tax is

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The size of a tax and the deadweight loss that results from the tax are

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Suppose the price of milk is $2.39 per gallon, and the equilibrium quantity of milk is 100 thousand gallons per day with no tax on milk. Starting from this initial situation, which of the following scenarios would result in the smallest deadweight loss?

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Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. The government collects tax revenue that is the area

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The deadweight loss from a tax

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Table 8-1 -Refer to Table 8-1. Suppose the government is considering levying a tax in one or more of the markets described in the table. Which of the markets will allow the government to minimize the deadweight loss(es) from the tax?

Correct AnswerverifiedShow Answer

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The tax re...
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Total surp...
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