Question 1

To fully understand how taxes affect economic well-being,we must compare the

Accepted Answer

A)   consumer surplus to the producer surplus.
B)   price paid by buyers to the price received by sellers.
C)   reduced welfare of buyers and sellers to the revenue raised by the government.
D)   consumer surplus to the deadweight loss.E) B) and D)
F) C) and D) C

Question 2

Figure 8-5
Suppose that the government imposes a tax of P3 - P1. 
-Refer to Figure 8-5.After the tax is levied,producer surplus is represented by area

Accepted Answer

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

Question 3

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

Question 4

Since the amount of land is fixed,the total supply of land is

Accepted Answer

A)   relatively elastic.
B)   perfectly elastic.
C)   perfectly inelastic.
D)   relatively inelastic.E) A) and C)
F) A) and B)

Question 5

According to Arthur Laffer,the graph that represents the amount of tax revenue (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 line or curve.E) A) and C)
F) None of the above

Question 6

Assume the price of gasoline is $2.40 per gallon,and the equilibrium quantity of gasoline is 12 million gallons per day with no tax on gasoline.Starting from this initial situation,which of the following scenarios would result in the largest deadweight loss?

Accepted Answer

A)   A 10 percent increase in the price of gasoline reduces the quantity of gasoline demanded by 2 percent and it increases the quantity of gasoline supplied by 5 percent;and the tax on gasoline amounts to $0.40 per gallon.
B)   A 10 percent increase in the price of gasoline reduces the quantity of gasoline demanded by 2 percent and it increases the quantity of gasoline supplied by 7 percent;and the tax on gasoline amounts to $0.40 per gallon.
C)   A 10 percent increase in the price of gasoline reduces the quantity of gasoline demanded by 1 percent and it increases the quantity of gasoline supplied by 8 percent;and the tax on gasoline amounts to $0.35 per gallon.
D)   There is insufficient information to make this determination.E) B) and D)
F) None of the above

Question 7

To fully understand how taxes affect economic well-being,we must

Accepted Answer

A)   assume that economic well-being is not affected if all tax revenue is spent on goods and services for the people who are being taxed.
B)   compare the taxes raised in the United States with those raised in other countries,especially France.
C)   compare the reduced welfare of buyers and sellers to the amount of revenue the government raises.
D)   take into account the fact that almost all taxes reduce the welfare of buyers,increase the welfare of sellers,and raise revenue for the government.E) A) and B)
F) A) and C)

Question 8

When the government imposes taxes on buyers and sellers of a good,society loses some of the benefits of market efficiency.

Accepted Answer

A) True 
 B)False

Question 9

Figure 8-10
The vertical distance between points A and B represents the original tax. 
-Refer to Figure 8-10.If the government changed the per-unit tax from $5.00 to $2.50,then the price paid by buyers would be $7.50,the price received by sellers would be $5,and the quantity sold in the market would be 1.5 units.Compared to the original tax rate,this lower tax rate would

Accepted Answer

A)   increase government revenue and increase the deadweight loss from the tax.
B)   increase government revenue and decrease the deadweight loss from the tax.
C)   decrease government revenue and increase the deadweight loss from the tax.
D)   decrease government revenue and decrease the deadweight loss from the tax.E) A) and B)
F) None of the above

Question 10

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

Accepted Answer

A)   supply curve shifts upward by the amount of the tax.
B)   quantity supplied increases for all conceivable prices of the good.
C)   buyers of the good will send tax payments to the government.
D)   demand curve shifts to the right by the horizontal distance of the tax.E) None of the above
F) C) and D)

Question 11

Which of the following is a tax on labor?

Accepted Answer

A)   Medicare tax
B)   inheritance tax
C)   sales tax
D)   All of the above are labor taxes.E) None of the above
F) A) and C)

Question 12

Normally,both buyers and sellers of a good become worse off when the good is taxed.

Accepted Answer

A) True 
 B)False

Question 13

The more inelastic are demand and supply,the greater is the deadweight loss of a tax.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A)   tax revenue.
B)   consumer surplus before the tax.
C)   producer surplus after the tax.
D)   total surplus before the tax.E) B) and D)
F) A) and D)

Question 15

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

Question 16

Taxes cause deadweight losses because taxes

Accepted Answer

A)   reduce the sum of producer and consumer surpluses by more than the amount of tax revenue.
B)   prevent buyers and sellers from realizing some of the gains from trade.
C)   cause marginal buyers and marginal sellers to leave the market,causing the quantity sold to fall.
D)   All of the above are correct.E) B) and C)
F) A) and B)

Question 17

The benefit that government receives from a tax is measured by

Accepted Answer

A)   the change in the equilibrium quantity of the good.
B)   the change in the equilibrium price of the good.
C)   tax revenue.
D)   total surplus.E) All of the above
F) A) and C)

Question 18

Figure 8-6
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-6.When the tax is imposed in this market,the price sellers effectively receive is

Accepted Answer

A)   $4.
B)   $6.
C)   $10.
D)   $16.E) A) and B)
F) A) and C) B

Question 19

When a tax is imposed on a good for which both demand and supply are very elastic,

Accepted Answer

A)   sellers effectively pay the majority of the tax.
B)   buyers effectively pay the majority of the tax.
C)   the tax burden is equally divided between buyers and sellers.
D)   None of the above is correct;further information would be required to determine how the burden of the tax is distributed between buyers and sellers.E) C) and D)
F) All of the above D

Question 20

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 C)
F) A) and D)

Exam 8: Application: The Costs of Taxation

To fully understand how taxes affect economic well-being,we must compare the

Correct Answer
verified
C

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.After the tax is levied,producer surplus is represented by area

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

Since the amount of land is fixed,the total supply of land is

Correct Answer
verified

According to Arthur Laffer,the graph that represents the amount of tax revenue (measured on the vertical axis) as a function of the size of the tax (measured on the horizontal axis) looks like

Correct Answer
verified

Assume the price of gasoline is $2.40 per gallon,and the equilibrium quantity of gasoline is 12 million gallons per day with no tax on gasoline.Starting from this initial situation,which of the following scenarios would result in the largest deadweight loss?

Correct Answer
verified

To fully understand how taxes affect economic well-being,we must

Correct Answer
verified

When the government imposes taxes on buyers and sellers of a good,society loses some of the benefits of market efficiency.

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Which of the following is a tax on labor?

Correct Answer
verified

Normally,both buyers and sellers of a good become worse off when the good is taxed.

Correct Answer
verified

The more inelastic are demand and supply,the greater is the deadweight loss of a tax.

Correct Answer
verified

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

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.Without a tax,consumer surplus in this market is

Correct Answer
verified

Taxes cause deadweight losses because taxes

Correct Answer
verified

The benefit that government receives from a tax is measured by

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.When the tax is imposed in this market,the price sellers effectively receive is

Correct Answer
verified
B

When a tax is imposed on a good for which both demand and supply are very elastic,

Correct Answer
verified
D

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

Exam 8: Application: The Costs of Taxation

To fully understand how taxes affect economic well-being,we must compare the

Correct AnswerverifiedC

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.After the tax is levied,producer surplus is represented by area

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

Since the amount of land is fixed,the total supply of land is

Correct AnswerverifiedShow Answer

According to Arthur Laffer,the graph that represents the amount of tax revenue (measured on the vertical axis) as a function of the size of the tax (measured on the horizontal axis) looks like

Correct AnswerverifiedShow Answer

Assume the price of gasoline is $2.40 per gallon,and the equilibrium quantity of gasoline is 12 million gallons per day with no tax on gasoline.Starting from this initial situation,which of the following scenarios would result in the largest deadweight loss?

Correct AnswerverifiedShow Answer

To fully understand how taxes affect economic well-being,we must

Correct AnswerverifiedShow Answer

When the government imposes taxes on buyers and sellers of a good,society loses some of the benefits of market efficiency.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is a tax on labor?

Correct AnswerverifiedShow Answer

Normally,both buyers and sellers of a good become worse off when the good is taxed.

Correct AnswerverifiedShow Answer

The more inelastic are demand and supply,the greater is the deadweight loss of a tax.

Correct AnswerverifiedShow Answer

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

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,consumer surplus in this market is

Correct AnswerverifiedShow Answer

Taxes cause deadweight losses because taxes

Correct AnswerverifiedShow Answer

The benefit that government receives from a tax is measured by

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.When the tax is imposed in this market,the price sellers effectively receive is

Correct AnswerverifiedB

When a tax is imposed on a good for which both demand and supply are very elastic,

Correct AnswerverifiedD

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

Correct Answer
verified
C

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
B

Correct Answer
verified
D

Correct Answer
verified