Question 1

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 tax revenue that the tax provides to the government?

Accepted Answer

A)   Tax revenue = (P2 - P1) xQ1
B)   Tax revenue = (P3 - P1) xQ1
C)   Tax revenue = (P3 - P2) xQ1
D)   Tax revenue = (P3 - P1) x(Q2 - Q1)

Question 2

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 tax revenue is

Accepted Answer

A)   (P0-P2)  x Q2.
B)   (P2-P8)  x Q2.
C)   (P2-P5)  x Q5.
D)   (P5-P8)  x Q5.

Question 3

If the government imposes a $3 tax in a market, the equilibrium price will rise by $3.

Accepted Answer

A) True 
 B)False

Question 4

Suppose a tax is imposed on bananas. In which of the following cases will the tax cause the equilibrium quantity of bananas to shrink by the largest amount?

Accepted Answer

A)   The response of buyers to a change in the price of bananas is strong, and the response of sellers to a change in the price of bananas is weak.
B)   The response of sellers to a change in the price of bananas is strong, and the response of buyers to a change in the price of bananas is weak.
C)   The response of buyers and sellers to a change in the price of bananas is strong.
D)   The response of buyers and sellers to a change in the price of bananas is weak.

Question 5

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,

Accepted Answer

A)   consumer surplus decreases from $200 to $80.
B)   producer surplus decreases from $200 to $145.
C)   the market experiences a deadweight loss of $80.
D)   All of the above are correct.

Question 6

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

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. Assume Roland is required to pay a tax of $10 each time he mows a lawn. Which of the following results is most likely?

Accepted Answer

A)   Karla now will decide to mow her own lawn, and Roland will decide it is no longer in his interest to mow Karla's lawn.
B)   Karla still is willing to pay Roland to mow her lawn, but Roland will decline her offer.
C)   Roland still is willing to mow Karla's lawn, but Karla will decide to mow her own lawn.
D)   Roland and Karla still can engage in a mutually-agreeable trade.

Question 8

Figure 8-29 
-Refer to Figure 8-29. If you were a policymaker choosing between a $3, $6, or $9 tax, which would you choose and why?

Accepted Answer

If the objective is to maximize tax reve...

Question 9

The Social Security tax is a tax on

Accepted Answer

A)   capital.
B)   labor.
C)   land.
D)   savings.

Question 10

Figure 8-23. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. 
-Refer to Figure 8-23. If the economy is at point A on the curve, then a decrease in the tax rate will

Accepted Answer

A)   increase the deadweight loss of the tax and increase tax revenue.
B)   increase the deadweight loss of the tax and decrease tax revenue.
C)   decrease the deadweight loss of the tax and increase tax revenue.
D)   decrease the deadweight loss of the tax and decrease tax revenue.

Question 11

Figure 8-11 
-Refer to Figure 8-11. The price labeled as P1 on the vertical axis represents the price

Accepted Answer

A)   received by sellers before the tax is imposed.
B)   received by sellers after the tax is imposed.
C)   paid by buyers before the tax is imposed.
D)   paid by buyers after the tax is imposed.

Question 12

Figure 8-25 
-Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How many units of this good will be bought and sold after the tax is imposed?

Accepted Answer

60 units will be bou...

Question 13

The greater the elasticity of demand, the smaller the deadweight loss of a tax.

Accepted Answer

A) True 
 B)False

Question 14

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.

Question 15

Figure 8-28 
-Refer to Figure 8-28. Suppose that Market A is characterized by Demand 1 and Supply 1, and Market B is characterized by Demand 1 and Supply 2. If an identical tax is imposed on each market, the tax will create a larger deadweight loss in which market? Explain.

Accepted Answer

The deadweight loss will be larger in Ma...

Question 16

Ronald Reagan believed that reducing income tax rates would

Accepted Answer

A)   do little, if anything, to encourage hard work.
B)   result in large increases in deadweight losses.
C)   raise economic well-being and perhaps even tax revenue.
D)   lower economic well-being, even though tax revenue could possibly increase.

Question 17

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.

Question 18

The graph that represents the amount of deadweight loss (measured on the vertical axis)  as a function of the size of the tax (measured on the horizontal axis)  looks like

Accepted Answer

A)   a U.
B)   an upside-down U.
C)   a horizontal straight line.
D)   an upward-sloping curve.

Question 19

When a tax is placed on a product, the price paid by buyers

Accepted Answer

A)   rises, and the price received by sellers rises.
B)   rises, and the price received by sellers falls.
C)   falls, and the price received by sellers rises.
D)   falls, and the price received by sellers falls.

Question 20

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, the equilibrium price and quantity are

Accepted Answer

A)   $16 and 300.
B)   $10 and 600.
C)   $10 and 300.
D)   $6 and 300.

Exam 8: Application: the Costs of Taxation

Figure 8-11 -Refer to Figure 8-11. The price labeled as P1 on the vertical axis represents the price

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

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 Answer
verified

The graph that represents the amount of deadweight loss (measured on the vertical axis) as a function of the size of the tax (measured on the horizontal axis) looks like

Correct Answer
verified

Suppose a tax is imposed on bananas. In which of the following cases will the tax cause the equilibrium quantity of bananas to shrink by the largest amount?

Correct Answer
verified

Figure 8-28 -Refer to Figure 8-28. Suppose that Market A is characterized by Demand 1 and Supply 1, and Market B is characterized by Demand 1 and Supply 2. If an identical tax is imposed on each market, the tax will create a larger deadweight loss in which market? Explain.

Correct Answer
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The deadweight loss will be larger in Ma...
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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, the equilibrium price and quantity are

Correct Answer
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When a tax is placed on a product, the price paid by buyers

Correct Answer
verified

The Social Security tax is a tax on

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 tax revenue that the tax provides to the government?

Correct Answer
verified

Ronald Reagan believed that reducing income tax rates would

Correct Answer
verified

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
verified

If the government imposes a $3 tax in a market, the equilibrium price will rise by $3.

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. As a result of the tax,

Correct Answer
verified

Figure 8-29 -Refer to Figure 8-29. If you were a policymaker choosing between a $3, $6, or $9 tax, which would you choose and why?

Correct Answer
verified
If the objective is to maximize tax reve...
View Answer

Figure 8-23. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-23. If the economy is at point A on the curve, then a decrease in the tax rate will

Correct Answer
verified

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 tax revenue is

Correct Answer
verified

Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How many units of this good will be bought and sold after the tax is imposed?

Correct Answer
verified
60 units will be bou...
View Answer

The greater the elasticity of demand, the smaller the deadweight loss of a tax.

Correct Answer
verified

Exam 8: Application: the Costs of Taxation

Figure 8-11 -Refer to Figure 8-11. The price labeled as P1 on the vertical axis represents the price

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

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

The graph that represents the amount of deadweight loss (measured on the vertical axis) as a function of the size of the tax (measured on the horizontal axis) looks like

Correct AnswerverifiedShow Answer

Suppose a tax is imposed on bananas. In which of the following cases will the tax cause the equilibrium quantity of bananas to shrink by the largest amount?

Correct AnswerverifiedShow Answer

Figure 8-28 -Refer to Figure 8-28. Suppose that Market A is characterized by Demand 1 and Supply 1, and Market B is characterized by Demand 1 and Supply 2. If an identical tax is imposed on each market, the tax will create a larger deadweight loss in which market? Explain.

Correct AnswerverifiedThe deadweight loss will be larger in Ma...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, the equilibrium price and quantity are

Correct AnswerverifiedShow Answer

When a tax is placed on a product, the price paid by buyers

Correct AnswerverifiedShow Answer

The Social Security tax is a tax on

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 tax revenue that the tax provides to the government?

Correct AnswerverifiedShow Answer

Ronald Reagan believed that reducing income tax rates would

Correct AnswerverifiedShow Answer

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

If the government imposes a $3 tax in a market, the equilibrium price will rise by $3.

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,

Correct AnswerverifiedShow Answer

Figure 8-29 -Refer to Figure 8-29. If you were a policymaker choosing between a $3, $6, or $9 tax, which would you choose and why?

Correct AnswerverifiedIf the objective is to maximize tax reve...View AnswerShow Answer

Figure 8-23. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-23. If the economy is at point A on the curve, then a decrease in the tax rate will

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 tax revenue is

Correct AnswerverifiedShow Answer

Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How many units of this good will be bought and sold after the tax is imposed?

Correct Answerverified60 units will be bou...View AnswerShow Answer

The greater the elasticity of demand, the smaller the deadweight loss of a tax.

Correct AnswerverifiedShow Answer

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The deadweight loss will be larger in Ma...
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If the objective is to maximize tax reve...
View Answer

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Correct Answer
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Correct Answer
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60 units will be bou...
View Answer

Correct Answer
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