Question 1

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

Question 2

Figure 8-25 
-Refer to Figure 8-25. Suppose the government increases the size of the tax on this good from $4 per unit to $6 per unit. Will the tax revenue collected from the tax increase, decrease, or stay the same?

Accepted Answer

Total tax ...

Question 3

Relative to a situation in which gasoline is not taxed, the imposition of a tax on gasoline causes the quantity of gasoline demanded to

Accepted Answer

A)  decrease and the quantity of gasoline supplied to decrease.
B)  decrease and the quantity of gasoline supplied to increase.
C)  increase and the quantity of gasoline supplied to decrease.
D)  increase and the quantity of gasoline supplied to increase.E) A) and B)
F) B) and C)

Question 4

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

Accepted Answer

A)  $2,000.
B)  $4,000.
C)  $6,000.
D)  $8,000.E) A) and B)
F) A) and C)

Question 5

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

Accepted Answer

A)  the larger is the decrease in quantity demanded as a result of the tax.
B)  the smaller is the tax burden on buyers relative to the tax burden on sellers.
C)  the larger is the deadweight loss of the tax.
D)  All of the above are correct.E) A) and B)
F) A) and C)

Question 6

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:  
If T = 40, how much will be the deadweight loss from this tax?

Accepted Answer

The deadwe...

Question 7

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

Accepted Answer

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

Question 8

Figure 8-5
Suppose that the government imposes a tax of P3 - P1. 
-Refer to Figure 8-5. The equilibrium price before the tax is imposed is

Accepted Answer

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

Question 9

Figure 8-25 
-Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is the deadweight loss from this tax?

Accepted Answer

The deadwe...

Question 10

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

Accepted Answer

A)  (P5-0)  x Q5.
B)  1/2 x (P5-0)  x Q5.
C)  (P8-0)  x Q2.
D)  1/2 x (P8-0)  x Q2.E) A) and C)
F) A) and B)

Question 11

The Social Security tax is a tax on

Accepted Answer

A)  capital.
B)  labor.
C)  land.
D)  savings.E) B) and C)
F) A) and B)

Question 12

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

Question 13

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 summarizes the incidence of the tax?

Accepted Answer

A)  For each unit of the good that is sold, buyers bear one-half of the tax burden, and sellers bear one-half of the tax burden.
B)  For each unit of the good that is sold, buyers bear one-third of the tax burden, and sellers bear two-thirds of the tax burden.
C)  For each unit of the good that is sold, buyers bear one-fourth of the tax burden, and sellers bear three-fourths of the tax burden.
D)  For each unit of the good that is sold, buyers bear three-fourths of the tax burden, and sellers bear one-fourth of the tax burden.E) All of the above
F) A) and B)

Question 14

When a tax is imposed on a good, the resulting decrease in consumer surplus is always larger than the resulting decrease in producer surplus.

Accepted Answer

A) True 
 B)False

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

Question 16

Figure 8-22 
-Refer to Figure 8-22. Suppose the government initially imposes a $3 per-unit tax on this good. Now suppose the government is deciding whether to lower the tax to $1.50 or raise it to $4.50. Which of the following statements is not correct?

Accepted Answer

A)  Compared to the original tax, the larger tax will decrease tax revenue.
B)  Compared to the original tax, the smaller tax will decrease deadweight loss.
C)  Compared to the original tax, the smaller tax will decrease tax revenue.
D)  Compared to the original tax, the larger tax will increase deadweight loss.E) A) and C)
F) B) and D)

Question 17

Figure 8-25 
-Refer to Figure 8-25. What are the equilibrium price and equilibrium quantity in this market?

Accepted Answer

The equilibrium pric...

Question 18

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

Question 19

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

Accepted Answer

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

Question 20

Suppose a tax of $0.50 per unit on a good creates a deadweight loss of $100. If the tax is increased to $2.50 per unit, the deadweight loss from the new tax would be

Accepted Answer

A)  $200.
B)  $250.
C)  $500.
D)  $2,500.E) A) and B)
F) A) and C)

Exam 8: Applications: the Costs of Taxation

Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is the deadweight loss from this tax?

Correct AnswerverifiedThe deadwe...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

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: If T = 40, how much will be the deadweight loss from this tax?

Correct AnswerverifiedThe deadwe...View AnswerShow Answer

The Social Security tax is a tax on

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Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, the

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Relative to a situation in which gasoline is not taxed, the imposition of a tax on gasoline causes the quantity of gasoline demanded to

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Figure 8-25 -Refer to Figure 8-25. What are the equilibrium price and equilibrium quantity in this market?

Correct AnswerverifiedThe equilibrium pric...View AnswerShow 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. Without the tax, the producer surplus is

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When a tax is imposed on a good, the resulting decrease in consumer surplus is always larger than the resulting decrease in producer surplus.

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Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. The equilibrium price before the tax is imposed is

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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. Which of the following statements summarizes the incidence of the tax?

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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

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

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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 consumer surplus with the tax is

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Figure 8-22 -Refer to Figure 8-22. Suppose the government initially imposes a $3 per-unit tax on this good. Now suppose the government is deciding whether to lower the tax to $1.50 or raise it to $4.50. Which of the following statements is not correct?

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

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Figure 8-25 -Refer to Figure 8-25. Suppose the government increases the size of the tax on this good from $4 per unit to $6 per unit. Will the tax revenue collected from the tax increase, decrease, or stay the same?

Correct AnswerverifiedTotal tax ...View AnswerShow Answer

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

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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

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Suppose a tax of $0.50 per unit on a good creates a deadweight loss of $100. If the tax is increased to $2.50 per unit, the deadweight loss from the new tax would be

Correct AnswerverifiedShow Answer

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