Question 1

Labor taxes may distort labor markets greatly if

Accepted Answer

A) labor supply is highly inelastic. 
B) many workers choose to work 40 hours per week regardless of their earnings. 
C) the number of hours many part-time workers want to work is very sensitive to the wage rate. 
D) "underground" workers do not respond to changes in the wages of legal jobs because they prefer not to pay taxes. 
A) labor supply is highly inelastic. 
B) many workers choose to work 40 hours per week regardless of their earnings. 
C) the number of hours many part-time workers want to work is very sensitive to the wage rate. 
D) "underground" workers do not respond to changes in the wages of legal jobs because they prefer not to pay taxes.

Question 2

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. 
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.

Question 3

Figure 8-4
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-4. The amount of the tax on each unit of the good is

Accepted Answer

A) $5. 
B) $7. 
C) $8. 
D) $12. 
A) $5. 
B) $7. 
C) $8. 
D) $12.

Question 4

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) consumer surplus decreases by $13. 
B) producer surplus decreases by $13. 
C) the deadweight loss amounts to $6. 
D) the amount of the good that is sold remains unchanged. 
A) consumer surplus decreases by $13. 
B) producer surplus decreases by $13. 
C) the deadweight loss amounts to $6. 
D) the amount of the good that is sold remains unchanged.

Question 5

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. 
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.

Question 6

The marginal tax rate on labor income for many workers in the United States is almost

Accepted Answer

A) 30 percent. 
B) 40 percent. 
C) 50 percent. 
D) 65 percent. 
A) 30 percent. 
B) 40 percent. 
C) 50 percent. 
D) 65 percent.

Question 7

Suppose that the market for product X is characterized by a typical, downward-sloping, linear demand curve and a typical, upward-sloping, linear supply curve. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $6 tax per unit?

Accepted Answer

The deadweight loss will be $1

Question 8

Figure 8-9
The vertical distance between points A and C represents a tax in the market.  
-Refer to Figure 8-9. The amount of tax revenue received by the government is

Accepted Answer

A) $4,000. 
B) $6,000. 
C) $10,000. 
D) $24,000. 
A) $4,000. 
B) $6,000. 
C) $10,000. 
D) $24,000.

Question 9

Figure 8-6
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-6. What happens to consumer surplus when the tax is imposed in this market?

Accepted Answer

A) Consumer surplus falls by $3,600. 
B) Consumer surplus falls by $2,700. 
C) Consumer surplus falls by $1,800. 
D) Consumer surplus falls by $900. 
A) Consumer surplus falls by $3,600. 
B) Consumer surplus falls by $2,700. 
C) Consumer surplus falls by $1,800. 
D) Consumer surplus falls by $900.

Question 10

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, consumer surplus is

Accepted Answer

A) $600. 
B) $900. 
C) $1,500. 
D) $3,000. 
A) $600. 
B) $900. 
C) $1,500. 
D) $3,000.

Question 11

Tax revenues increase in direct proportion to increases in the size of the tax.

Accepted Answer

A) True 
 B)False

Question 12

Figure 8-25  
-Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. What price will consumers pay for the good after the tax is imposed?

Accepted Answer

Consumers will pay $

Question 13

Use the following graph shown to fill in the table that follows.

Accepted Answer

The answer of Use the following graph shown to fill...

Question 14

Taxes drive a wedge into the market by raising the price that sellers receive and lowering the price that buyers pay.

Accepted Answer

A) True 
 B)False

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) 
A) Panel (a) 
B) Panel (b) 
C) Panel (c) 
D) Panel (d)

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 $40 when she hires someone to clean her house for a week. Which of the following is correct?

Accepted Answer

A) Erin will now clean her own house. 
B) Ernesto will continue to clean Erin's house, but his producer surplus will decline. 
C) Total economic welfare (consumer surplus plus producer surplus plus tax revenue) will increase. 
D) Erin will continue to hire Ernesto to clean her house, but her consumer surplus will decline. 
A) Erin will now clean her own house. 
B) Ernesto will continue to clean Erin's house, but his producer surplus will decline. 
C) Total economic welfare (consumer surplus plus producer surplus plus tax revenue) will increase. 
D) Erin will continue to hire Ernesto to clean her house, but her consumer surplus will decline.

Question 17

The Social Security tax, and to a large extent, the federal income tax, are labor taxes.

Accepted Answer

A) True 
 B)False

Question 18

Figure 8-13  
-Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The producer surplus after this tax is

Accepted Answer

A) $60. 
B) $45. 
C) $30. 
D) $15. 
A) $60. 
B) $45. 
C) $30. 
D) $15.

Question 19

Figure 8-9
The vertical distance between points A and C represents a tax in the market.  
-Refer to Figure 8-9. The amount of amount of deadweight loss as a result of the tax is

Accepted Answer

A) $4,000. 
B) $5,000. 
C) $6,000. 
D) $10,000. 
A) $4,000. 
B) $5,000. 
C) $6,000. 
D) $10,000.

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 8: Applications: the Costs of Taxation

Labor taxes may distort labor markets greatly if

When a tax is levied on a good,

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4. The amount of the tax on each unit of the good is

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,

Taxes are of interest to

The marginal tax rate on labor income for many workers in the United States is almost

Suppose that the market for product X is characterized by a typical, downward-sloping, linear demand curve and a typical, upward-sloping, linear supply curve. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $6 tax per unit?

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The amount of tax revenue received by the government is

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. What happens to consumer surplus when the tax is imposed in this market?

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, consumer surplus is

Tax revenues increase in direct proportion to increases in the size of the tax.

Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. What price will consumers pay for the good after the tax is imposed?

Use the following graph shown to fill in the table that follows.

Taxes drive a wedge into the market by raising the price that sellers receive and lowering the price that buyers pay.

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?

The Social Security tax, and to a large extent, the federal income tax, are labor taxes.

Figure 8-13 -Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The producer surplus after this tax is

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The amount of amount of deadweight loss as a result of the tax is

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

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

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,