Question 1

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 2

Because taxes distort incentives,they cause markets to allocate resources inefficiently.

Accepted Answer

A) True 
 B)False

Question 3

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 4

One negative aspect of Henry George's single tax on land is that,if it were applied today,

Accepted Answer

A) the loss of surplus to landowners would be greater than the tax revenue raised. 
B) the deadweight loss would be much larger than the deadweight loss of alternative taxes. 
C) the tax would not raise enough revenue to pay for government spending. 
D) it would result in enormous harm to users of land. 
A) the loss of surplus to landowners would be greater than the tax revenue raised. 
B) the deadweight loss would be much larger than the deadweight loss of alternative taxes. 
C) the tax would not raise enough revenue to pay for government spending. 
D) it would result in enormous harm to users of land.

Question 5

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) know the dollar amount of all taxes raised in the country each year. 
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. 
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) know the dollar amount of all taxes raised in the country each year. 
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.

Question 6

A tax on a good

Accepted Answer

A) raises the price that buyers effectively pay and raises the price that sellers effectively receive. 
B) raises the price that buyers effectively pay and lowers the price that sellers effectively receive. 
C) lowers the price that buyers effectively pay and raises the price that sellers effectively receive. 
D) lowers the price that buyers effectively pay and lowers the price that sellers effectively receive. 
A) raises the price that buyers effectively pay and raises the price that sellers effectively receive. 
B) raises the price that buyers effectively pay and lowers the price that sellers effectively receive. 
C) lowers the price that buyers effectively pay and raises the price that sellers effectively receive. 
D) lowers the price that buyers effectively pay and lowers the price that sellers effectively receive.

Question 7

Figure 8-2
  
-Refer to Figure 8-2.Which of the following equations is valid for the deadweight loss of the tax?

Accepted Answer

A) Deadweight loss = (1/2)(P₂ - P₁)(Q₂ + Q₁) 
B) Deadweight loss = (1/2)(P₃ - P₁)(Q₂ + Q₁) 
C) Deadweight loss = (1/2)(P₃ - P₂)(Q₂ - Q₁) 
D) Deadweight loss = (1/2)(P₃ - P₁)(Q₂ - Q₁) 
A) Deadweight loss = (1/2)(P₂ - P₁)(Q₂ + Q₁) 
B) Deadweight loss = (1/2)(P₃ - P₁)(Q₂ + Q₁) 
C) Deadweight loss = (1/2)(P₃ - P₂)(Q₂ - Q₁) 
D) Deadweight loss = (1/2)(P₃ - P₁)(Q₂ - Q₁)

Question 8

Figure 8-2
  
-Refer to Figure 8-2.Which of the following equations is valid for the loss in producer surplus caused by the tax?

Accepted Answer

A) Loss of producer surplus = (1/2)(P₂ + P₁)(Q₁ + Q₂). 
B) Loss of producer surplus = (1/2)(P₂ + P₁)(Q₁ - Q₂). 
C) Loss of producer surplus = (1/2)(P₂ - P₁)(Q₁ + Q₂). 
D) Loss of producer surplus = (1/2)(P₂ - P₁)(Q₁ - Q₂). 
A) Loss of producer surplus = (1/2)(P₂ + P₁)(Q₁ + Q₂). 
B) Loss of producer surplus = (1/2)(P₂ + P₁)(Q₁ - Q₂). 
C) Loss of producer surplus = (1/2)(P₂ - P₁)(Q₁ + Q₂). 
D) Loss of producer surplus = (1/2)(P₂ - P₁)(Q₁ - Q₂).

Question 9

The supply curve and the demand curve for a good are straight lines,and the good is taxed.When the tax is doubled,

Accepted Answer

A) the base of the triangle that represents the deadweight loss quadruples. 
B) the height of the triangle that represents the deadweight loss doubles. 
C) the deadweight loss of the tax doubles. 
D) All of the above are correct. 
A) the base of the triangle that represents the deadweight loss quadruples. 
B) the height of the triangle that represents the deadweight loss doubles. 
C) the deadweight loss of the tax doubles. 
D) All of the above are correct.

Question 10

Which of the following scenarios is not consistent with the Laffer curve?

Accepted Answer

A) The tax rate is very low and tax revenue is very low. 
B) The tax rate is very high and tax revenue is very low. 
C) The tax rate is very high and tax revenue is very high. 
D) The tax rate is moderate (between very high and very low) and tax revenue is relatively high. 
A) The tax rate is very low and tax revenue is very low. 
B) The tax rate is very high and tax revenue is very low. 
C) The tax rate is very high and tax revenue is very high. 
D) The tax rate is moderate (between very high and very low) and tax revenue is relatively high.

Question 11

Figure 8-4
  
-Refer to Figure 8-4.Consumer surplus before the tax was levied is represented by area

Accepted Answer

A) a. 
B) A + B + C. 
C) D + E + F. 
D) F. 
A) a. 
B) A + B + C. 
C) D + E + F. 
D) F.

Question 12

When a tax on a good is enacted,

Accepted Answer

A) buyers and sellers share the burden of the tax regardless of whether the tax is levied on buyers or on sellers. 
B) buyers always bear the full burden of the tax. 
C) sellers always bear the full burden of the tax. 
D) sellers bear the full burden of the tax if the tax is levied on them; buyers bear the full burden of the tax if the tax is levied on them. 
A) buyers and sellers share the burden of the tax regardless of whether the tax is levied on buyers or on sellers. 
B) buyers always bear the full burden of the tax. 
C) sellers always bear the full burden of the tax. 
D) sellers bear the full burden of the tax if the tax is levied on them; buyers bear the full burden of the tax if the tax is levied on them.

Question 13

Figure 8-2
  
-Refer to Figure 8-2.The equilibrium price before the tax is imposed is

Accepted Answer

A) P₁. 
B) P₂. 
C) P₃. 
D) None of the above is correct. 
A) P₁. 
B) P₂. 
C) P₃. 
D) None of the above is correct.

Question 14

Figure 8-2
  
-Refer to Figure 8-2.The per-unit burden of the tax on sellers is

Accepted Answer

A) P₃ - P₁. 
B) P₃ - P₂. 
C) P₂ - P₁. 
D) Q₂ - Q₁. 
A) P₃ - P₁. 
B) P₃ - P₂. 
C) P₂ - P₁. 
D) Q₂ - Q₁.

Question 15

When a good is taxed,

Accepted Answer

A) both buyers and sellers of the good are made worse off. 
B) only buyers are made worse off, because they ultimately bear the burden of the tax. 
C) only sellers are made worse off, because the government holds them responsible for sending in the tax payments. 
D) neither buyers nor sellers are made worse off, since tax revenue is used to provide goods and services that would otherwise not be provided in a market economy. 
A) both buyers and sellers of the good are made worse off. 
B) only buyers are made worse off, because they ultimately bear the burden of the tax. 
C) only sellers are made worse off, because the government holds them responsible for sending in the tax payments. 
D) neither buyers nor sellers are made worse off, since tax revenue is used to provide goods and services that would otherwise not be provided in a market economy.

Question 16

Scenario 8-1
Ryan would be willing to pay as much as $100 per week to have his house cleaned. Tammy's opportunity cost of cleaning Ryan's house is $70 per week.
-Refer to Scenario 8-1.If Tammy cleans Ryan's house for $80,Tammy's producer surplus is

Accepted Answer

A) $10. 
B) $70. 
C) $80. 
D) $100. 
A) $10. 
B) $70. 
C) $80. 
D) $100.

Question 17

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 18

Taxes on labor encourage all of the following except

Accepted Answer

A) older workers to take early retirement from the labor force. 
B) mothers to stay at home rather than work in the labor force. 
C) workers to work overtime. 
D) people to be paid "under the table." 
A) older workers to take early retirement from the labor force. 
B) mothers to stay at home rather than work in the labor force. 
C) workers to work overtime. 
D) people to be paid "under the table."

Question 19

A tax placed on buyers of tires shifts

Accepted Answer

A) the demand curve for tires downward, decreasing the price received by sellers of tires and causing the market for tires to expand. 
B) the demand curve for tires downward, decreasing the price received by sellers of tires and causing the market for tires to shrink. 
C) the supply curve for tires upward, decreasing the effective price paid by buyers of tires and causing the market for tires to expand. 
D) the supply curve for tires upward, increasing the effective price paid by buyers of tires and causing the market for tires to shrink. 
A) the demand curve for tires downward, decreasing the price received by sellers of tires and causing the market for tires to expand. 
B) the demand curve for tires downward, decreasing the price received by sellers of tires and causing the market for tires to shrink. 
C) the supply curve for tires upward, decreasing the effective price paid by buyers of tires and causing the market for tires to expand. 
D) the supply curve for tires upward, increasing the effective price paid by buyers of tires and causing the market for tires to shrink.

Question 20

Scenario 8-2
Tom mows Stephanie's lawn for $25. Tom's opportunity cost of mowing Stephanie's lawn is $20, and Stephanie's willingness to pay Tom to mow her lawn is $28.
-Refer to Scenario 8-2.Stephanie's consumer surplus as a result of hiring Tom to mow her lawn is

Accepted Answer

A) $3. 
B) $5. 
C) $8. 
D) $25. 
A) $3. 
B) $5. 
C) $8. 
D) $25.

Exam 8: Application: the Costs of Taxation

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

Because taxes distort incentives,they cause markets to allocate resources inefficiently.

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

One negative aspect of Henry George's single tax on land is that,if it were applied today,

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

A tax on a good

Figure 8-2 -Refer to Figure 8-2.Which of the following equations is valid for the deadweight loss of the tax?

Figure 8-2 -Refer to Figure 8-2.Which of the following equations is valid for the loss in producer surplus caused by the tax?

The supply curve and the demand curve for a good are straight lines,and the good is taxed.When the tax is doubled,

Which of the following scenarios is not consistent with the Laffer curve?

Figure 8-4 -Refer to Figure 8-4.Consumer surplus before the tax was levied is represented by area

When a tax on a good is enacted,

Figure 8-2 -Refer to Figure 8-2.The equilibrium price before the tax is imposed is

Figure 8-2 -Refer to Figure 8-2.The per-unit burden of the tax on sellers is

When a good is taxed,

Scenario 8-1 Ryan would be willing to pay as much as $100 per week to have his house cleaned. Tammy's opportunity cost of cleaning Ryan's house is $70 per week. -Refer to Scenario 8-1.If Tammy cleans Ryan's house for $80,Tammy's producer surplus is

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

Taxes on labor encourage all of the following except

A tax placed on buyers of tires shifts

Scenario 8-2 Tom mows Stephanie's lawn for $25. Tom's opportunity cost of mowing Stephanie's lawn is $20, and Stephanie's willingness to pay Tom to mow her lawn is $28. -Refer to Scenario 8-2.Stephanie's consumer surplus as a result of hiring Tom to mow her lawn 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 Applications

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

Oligopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

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 Trade Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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