Question 1

The less freedom people are given to choose the date of their retirement, the

Accepted Answer

A)   more elastic is the supply of labor.
B)   less elastic is the supply of labor.
C)   flatter is the labor supply curve.
D)   smaller is the decrease in employment that will result from a tax on labor.E) A) and C)
F) All of the above

Question 2

Tom walks Bethany's dog once a day for $50 per week. Bethany values this service at $60 per week, while the opportunity cost of Tom's time is $30 per week. The government places a tax of $35 per week on dog walkers. After the tax, what is the total surplus?

Accepted Answer

A)   $50
B)   $30
C)   $25
D)   $0E) A) and B)
F) A) and C)

Question 3

The larger the deadweight loss from taxation, the larger the cost of government programs.

Accepted Answer

A) True 
 B)False

Question 4

Figure 8-15
 
-Refer to Figure 8-15. Panel (a)  and Panel (b)  each illustrate a $4 tax placed on a market. In comparison to Panel (b) , Panel (a)  illustrates which of the following statements?

Accepted Answer

A)   When demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic.
B)   When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic.
C)   When supply is relatively inelastic, the deadweight loss of a tax is smaller than when supply is relatively elastic.
D)   When supply is relatively elastic, the deadweight loss of a tax is larger than when supply is relatively inelastid.E) A) and C)
F) A) and B)

Question 5

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

Accepted Answer

A)   $120.
B)   $80.
C)   $50.
D)   $25.E) None of the above
F) All of the above

Question 6

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

Accepted Answer

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

Question 7

Scenario 8-2
Roland mows Karla's lawn for $25. Roland's opportunity cost of mowing Karla's lawn is $20, and Karla's willingness to pay Roland to mow her lawn is $28.
-Refer to Scenario 8-2. If Karla hires Roland to mow her lawn, Karla's consumer surplus is

Accepted Answer

A)   $3.
B)   $5.
C)   $8.
D)   $25.E) B) and C)
F) All of the above

Question 8

Suppose Rebecca needs a dog sitter so that she can travel to her sister's wedding. Rebecca values dog sitting for the weekend at $200. Susan is willing to dog sit for Rebecca so long as she receives at least $175. Rebecca and Susan agree on a price of $185. Suppose the government imposes a tax of $30 on dog sitting. The tax has made Rebecca and Susan worse off by a total of

Accepted Answer

A)   $30.
B)   $25.
C)   $10.
D)   $5.E) C) and D)
F) B) and D)

Question 9

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) A) and B)
F) B) and D)

Question 10

A tax on a good causes the size of the market to increase.

Accepted Answer

A) True 
 B)False

Question 11

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 D)
F) None of the above

Question 12

Figure 8-16
 
-Refer to Figure 8-16. Panel (a)  and Panel (b)  each illustrate a $2 tax placed on a market. In comparison to Panel (a) , Panel (b)  illustrates which of the following statements?

Accepted Answer

A)   When demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic.
B)   When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic.
C)   When supply is relatively inelastic, the deadweight loss of a tax is smaller than when supply is relatively elastic.
D)   When supply is relatively elastic, the deadweight loss of a tax is larger than when supply is relatively inelastid.E) None of the above
F) A) and D)

Question 13

Figure 8-4
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-4. The amount of tax revenue received by the government is equal to

Accepted Answer

A)   $245.
B)   $350.
C)   $490.
D)   $700.E) All of the above
F) A) and D)

Question 14

Taxes cause deadweight losses because they

Accepted Answer

A)   lead to losses in surplus for consumers and for producers that, when taken together, exceed tax revenue collected by the government.
B)   distort incentives to both buyers and sellers.
C)   prevent buyers and sellers from realizing some of the gains from trade.
D)   All of the above are correct.E) B) and C)
F) B) and D)

Question 15

Figure 8-4
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-4. The price that sellers effectively receive after the tax is imposed is

Accepted Answer

A)   $12.
B)   between $8 and $12.
C)   between $5 and $8.
D)   $5.E) A) and B)
F) All of the above

Question 16

If a tax did not induce buyers or sellers to change their behavior, it would not cause a deadweight loss.

Accepted Answer

A) True 
 B)False

Question 17

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?

Accepted Answer

A)   The demand for cigars is less elastic than the supply of cigars.
B)   The tax causes a decrease in consumer surplus of $390 and a decrease in producer surplus of $97.50.
C)   The deadweight loss of the tax is $12.50.
D)   All of the above are correct.E) B) and C)
F) C) and D)

Question 18

Economists use the government's tax revenue to measure the public benefit from a tax.

Accepted Answer

A) True 
 B)False

Question 19

Suppose a tax of $5 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 $10,000 and decreases producer surplus by $15,000. The deadweight loss of the tax is $2,500. The tax decreased the equilibrium quantity of the good from

Accepted Answer

A)   6,500 to 5,500.
B)   5,500 to 4,500.
C)   5,000 to 3,000.
D)   6,000 to 4,000.E) None of the above
F) All of the above

Question 20

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, what price will buyers pay and what price will sellers receive?

Accepted Answer

Buyers will pay $80 ...

Exam 8: Application: The Costs of Taxation

Correct Answer
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Tom walks Bethany's dog once a day for $50 per week. Bethany values this service at $60 per week, while the opportunity cost of Tom's time is $30 per week. The government places a tax of $35 per week on dog walkers. After the tax, what is the total surplus?

Correct Answer
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A tax on a good causes the size of the market to increase.

Correct Answer
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Scenario 8-2 Roland mows Karla's lawn for $25. Roland's opportunity cost of mowing Karla's lawn is $20, and Karla's willingness to pay Roland to mow her lawn is $28. -Refer to Scenario 8-2. If Karla hires Roland to mow her lawn, Karla's consumer surplus is

Correct Answer
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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

Correct Answer
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The larger the deadweight loss from taxation, the larger the cost of government programs.

Correct Answer
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If a tax did not induce buyers or sellers to change their behavior, it would not cause a deadweight loss.

Correct Answer
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Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4. The amount of tax revenue received by the government is equal to

Correct Answer
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Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4. The price that sellers effectively receive after the tax is imposed is

Correct Answer
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The less freedom people are given to choose the date of their retirement, the

Correct Answer
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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?

Correct Answer
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Taxes cause deadweight losses because they

Correct Answer
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Figure 8-16 -Refer to Figure 8-16. Panel (a) and Panel (b) each illustrate a $2 tax placed on a market. In comparison to Panel (a) , Panel (b) illustrates which of the following statements?

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 amount of deadweight loss resulting from this tax is

Correct Answer
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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: If T = 40, what price will buyers pay and what price will sellers receive?

Correct Answer
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Buyers will pay $80 ...
View Answer

Figure 8-15 -Refer to Figure 8-15. Panel (a) and Panel (b) each illustrate a $4 tax placed on a market. In comparison to Panel (b) , Panel (a) illustrates which of the following statements?

Correct Answer
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Economists use the government's tax revenue to measure the public benefit from a tax.

Correct Answer
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Correct Answer
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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

Correct Answer
verified

Exam 8: Application: The Costs of Taxation

Correct AnswerverifiedShow Answer

Tom walks Bethany's dog once a day for $50 per week. Bethany values this service at $60 per week, while the opportunity cost of Tom's time is $30 per week. The government places a tax of $35 per week on dog walkers. After the tax, what is the total surplus?

Correct AnswerverifiedShow Answer

A tax on a good causes the size of the market to increase.

Correct AnswerverifiedShow Answer

Scenario 8-2 Roland mows Karla's lawn for $25. Roland's opportunity cost of mowing Karla's lawn is $20, and Karla's willingness to pay Roland to mow her lawn is $28. -Refer to Scenario 8-2. If Karla hires Roland to mow her lawn, Karla's consumer surplus is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The larger the deadweight loss from taxation, the larger the cost of government programs.

Correct AnswerverifiedShow Answer

If a tax did not induce buyers or sellers to change their behavior, it would not cause a deadweight loss.

Correct AnswerverifiedShow Answer

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4. The amount of tax revenue received by the government is equal to

Correct AnswerverifiedShow Answer

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4. The price that sellers effectively receive after the tax is imposed is

Correct AnswerverifiedShow Answer

The less freedom people are given to choose the date of their retirement, the

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Taxes cause deadweight losses because they

Correct AnswerverifiedShow Answer

Figure 8-16 -Refer to Figure 8-16. Panel (a) and Panel (b) each illustrate a $2 tax placed on a market. In comparison to Panel (a) , Panel (b) illustrates which of the following statements?

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Correct AnswerverifiedShow Answer

Figure 8-13 -Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The amount of deadweight loss 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: If T = 40, what price will buyers pay and what price will sellers receive?

Correct AnswerverifiedBuyers will pay $80 ...View AnswerShow Answer

Figure 8-15 -Refer to Figure 8-15. Panel (a) and Panel (b) each illustrate a $4 tax placed on a market. In comparison to Panel (b) , Panel (a) illustrates which of the following statements?

Correct AnswerverifiedShow Answer

Economists use the government's tax revenue to measure the public benefit from a tax.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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Buyers will pay $80 ...
View Answer

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