Question 1

Figure 8-26 
-Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much is total surplus after the tax is imposed?

Accepted Answer

Total surplus is the sum of co...

Question 2

If a tax shifts the demand curve upward (or to the right) , we can infer that the tax was levied on

Accepted Answer

A)   buyers of the good.
B)   sellers of the good.
C)   both buyers and sellers of the good.
D)   We cannot infer anything because the shift described is not consistent with a tax.E) B) and C)
F) A) and D)

Question 3

When a tax is levied on a good,

Accepted Answer

A)   government collects revenues which might justify the loss in total welfare.
B)   there is a decrease in the quantity of the good bought and sold in the market.
C)   a wedge is placed between the price buyers pay and the price sellers effectively receive.
D)   All of the above are correct.E) None of the above
F) All of the above

Question 4

Figure 8-3
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-3. The loss in producer surplus caused by the tax is measured by the area

Accepted Answer

A)   ABC.
B)   P1P3ABC.
C)   P1P2BC.
D)   P1C0.E) B) and D)
F) B) and C)

Question 5

Figure 8-29 
-Refer to Figure 8-29. As the size of the tax increases from $3 to $6 to $9, what happens to tax revenues?

Accepted Answer

When the tax is $3, tax revenue is $3 x ...

Question 6

Suppose the tax on gasoline is decreased from $0.60 per gallon to $0.40 per gallon. As a result,

Accepted Answer

A)   tax revenue necessarily decreases.
B)   the deadweight loss of the tax necessarily decreases.
C)   the demand curve for gasoline necessarily becomes steeper.
D)   the supply curve for gasoline necessarily becomes flatter.E) B) and C)
F) C) and D) B

Question 7

When the government imposes taxes on buyers or sellers of a good, society

Accepted Answer

A)   loses some of the benefits of market efficiency.
B)   gains efficiency but loses equality.
C)   is better off because the government's tax revenues exceed the deadweight loss.
D)   moves from an elastic supply curve to an inelastic supply curve.E) None of the above
F) B) and C)

Question 8

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 B on the curve, then an increase 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.E) C) and D)
F) All of the above

Question 9

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

Question 10

If the tax on a good is increased from $1 per unit to $4 per unit, the deadweight loss from the tax increases by a factor of

Accepted Answer

A)   5.
B)   9.
C)   16.
D)   24.E) C) and D)
F) B) and C) C

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, consumer surplus in this market is

Accepted Answer

A)   $1,500.
B)   $2,400.
C)   $3,000.
D)   $3,600.E) A) and B)
F) None of the above

Question 12

Figure 8-11 
-Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then, when the tax is imposed,

Accepted Answer

A)   the government collects $28 in tax revenue.
B)   producer surplus decreases by $13.
C)   consumer surplus decreases by $11.
D)   the deadweight loss amounts to $9.E) None of the above
F) B) and C)

Question 13

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 14

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 $150. Rebecca and Susan agree on a price of $175. Suppose the government imposes a tax of $10 on dog sitting. The tax has made Rebecca and Susan worse off by a total of

Accepted Answer

A)   $50.
B)   $40.
C)   $20.
D)   $10.E) A) and B)
F) None of the above

Question 15

Figure 8-20
On the vertical axis of each graph, DWL is deadweight loss.
 
-Refer to Figure 8-20. Which graph correctly illustrates the relationship between the size of a tax and the size of the deadweight loss associated with the tax?

Accepted Answer

A)   Panel (a) 
B)   Panel (b) 
C)   Panel (c) 
D)   Panel (d) E) C) and D)
F) None of the above

Question 16

Scenario 8-1
Erin would be willing to pay as much as $100 per week to have her house cleaned. Ernesto's opportunity cost of cleaning Erin's house is $70 per week.
-Refer to Scenario 8-1. Assume Erin is required to pay a tax of $5 when she hires someone to clean her house. Which of the following is true?

Accepted Answer

A)   Erin will continue to hire Ernesto to clean her house, but her consumer surplus will decline.
B)   Ernesto will continue to clean Erin's house, and his producer surplus will increase.
C)   Total economic welfare (consumer surplus plus producer surplus plus tax revenue)  will decrease.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 17

The demand for bread is less elastic than the demand for donuts; hence, a tax on bread will create a larger deadweight loss than will the same tax on donuts, other things equal.

Accepted Answer

A) True 
 B)False

Question 18

When a good is taxed, the tax revenue collected by the government equals the decrease in the welfare of buyers and sellers caused by the tax.

Accepted Answer

A) True 
 B)False

Question 19

Figure 8-14 
-Refer to Figure 8-14. Which of the following combinations will maximize the deadweight loss from a tax?

Accepted Answer

A)   supply 1 and demand 1
B)   supply 2 and demand 2
C)   supply 1 and demand 2
D)   supply 2 and demand 1E) A) and B)
F) A) and C)

Question 20

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 B on the curve, then a small 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.E) C) and D)
F) A) and C) C

Exam 8: Application: The Costs of Taxation

Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much is total surplus after the tax is imposed?

Correct Answer
verified
Total surplus is the sum of co...
View Answer

If a tax shifts the demand curve upward (or to the right) , we can infer that the tax was levied on

Correct Answer
verified

When a tax is levied on a good,

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. The loss in producer surplus caused by the tax is measured by the area

Correct Answer
verified

Figure 8-29 -Refer to Figure 8-29. As the size of the tax increases from $3 to $6 to $9, what happens to tax revenues?

Correct Answer
verified
When the tax is $3, tax revenue is $3 x ...
View Answer

Suppose the tax on gasoline is decreased from $0.60 per gallon to $0.40 per gallon. As a result,

Correct Answer
verified
B

When the government imposes taxes on buyers or sellers of a good, society

Correct Answer
verified

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 B on the curve, then an increase in the tax rate will

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

Correct Answer
verified

If the tax on a good is increased from $1 per unit to $4 per unit, the deadweight loss from the tax increases by a factor of

Correct Answer
verified
C

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

Correct Answer
verified

Figure 8-11 -Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then, when the tax is imposed,

Correct Answer
verified

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 Answer
verified
Total tax ...
View Answer

Correct Answer
verified

Figure 8-20 On the vertical axis of each graph, DWL is deadweight loss. -Refer to Figure 8-20. Which graph correctly illustrates the relationship between the size of a tax and the size of the deadweight loss associated with the tax?

Correct Answer
verified

Correct Answer
verified

The demand for bread is less elastic than the demand for donuts; hence, a tax on bread will create a larger deadweight loss than will the same tax on donuts, other things equal.

Correct Answer
verified

When a good is taxed, the tax revenue collected by the government equals the decrease in the welfare of buyers and sellers caused by the tax.

Correct Answer
verified

Figure 8-14 -Refer to Figure 8-14. Which of the following combinations will maximize the deadweight loss from a tax?

Correct Answer
verified

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 B on the curve, then a small decrease in the tax rate will

Correct Answer
verified
C

Exam 8: Application: The Costs of Taxation

Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much is total surplus after the tax is imposed?

Correct AnswerverifiedTotal surplus is the sum of co...View AnswerShow Answer

If a tax shifts the demand curve upward (or to the right) , we can infer that the tax was levied on

Correct AnswerverifiedShow Answer

When a tax is levied on a good,

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 loss in producer surplus caused by the tax is measured by the area

Correct AnswerverifiedShow Answer

Figure 8-29 -Refer to Figure 8-29. As the size of the tax increases from $3 to $6 to $9, what happens to tax revenues?

Correct AnswerverifiedWhen the tax is $3, tax revenue is $3 x ...View AnswerShow Answer

Suppose the tax on gasoline is decreased from $0.60 per gallon to $0.40 per gallon. As a result,

Correct AnswerverifiedB

When the government imposes taxes on buyers or sellers of a good, society

Correct AnswerverifiedShow 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 B on the curve, then an increase in the tax rate will

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

Correct AnswerverifiedShow Answer

If the tax on a good is increased from $1 per unit to $4 per unit, the deadweight loss from the tax increases by a factor of

Correct AnswerverifiedC

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

Correct AnswerverifiedShow Answer

Figure 8-11 -Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then, when the tax is imposed,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 8-20 On the vertical axis of each graph, DWL is deadweight loss. -Refer to Figure 8-20. Which graph correctly illustrates the relationship between the size of a tax and the size of the deadweight loss associated with the tax?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The demand for bread is less elastic than the demand for donuts; hence, a tax on bread will create a larger deadweight loss than will the same tax on donuts, other things equal.

Correct AnswerverifiedShow Answer

When a good is taxed, the tax revenue collected by the government equals the decrease in the welfare of buyers and sellers caused by the tax.

Correct AnswerverifiedShow Answer

Figure 8-14 -Refer to Figure 8-14. Which of the following combinations will maximize the deadweight loss from a tax?

Correct AnswerverifiedShow 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 B on the curve, then a small decrease in the tax rate will

Correct AnswerverifiedC

Correct Answer
verified
Total surplus is the sum of co...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
When the tax is $3, tax revenue is $3 x ...
View Answer

Correct Answer
verified
B

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
C

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Total tax ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
C