Question 1

Figure 8-11  
-Refer to Figure 8-11. The price labeled as P1 on the vertical axis represents the price

Accepted Answer

A) received by sellers before the tax is imposed. 
B) received by sellers after the tax is imposed. 
C) paid by buyers before the tax is imposed. 
D) paid by buyers after the tax is imposed. 
A) received by sellers before the tax is imposed. 
B) received by sellers after the tax is imposed. 
C) paid by buyers before the tax is imposed. 
D) paid by buyers after the tax is imposed.

Question 2

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. Suppose the price elasticity of supply is 0.7. Will the deadweight loss from a $3 tax per unit be smaller if the absolute value of the price elasticity of demand is 0.6 or if the absolute value of the price elasticity of demand is 1.5?

Accepted Answer

The deadweight loss will be smaller if t

Question 3

Figure 8-22  
-Refer to Figure 8-22. Suppose the government changed the per-unit tax on this good from $3.00 to $1.50. Compared to the original tax rate, this lower tax rate would

Accepted Answer

A) increase tax revenue and increase the deadweight loss from the tax. 
B) increase tax revenue and decrease the deadweight loss from the tax. 
C) decrease tax revenue and increase the deadweight loss from the tax. 
D) decrease tax revenue and decrease the deadweight loss from the tax. 
A) increase tax revenue and increase the deadweight loss from the tax. 
B) increase tax revenue and decrease the deadweight loss from the tax. 
C) decrease tax revenue and increase the deadweight loss from the tax. 
D) decrease tax revenue and decrease the deadweight loss from the tax.

Question 4

The larger the deadweight loss from taxation, the larger the cost of government programs.

Accepted Answer

A) True 
 B)False

Question 5

Figure 8-9
The vertical distance between points A and C represents a tax in the market.  
-Refer to Figure 8-9. The imposition of the tax causes the price received by sellers to

Accepted Answer

A) increase from $600 to $800. 
B) decrease from $800 to $300. 
C) decrease from $600 to $300. 
D) remain unchanged at $600. 
A) increase from $600 to $800. 
B) decrease from $800 to $300. 
C) decrease from $600 to $300. 
D) remain unchanged at $600.

Question 6

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. If Erin pays Ernesto $90 to clean her house, Erin's consumer surplus is

Accepted Answer

A) $80. 
B) $30. 
C) $20. 
D) $10. 
A) $80. 
B) $30. 
C) $20. 
D) $10.

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Figure 8-11  
-Refer to Figure 8-11. The deadweight loss of the tax is represented by the

Accepted Answer

A) length of the line segment connecting points A and B. 
B) length of the line segment connecting points A and C. 
C) length of the line segment connecting points B and C. 
D) area of the triangle bounded by the points A, B, and C. 
A) length of the line segment connecting points A and B. 
B) length of the line segment connecting points A and C. 
C) length of the line segment connecting points B and C. 
D) area of the triangle bounded by the points A, B, and C.

Question 9

Figure 8-27  
-Refer to Figure 8-27. Suppose that Market A is characterized by Demand 1 and Supply 1, and Market B is characterized by Demand 2 and Supply 1. If an identical tax is imposed on each market, the tax will create a larger deadweight loss in which market? Explain.

Accepted Answer

The deadweight loss will be larger in Ma

Question 10

The deadweight loss from a tax of $x per unit will be smallest in a market

Accepted Answer

A) in which demand is elastic and supply is inelastic. 
B) in which demand is inelastic and supply is elastic. 
C) in which demand is inelastic and supply is inelastic. 
D) None of the above are correct; we need to know the value of x in order to determine the answer. 
A) in which demand is elastic and supply is inelastic. 
B) in which demand is inelastic and supply is elastic. 
C) in which demand is inelastic and supply is inelastic. 
D) None of the above are correct; we need to know the value of x in order to determine the answer.

Question 11

When a tax is imposed on the buyers of a good, the demand curve shifts

Accepted Answer

A) downward by the amount of the tax. 
B) upward by the amount of the tax. 
C) downward by less than the amount of the tax. 
D) upward by more than the amount of the tax. 
A) downward by the amount of the tax. 
B) upward by the amount of the tax. 
C) downward by less than the amount of the tax. 
D) upward by more than the amount of the tax.

Question 12

Figure 8-26  
-Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How many units of this good will be bought and sold after the tax is imposed?

Accepted Answer

60 units will be bou

Question 13

When a tax is levied on a good, the buyers and sellers of the good share the burden,

Accepted Answer

A) provided the tax is levied on the sellers. 
B) provided the tax is levied on the buyers. 
C) provided a portion of the tax is levied on the buyers, with the remaining portion levied on the sellers. 
D) regardless of how the tax is levied. 
A) provided the tax is levied on the sellers. 
B) provided the tax is levied on the buyers. 
C) provided a portion of the tax is levied on the buyers, with the remaining portion levied on the sellers. 
D) regardless of how the tax is levied.

Question 14

Figure 8-2
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-2. The loss of producer surplus associated with some sellers dropping out of the market as a result of the tax is

Accepted Answer

A) $0. 
B) $1. 
C) $2. 
D) $3. 
A) $0. 
B) $1. 
C) $2. 
D) $3.

Question 15

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

Accepted Answer

A) $7. 
B) $5. 
C) $4. 
D) $3. 
A) $7. 
B) $5. 
C) $4. 
D) $3.

Question 16

In the market for widgets, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. The equilibrium quantity in the market for widgets is 200 per month when there is no tax. Then a tax of $5 per widget is imposed. As a result, the government is able to raise $800 per month in tax revenue. We can conclude that the equilibrium quantity of widgets has fallen by

Accepted Answer

A) 40 per month. 
B) 50 per month. 
C) 75 per month. 
D) 100 per month. 
A) 40 per month. 
B) 50 per month. 
C) 75 per month. 
D) 100 per month.

Question 17

Figure 8-5
Suppose that the government imposes a tax of P3 - P1.  
-Refer to Figure 8-5. The price that sellers effectively receive 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 18

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. 
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.

Question 19

Taxes on labor tend to encourage second earners to stay at home rather than work in the labor force.

Accepted Answer

A) True 
 B)False

Question 20

Table 8-1  
-Refer to Table 8-1. Suppose the government is considering levying a tax in one or more of the markets described in the table. Which of the markets will allow the government to minimize the deadweight loss(es) from the tax?

Accepted Answer

A) market A only 
B) markets A and C only 
C) markets B and D only 
D) market C only 
A) market A only 
B) markets A and C only 
C) markets B and D only 
D) market C only

Exam 8: Applications: the Costs of Taxation

Figure 8-11 -Refer to Figure 8-11. The price labeled as P1 on the vertical axis represents the price

Figure 8-22 -Refer to Figure 8-22. Suppose the government changed the per-unit tax on this good from $3.00 to $1.50. Compared to the original tax rate, this lower tax rate would

The larger the deadweight loss from taxation, the larger the cost of government programs.

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The imposition of the tax causes the price received by sellers to

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. If Erin pays Ernesto $90 to clean her house, Erin's consumer surplus is

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

Figure 8-11 -Refer to Figure 8-11. The deadweight loss of the tax is represented by the

Figure 8-27 -Refer to Figure 8-27. Suppose that Market A is characterized by Demand 1 and Supply 1, and Market B is characterized by Demand 2 and Supply 1. If an identical tax is imposed on each market, the tax will create a larger deadweight loss in which market? Explain.

The deadweight loss from a tax of $x per unit will be smallest in a market

When a tax is imposed on the buyers of a good, the demand curve shifts

Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How many units of this good will be bought and sold after the tax is imposed?

When a tax is levied on a good, the buyers and sellers of the good share the burden,

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2. The loss of producer surplus associated with some sellers dropping out of the market as a result of the tax is

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

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. The price that sellers effectively receive after the tax is imposed is

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

Taxes on labor tend to encourage second earners to stay at home rather than work in the labor force.

Table 8-1 -Refer to Table 8-1. Suppose the government is considering levying a tax in one or more of the markets described in the table. Which of the markets will allow the government to minimize the deadweight loss(es) from the tax?

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. The price labeled as P₁ on the vertical axis represents the price