Question 1

When a tax is imposed, the loss of consumer surplus and producer surplus as a result of the tax exceeds the tax revenue collected by the government.

Accepted Answer

A) True 
 B)False

Question 2

Figure 8-22 
-Refer to Figure 8-22. Suppose the government changed the per-unit tax from $3.00 to $4.50. Compared to the original tax rate, this higher tax rate would

Accepted Answer

A)   increase tax revenue and increase the deadweight loss from the tax.
B)   increase tax revenue and decrease the deadweight loss from the tax.
C)   decrease tax revenue and increase the deadweight loss from the tax.
D)   decrease tax revenue and decrease the deadweight loss from the tax.E) B) and C)
F) A) and C)

Question 3

The result of the large tax cuts in the first Reagan Administration demonstrated very convincingly that Arthur Laffer was correct when he asserted that cuts in tax rates would increase tax revenue.

Accepted Answer

A) True 
 B)False

Question 4

Figure 8-12 
-Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The loss of consumer surplus resulting from this tax is

Accepted Answer

A)   $35.
B)   $45.
C)   $70.
D)   $80.E) A) and D)
F) B) and C)

Question 5

The price elasticities of supply and demand affect

Accepted Answer

A)   both the size of the deadweight loss from a tax and the tax incidence.
B)   the size of the deadweight loss from a tax but not the tax incidence.
C)   the tax incidence but not the size of the deadweight loss from a tax.
D)   neither the size of the deadweight loss from a tax nor the tax incidence.E) B) and C)
F) A) and D)

Question 6

Economists generally agree that the most important tax in the U.S. economy is the

Accepted Answer

A)   income tax.
B)   tax on labor.
C)   inheritance or death tax.
D)   tax on corporate profits.E) B) and C)
F) C) and D)

Question 7

The more elastic the supply, the larger the deadweight loss from a tax, all else equal.

Accepted Answer

A) True 
 B)False

Question 8

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 9

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. For an economy that is currently at point D on the curve, a decrease in the tax rate would

Accepted Answer

A)   decrease consumer surplus.
B)   decrease producer surplus.
C)   increase tax revenue.
D)   increase the deadweight loss of the tax.E) A) and D)
F) C) and D)

Question 10

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 is the burden of the tax on the buyers and on the sellers?

Accepted Answer

The burden of the ta...

Question 11

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, producer surplus in this market is

Accepted Answer

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

Question 12

Taxes are of interest to

Accepted Answer

A)   microeconomists because they consider how to balance equality and efficiency.
B)   microeconomists because they consider how best to design a tax system.
C)   macroeconomists because they consider how policymakers can use the tax system to stabilize economic activity.
D)   All of the above are correct.E) A) and C)
F) B) and C)

Question 13

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

Question 14

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

Accepted Answer

A)   P1.
B)   P2.
C)   P3.
D)   P4.E) None of the above
F) A) and B)

Question 15

The higher a country's tax rates, the more likely that country will be

Accepted Answer

A)   at the top of the Laffer curve.
B)   on the positively sloped part of the Laffer curve.
C)   on the negatively sloped part of the Laffer curve.
D)   experiencing small deadweight losses.E) All of the above
F) None of the above

Question 16

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 paid by buyers to

Accepted Answer

A)   increase from $600 to $800.
B)   increase from $300 to $800.
C)   decrease from $600 to $300.
D)   remain unchanged at $600.E) B) and C)
F) A) and B)

Question 17

Figure 8-1 
-Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by I+Y represents the

Accepted Answer

A)   deadweight loss due to the tax.
B)   loss in consumer surplus due to the tax.
C)   loss in producer surplus due to the tax.
D)   total surplus before the tax.E) All of the above
F) C) and D)

Question 18

Illustrate on three demand-and-supply graphs how the size of a tax (small, medium and large) can alter total revenue and deadweight loss.

Accepted Answer

The answer of Illustrate on three demand-and-supply graphs how the...

Question 19

Figure 8-3
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-3. The amount of the tax on each unit of the good is

Accepted Answer

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

Question 20

When a tax is levied on a good,

Accepted Answer

A)   neither buyers nor sellers are made worse off.
B)   only sellers are made worse off.
C)   only buyers are made worse off.
D)   both buyers and sellers are made worse off.E) A) and B)
F) A) and C)

Exam 8: Application: the Costs of Taxation

Figure 8-12 -Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The loss of consumer surplus resulting from this tax is

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Figure 8-22 -Refer to Figure 8-22. Suppose the government changed the per-unit tax from $3.00 to $4.50. Compared to the original tax rate, this higher tax rate would

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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

The price elasticities of supply and demand affect

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The loss in total surplus resulting from a tax is called

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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. For an economy that is currently at point D on the curve, a decrease in the tax rate would

Correct AnswerverifiedShow Answer

Illustrate on three demand-and-supply graphs how the size of a tax (small, medium and large) can alter total revenue and deadweight loss.

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The more elastic the supply, the larger the deadweight loss from a tax, all else equal.

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When a tax is levied on a good,

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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 equilibrium price before the tax is imposed is

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When a tax is imposed, the loss of consumer surplus and producer surplus as a result of the tax exceeds the tax revenue collected by the government.

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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, how much is the burden of the tax on the buyers and on the sellers?

Correct AnswerverifiedThe burden of the ta...View AnswerShow Answer

Taxes are of interest to

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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 amount of the tax on each unit of the good is

Correct AnswerverifiedShow Answer

The higher a country's tax rates, the more likely that country will be

Correct AnswerverifiedShow Answer

The result of the large tax cuts in the first Reagan Administration demonstrated very convincingly that Arthur Laffer was correct when he asserted that cuts in tax rates would increase 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 imposition of the tax causes the price paid by buyers to

Correct AnswerverifiedShow Answer

Economists generally agree that the most important tax in the U.S. economy is the

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Figure 8-1 -Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by I+Y represents the

Correct AnswerverifiedShow 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, producer surplus in this market is

Correct AnswerverifiedShow Answer

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The equilibrium pric...
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The burden of the ta...
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