Question 1

Figure 8-3
The vertical distance between points A and C represents a tax in the market.  + Q1)  C)  Deadweight loss = (1/2) (P3 - P2) (Q2 - Q1)  D)  Deadweight loss = (1/2) (P3 - P1) (Q2 - Q1) " class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 8-3.Which of the following equations is valid for the deadweight loss of the tax?

Accepted Answer

A)   Deadweight loss = (1/2) (P2 - P1) (Q2 + Q1) 
B)   Deadweight loss = (1/2) (P3 - P1) (Q2  + Q1) 
C)   Deadweight loss = (1/2) (P3 - P2) (Q2 - Q1) 
D)   Deadweight loss = (1/2) (P3 - P1) (Q2 - Q1)

Question 2

John has been in the habit of mowing Willa's lawn each week for $20.John's opportunity cost is $15,and Willa would be willing to pay $25 to have her lawn mowed.What is the maximum tax the government can impose on lawn mowing without discouraging John and Willa from continuing their mutually beneficial arrangement?

Accepted Answer

If the tax is less than $10,there will e...

Question 3

Figure 8-7
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-7.Suppose a 22nd unit of the good were sold by a seller to a buyer.Which of the following statements is correct?

Accepted Answer

A)   For the 22nd unit,the difference between the buyer's value and the seller's cost is less than the tax per unit.
B)   For the 22nd unit,the difference between the buyer's value and the seller's cost is greater than the tax per unit.
C)   For the 22nd unit,the difference between the buyer's value and the seller's cost is equal to the tax per unit.
D)   It makes sense for the buyer to buy and for the seller to sell the 22nd unit,with or without the tax in place.

Question 4

When a tax is levied on the sellers of a good,the

Accepted Answer

A)   supply curve shifts upward by the amount of the tax.
B)   quantity demanded decreases for all conceivable prices of the good.
C)   quantity supplied increases for all conceivable prices of the good.
D)   None of the above is correct.

Question 5

Figure 8-11 2 on the vertical axis represents the A)  difference between the price paid by buyers after the tax is imposed and the price paid by buyers before the tax is imposed. B)  difference between the price received by sellers before the tax is imposed and the price received by sellers after the tax is imposed. C)  price of the good before the tax is imposed. D)  price of the good after the tax is imposed." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 8-11.The price labeled as P2 on the vertical axis represents the

Accepted Answer

A)   difference between the price paid by buyers after the tax is imposed and the price paid by buyers before the tax is imposed.
B)   difference between the price received by sellers before the tax is imposed and the price received by sellers after the tax is imposed.
C)   price of the good before the tax is imposed.
D)   price of the good after the tax is imposed.

Question 6

Figure 8-19.The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. 
-Refer to Figure 8-19.According to a recent research paper published by the European Central Bank,the U.S.

Accepted Answer

A)   is more likely at a point such as point A rather than point B if the tax in question is the tax on capital income.
B)   is more likely at a point such as point B rather than point A if the tax in question is the tax on labor income.
C)   could increase tax revenues more by raising taxes on capital income than by raising taxes on labor income.
D)   All of the above are correct.

Question 7

Figure 8-5
Suppose that the government imposes a tax of P3 - P1. 
-Refer to Figure 8-5.The tax is levied on

Accepted Answer

A)   buyers only.
B)   sellers only.
C)   both buyers and sellers.
D)   This is impossible to determine from the figure.

Question 8

Figure 8-6
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-6.The tax results in a deadweight loss that amounts to

Accepted Answer

A)   $600.
B)   $900.
C)   $1,500.
D)   $1,800.

Question 9

Figure 8-9
The vertical distance between points A and C represent a tax in the market. 
-Refer to Figure 8-9.The imposition of the tax causes the price paid by buyers to increase by

Accepted Answer

A)   $20.
B)   $200.
C)   $300.
D)   $500.

Question 10

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

Accepted Answer

A)   investment tax.
B)   sales tax.
C)   property tax.
D)   labor tax.

Question 11

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.

Question 12

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 13

When the price of a good is measured in dollars,then the size of the deadweight loss that results from taxing that good is measured in

Accepted Answer

A)   units of the good that is being taxed.
B)   units of a related good that is not being taxed.
C)   dollars.
D)   percentage change.

Question 14

Figure 8-4
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-4.The equilibrium price before the tax is imposed is

Accepted Answer

A)   $12,and the equilibrium quantity is 70.
B)   $8,and the equilibrium quantity is 100.
C)   $5,and the equilibrium quantity is 70.
D)   $5,and the equilibrium quantity is 100.

Question 15

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 producer surplus as a result of the tax is

Accepted Answer

A)   $1.
B)   $2.
C)   $3.
D)   $4.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

When the government places a tax on a product,the cost of the tax to buyers and sellers

Accepted Answer

A)   is less than the revenue raised from the tax by the government.
B)   is equal to the revenue raised from the tax by the government.
C)   exceeds the revenue raised from the tax by the government.
D)   Without additional information,such as the elasticity of demand for this product,it is impossible to compare the cost of a tax to buyers and sellers with tax revenue.

Question 18

Figure 8-5
Suppose that the government imposes a tax of P3 - P1. 
-Refer to Figure 8-5.Consumer surplus before the tax was levied is represented by area

Accepted Answer

A)   A.
B)   A+B+C.
C)   D+H+F.
D)   F.

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 tax revenue received by the government is equal to the area

Accepted Answer

A)   P3ACP1.
B)   ABC.
C)   P2DAP3.
D)   P1CDP2.

Question 20

Economists dismiss the idea that lower tax rates can lead to higher tax revenue,because there is a consensus that the relevant elasticities of demand and supply are very low.

Accepted Answer

A) True 
 B)False

Exam 8: Application: the Costs of Taxation

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 producer surplus as a result of the tax is

Correct Answer
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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 tax revenue received by the government is equal to the area

Correct Answer
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Figure 8-9 The vertical distance between points A and C represent a tax in the market. -Refer to Figure 8-9.The imposition of the tax causes the price paid by buyers to increase by

Correct Answer
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Figure 8-19.The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-19.According to a recent research paper published by the European Central Bank,the U.S.

Correct Answer
verified

Economists dismiss the idea that lower tax rates can lead to higher tax revenue,because there is a consensus that the relevant elasticities of demand and supply are very low.

Correct Answer
verified

Correct Answer
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If the tax is less than $10,there will e...
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Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.Consumer surplus before the tax was levied is represented by area

Correct Answer
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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.

Correct Answer
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Figure 8-11 -Refer to Figure 8-11.The price labeled as P₂ on the vertical axis represents the

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 equilibrium price before the tax is imposed is

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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When the price of a good is measured in dollars,then the size of the deadweight loss that results from taxing that good is measured in

Correct Answer
verified

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7.Suppose a 22nd unit of the good were sold by a seller to a buyer.Which of the following statements is correct?

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 is levied on

Correct Answer
verified

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.The tax results in a deadweight loss that amounts to

Correct Answer
verified

The price elasticities of supply and demand affect

Correct Answer
verified

When the government places a tax on a product,the cost of the tax to buyers and sellers

Correct Answer
verified

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

Correct Answer
verified

When a tax is levied on the sellers of a good,the

Correct Answer
verified

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3.Which of the following equations is valid for the deadweight loss of the tax?

Correct Answer
verified

Exam 8: Application: the Costs of Taxation

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 producer surplus as a result of the tax is

Correct AnswerverifiedShow Answer

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 tax revenue received by the government is equal to the area

Correct AnswerverifiedShow Answer

Figure 8-9 The vertical distance between points A and C represent a tax in the market. -Refer to Figure 8-9.The imposition of the tax causes the price paid by buyers to increase by

Correct AnswerverifiedShow Answer

Figure 8-19.The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-19.According to a recent research paper published by the European Central Bank,the U.S.

Correct AnswerverifiedShow Answer

Economists dismiss the idea that lower tax rates can lead to higher tax revenue,because there is a consensus that the relevant elasticities of demand and supply are very low.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedIf the tax is less than $10,there will e...View AnswerShow Answer

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.Consumer surplus before the tax was levied is represented by area

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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.

Correct AnswerverifiedShow Answer

Figure 8-11 -Refer to Figure 8-11.The price labeled as P2 on the vertical axis represents the

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 equilibrium price before the tax is imposed is

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

Correct AnswerverifiedShow Answer

When the price of a good is measured in dollars,then the size of the deadweight loss that results from taxing that good is measured in

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.Suppose a 22nd unit of the good were sold by a seller to a buyer.Which of the following statements is correct?

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Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The tax is levied on

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.The tax results in a deadweight loss that amounts to

Correct AnswerverifiedShow Answer

The price elasticities of supply and demand affect

Correct AnswerverifiedShow Answer

When the government places a tax on a product,the cost of the tax to buyers and sellers

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When a tax is levied on the sellers of a good,the

Correct AnswerverifiedShow Answer

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3.Which of the following equations is valid for the deadweight loss of the tax?

Correct AnswerverifiedShow Answer

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If the tax is less than $10,there will e...
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Figure 8-11 -Refer to Figure 8-11.The price labeled as P₂ on the vertical axis represents the

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