Question 1

Who once said that taxes are the price we pay for a civilized society?

Accepted Answer

A) Aristotle 
B) George Washington 
C) Oliver Wendell Holmes, Jr. 
D) Ronald Reagan 
A) Aristotle 
B) George Washington 
C) Oliver Wendell Holmes, Jr. 
D) Ronald Reagan

Question 2

Assume that for good X the supply curve for a good is a typical, upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. If the good is taxed, and the tax is tripled, the

Accepted Answer

A) base of the triangle that represents the deadweight loss triples. 
B) height of the triangle that represents the deadweight loss triples. 
C) deadweight loss of the tax increases by a factor of nine. 
D) All of the above are correct. 
A) base of the triangle that represents the deadweight loss triples. 
B) height of the triangle that represents the deadweight loss triples. 
C) deadweight loss of the tax increases by a factor of nine. 
D) All of the above are correct.

Question 3

Suppose the demand curve and the supply curve in a market are both linear, and suppose the price elasticity of supply is 0.5. Will the deadweight loss from a $3 tax per unit be larger if the price elasticity of demand is 0.3 or if the price elasticity of demand is 0.7?

Accepted Answer

The deadweight loss

Question 4

Figure 8-16    
-Refer to Figure 8-16. Panel (a) and Panel (b) each illustrate a $2 tax placed on a market. In comparison to Panel (b), Panel (a) illustrates which of the following statements?

Accepted Answer

A) When demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic. 
B) When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic. 
C) When supply is relatively inelastic, the deadweight loss of a tax is smaller than when supply is relatively elastic. 
D) When supply is relatively elastic, the deadweight loss of a tax is larger than when supply is relatively inelastic. 
A) When demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic. 
B) When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic. 
C) When supply is relatively inelastic, the deadweight loss of a tax is smaller than when supply is relatively elastic. 
D) When supply is relatively elastic, the deadweight loss of a tax is larger than when supply is relatively inelastic.

Question 5

When a tax is imposed, the loss of consumer surplus and producer surplus as a result of the tax exceeds the tax revenue collected by the government.

Accepted Answer

A) True 
 B)False

Question 6

The deadweight loss of a tax rises even more rapidly than the size of the tax.

Accepted Answer

A) True 
 B)False

Question 7

Figure 8-4
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-4. The tax results in a loss of producer surplus that amounts to

Accepted Answer

A) $75.50. 
B) $90.00. 
C) $112.50. 
D) $127.50. 
A) $75.50. 
B) $90.00. 
C) $112.50. 
D) $127.50.

Question 8

The amount of deadweight loss that results from a tax of a given size is determined by

Accepted Answer

A) whether the tax is levied on buyers or sellers. 
B) the number of buyers in the market relative to the number of sellers. 
C) the price elasticities of demand and supply. 
D) the ratio of the tax per unit to the effective price received by sellers. 
A) whether the tax is levied on buyers or sellers. 
B) the number of buyers in the market relative to the number of sellers. 
C) the price elasticities of demand and supply. 
D) the ratio of the tax per unit to the effective price received by sellers.

Question 9

Other things equal, the deadweight loss of a tax

Accepted Answer

A) decreases as the size of the tax increases. 
B) increases as the size of the tax increases, but the increase in the deadweight loss is less rapid than the increase in the size of the tax. 
C) increases as the size of the tax increases, and the increase in the deadweight loss is more rapid than the increase in the size of the tax. 
D) increases as the price elasticities of demand and/or supply increase, but the deadweight loss does not change as the size of the tax increases. 
A) decreases as the size of the tax increases. 
B) increases as the size of the tax increases, but the increase in the deadweight loss is less rapid than the increase in the size of the tax. 
C) increases as the size of the tax increases, and the increase in the deadweight loss is more rapid than the increase in the size of the tax. 
D) increases as the price elasticities of demand and/or supply increase, but the deadweight loss does not change as the size of the tax increases.

Question 10

Figure 8-7
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-7. Before the tax is imposed, the equilibrium price is

Accepted Answer

A) $32, and the equilibrium quantity is 15. 
B) $24, and the equilibrium quantity is 15. 
C) $24, and the equilibrium quantity is 25. 
D) $16, and the equilibrium quantity is 15. 
A) $32, and the equilibrium quantity is 15. 
B) $24, and the equilibrium quantity is 15. 
C) $24, and the equilibrium quantity is 25. 
D) $16, and the equilibrium quantity is 15.

Question 11

Figure 8-14  
-Refer to Figure 8-14. Which of the following combinations will minimize 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 1 
A) supply 1 and demand 1 
B) supply 2 and demand 2 
C) supply 1 and demand 2 
D) supply 2 and demand 1

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Figure 8-9
The vertical distance between points A and C represents a tax in the market.  
-Refer to Figure 8-9. The consumer surplus without the tax is

Accepted Answer

A) $2,000. 
B) $5,000. 
C) $8,000. 
D) $16,000. 
A) $2,000. 
B) $5,000. 
C) $8,000. 
D) $16,000.

Question 14

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. 
A) 5. 
B) 9. 
C) 16. 
D) 24.

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

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

Question 17

Scenario 8-3
Suppose the market demand and market supply curves are given by the equations:  
-Refer to Scenario 8-3. Suppose that a tax of T is placed on buyers so that the demand curve becomes:   
What will be the deadweight loss from this tax?

Accepted Answer

The deadwe

Question 18

The government's benefit from a tax can be measured by

Accepted Answer

A) consumer surplus. 
B) producer surplus. 
C) tax revenue. 
D) All of the above are correct. 
A) consumer surplus. 
B) producer surplus. 
C) tax revenue. 
D) All of the above are correct.

Question 19

Figure 8-2
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-2. Consumer surplus without the tax is

Accepted Answer

A) $6, and consumer surplus with the tax is $1.50. 
B) $6, and consumer surplus with the tax is $4.50. 
C) $10, and consumer surplus with the tax is $1.50. 
D) $10, and consumer surplus with the tax is $4.50. 
A) $6, and consumer surplus with the tax is $1.50. 
B) $6, and consumer surplus with the tax is $4.50. 
C) $10, and consumer surplus with the tax is $1.50. 
D) $10, and consumer surplus with the tax is $4.50.

Question 20

Figure 8-25  
-Refer to Figure 8-25. How much is producer surplus at the market equilibrium?

Accepted Answer

Producer s

Exam 8: Applications: the Costs of Taxation

Who once said that taxes are the price we pay for a civilized society?

Assume that for good X the supply curve for a good is a typical, upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. If the good is taxed, and the tax is tripled, the

Suppose the demand curve and the supply curve in a market are both linear, and suppose the price elasticity of supply is 0.5. Will the deadweight loss from a $3 tax per unit be larger if the price elasticity of demand is 0.3 or if the price elasticity of demand is 0.7?

Figure 8-16 -Refer to Figure 8-16. Panel (a) and Panel (b) each illustrate a $2 tax placed on a market. In comparison to Panel (b), Panel (a) illustrates which of the following statements?

When a tax is imposed, the loss of consumer surplus and producer surplus as a result of the tax exceeds the tax revenue collected by the government.

The deadweight loss of a tax rises even more rapidly than the size of the tax.

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4. The tax results in a loss of producer surplus that amounts to

The amount of deadweight loss that results from a tax of a given size is determined by

Other things equal, the deadweight loss of a tax

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7. Before the tax is imposed, the equilibrium price is

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

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

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The consumer surplus without the tax is

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

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

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

Scenario 8-3 Suppose the market demand and market supply curves are given by the equations: -Refer to Scenario 8-3. Suppose that a tax of T is placed on buyers so that the demand curve becomes: What will be the deadweight loss from this tax?

The government's benefit from a tax can be measured by

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2. Consumer surplus without the tax is

Figure 8-25 -Refer to Figure 8-25. How much is producer surplus at the market equilibrium?

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

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