Question 1

The Social Security tax is a tax on

Accepted Answer

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

Question 2

Figure 8-25  
-Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is the deadweight loss from this tax?

Accepted Answer

The deadwe

Question 3

Taxes affect market participants by increasing the price paid by the buyer and decreasing the price received by the seller.

Accepted Answer

A) True 
 B)False

Question 4

Figure 8-5
Suppose that the government imposes a tax of P3 - P1.  
-Refer to Figure 8-5. The equilibrium price before the tax is imposed is

Accepted Answer

A) P1. 
B) P2. 
C) P3. 
D) P4. 
A) P1. 
B) P2. 
C) P3. 
D) P4.

Question 5

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:   
If T = 40, how much will be the deadweight loss from this tax?

Accepted Answer

The deadwe

Question 6

Figure 8-22  
-Refer to Figure 8-22. Suppose the government initially imposes a $3 per-unit tax on this good. Now suppose the government is deciding whether to lower the tax to $1.50 or raise it to $4.50. Which of the following statements is not correct?

Accepted Answer

A) Compared to the original tax, the larger tax will decrease tax revenue. 
B) Compared to the original tax, the smaller tax will decrease deadweight loss. 
C) Compared to the original tax, the smaller tax will decrease tax revenue. 
D) Compared to the original tax, the larger tax will increase deadweight loss. 
A) Compared to the original tax, the larger tax will decrease tax revenue. 
B) Compared to the original tax, the smaller tax will decrease deadweight loss. 
C) Compared to the original tax, the smaller tax will decrease tax revenue. 
D) Compared to the original tax, the larger tax will increase deadweight loss.

Question 7

Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, the

Accepted Answer

A) less elastic is the demand for the good. 
B) less elastic is the supply of the good. 
C) smaller is the amount of the tax. 
D) All of the above are correct. 
A) less elastic is the demand for the good. 
B) less elastic is the supply of the good. 
C) smaller is the amount of the tax. 
D) All of the above are correct.

Question 8

Figure 8-3
The vertical distance between points A and C represents a tax in the market.  
-Refer to Figure 8-3. The price that buyers effectively pay after the tax is imposed is

Accepted Answer

A) P1. 
B) P2. 
C) P3. 
D) P4. 
A) P1. 
B) P2. 
C) P3. 
D) P4.

Question 9

Suppose a tax of $1 per unit is imposed on a good. The more elastic the demand for the good, other things equal,

Accepted Answer

A) the larger is the decrease in quantity demanded as a result of the tax. 
B) the smaller is the tax burden on buyers relative to the tax burden on sellers. 
C) the larger is the deadweight loss of the tax. 
D) All of the above are correct. 
A) the larger is the decrease in quantity demanded as a result of the tax. 
B) the smaller is the tax burden on buyers relative to the tax burden on sellers. 
C) the larger is the deadweight loss of the tax. 
D) All of the above are correct.

Question 10

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 11

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. 
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.

Question 12

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. 
A) $1,500. 
B) $2,400. 
C) $3,000. 
D) $3,600.

Question 13

Figure 8-5
Suppose that the government imposes a tax of P3 - P1.  
-Refer to Figure 8-5. The loss in total welfare that results from the tax is represented by area

Accepted Answer

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

Question 14

If the tax on a good is tripled, the deadweight loss of the tax

Accepted Answer

A) remains constant. 
B) triples. 
C) increases by a factor of 9. 
D) increases by a factor of 12. 
A) remains constant. 
B) triples. 
C) increases by a factor of 9. 
D) increases by a factor of 12.

Question 15

Figure 8-25  
-Refer to Figure 8-25. What are the equilibrium price and equilibrium quantity in this market?

Accepted Answer

The equilibrium pric

Question 16

When a tax is imposed on a good, the resulting decrease in consumer surplus is always larger than the resulting decrease in producer surplus.

Accepted Answer

A) True 
 B)False

Question 17

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. 
A) $200. 
B) $250. 
C) $500. 
D) $2,500.

Question 18

Relative to a situation in which gasoline is not taxed, the imposition of a tax on gasoline causes the quantity of gasoline demanded to

Accepted Answer

A) decrease and the quantity of gasoline supplied to decrease. 
B) decrease and the quantity of gasoline supplied to increase. 
C) increase and the quantity of gasoline supplied to decrease. 
D) increase and the quantity of gasoline supplied to increase. 
A) decrease and the quantity of gasoline supplied to decrease. 
B) decrease and the quantity of gasoline supplied to increase. 
C) increase and the quantity of gasoline supplied to decrease. 
D) increase and the quantity of gasoline supplied to increase.

Question 19

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. Without the tax, the producer surplus is

Accepted Answer

A) (P5-0) x Q5. 
B) 1/2 x (P5-0) x Q5. 
C) (P8-0) x Q2. 
D) 1/2 x (P8-0) x Q2. 
A) (P5-0) x Q5. 
B) 1/2 x (P5-0) x Q5. 
C) (P8-0) x Q2. 
D) 1/2 x (P8-0) x Q2.

Question 20

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 with the tax is

Accepted Answer

A) $2,000. 
B) $4,000. 
C) $6,000. 
D) $8,000. 
A) $2,000. 
B) $4,000. 
C) $6,000. 
D) $8,000.

Exam 8: Applications: the Costs of Taxation

The Social Security tax is a tax on

Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is the deadweight loss from this tax?

Taxes affect market participants by increasing the price paid by the buyer and decreasing the price received by the seller.

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. The equilibrium price before the tax is imposed is

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: If T = 40, how much will be the deadweight loss from this tax?

Figure 8-22 -Refer to Figure 8-22. Suppose the government initially imposes a $3 per-unit tax on this good. Now suppose the government is deciding whether to lower the tax to $1.50 or raise it to $4.50. Which of the following statements is not correct?

Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, the

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. The price that buyers effectively pay after the tax is imposed is

Suppose a tax of $1 per unit is imposed on a good. The more elastic the demand for the good, other things equal,

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?

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?

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

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. The loss in total welfare that results from the tax is represented by area

If the tax on a good is tripled, the deadweight loss of the tax

Figure 8-25 -Refer to Figure 8-25. What are the equilibrium price and equilibrium quantity in this market?

When a tax is imposed on a good, the resulting decrease in consumer surplus is always larger than the resulting decrease in producer surplus.

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

Relative to a situation in which gasoline is not taxed, the imposition of a tax on gasoline causes the quantity of gasoline demanded to

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. Without the tax, the producer surplus is

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 with the tax is

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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