Question 1

Figure 8-1  
-Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by I+J+K+L+M+Y represents

Accepted Answer

A) total surplus before the tax. 
B) total surplus after the tax. 
C) consumer surplus before the tax. 
D) deadweight loss from the tax. 
A) total surplus before the tax. 
B) total surplus after the tax. 
C) consumer surplus before the tax. 
D) deadweight loss from the tax. A

Question 2

Figure 8-9
The vertical distance between points A and C represent a tax in the market.  
-Refer to Figure 8-9. The imposition of the tax causes the price paid by buyers to increase by

Accepted Answer

A) $20. 
B) $200. 
C) $300. 
D) $500. 
A) $20. 
B) $200. 
C) $300. 
D) $500. B

Question 3

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

Accepted Answer

A) increases by 50 percent. 
B) doubles. 
C) triples. 
D) quadruples. 
A) increases by 50 percent. 
B) doubles. 
C) triples. 
D) quadruples. D

Question 4

Figure 8-2
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-2. The imposition of the tax causes the quantity sold to

Accepted Answer

A) increase by 1 unit. 
B) decrease by 1 unit. 
C) increase by 2 units. 
D) decrease by 2 units. 
A) increase by 1 unit. 
B) decrease by 1 unit. 
C) increase by 2 units. 
D) decrease by 2 units.

Question 5

Suppose the federal government doubles the gasoline tax. The deadweight loss associated with the tax

Accepted Answer

A) also doubles. 
B) triples. 
C) quadruples. 
D) rises by a factor of 8. 
A) also doubles. 
B) triples. 
C) quadruples. 
D) rises by a factor of 8.

Question 6

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 as a result of the tax is

Accepted Answer

A) $1. 
B) $2. 
C) $3. 
D) $4. 
A) $1. 
B) $2. 
C) $3. 
D) $4.

Question 7

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. The tax revenue is

Accepted Answer

A) (P0-P2) x Q2. 
B) (P2-P8) x Q2. 
C) (P2-P5) x Q5. 
D) (P5-P8) x Q5. 
A) (P0-P2) x Q2. 
B) (P2-P8) x Q2. 
C) (P2-P5) x Q5. 
D) (P5-P8) x Q5.

Question 8

Which of the following is a tax on labor?

Accepted Answer

A) Medicare tax 
B) inheritance tax 
C) sales tax 
D) All of the above are labor taxes. 
A) Medicare tax 
B) inheritance tax 
C) sales tax 
D) All of the above are labor taxes.

Question 9

Figure 8-20. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax.  
-Refer to Figure 8-20. For an economy that is currently at point D on the curve, a decrease in the tax rate would

Accepted Answer

A) decrease consumer surplus. 
B) decrease producer surplus. 
C) increase tax revenue. 
D) increase the deadweight loss of the tax. 
A) decrease consumer surplus. 
B) decrease producer surplus. 
C) increase tax revenue. 
D) increase the deadweight loss of the tax.

Question 10

In which of the following instances would the deadweight loss of the tax on airline tickets increase by a factor of 9?

Accepted Answer

A) The tax on airline tickets increases from $20 per ticket to $60 per ticket. 
B) The tax on airline tickets increases from $20 per ticket to $90 per ticket. 
C) The tax on airline tickets increases from $15 per ticket to $60 per ticket. 
D) The tax on airline tickets increases from $15 per ticket to $135 per ticket. 
A) The tax on airline tickets increases from $20 per ticket to $60 per ticket. 
B) The tax on airline tickets increases from $20 per ticket to $90 per ticket. 
C) The tax on airline tickets increases from $15 per ticket to $60 per ticket. 
D) The tax on airline tickets increases from $15 per ticket to $135 per ticket.

Question 11

If the tax on gasoline increases from $2 to $4 per gallon, the deadweight loss from the tax increases by a factor of

Accepted Answer

A) one-half. 
B) two. 
C) four. 
D) six. 
A) one-half. 
B) two. 
C) four. 
D) six.

Question 12

Suppose a tax of $5 per unit is imposed on a good. The supply curve is a typical upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. The tax decreases consumer surplus by $10,000 and decreases producer surplus by $15,000. The deadweight loss of the tax is $2,500. The tax decreased the equilibrium quantity of the good from

Accepted Answer

A) 6,500 to 5,500. 
B) 5,500 to 4,500. 
C) 5,000 to 3,000. 
D) 6,000 to 4,000. 
A) 6,500 to 5,500. 
B) 5,500 to 4,500. 
C) 5,000 to 3,000. 
D) 6,000 to 4,000.

Question 13

Ronald Reagan believed that reducing income tax rates would

Accepted Answer

A) do little, if anything, to encourage hard work. 
B) result in large increases in deadweight losses. 
C) raise economic well-being and perhaps even tax revenue. 
D) lower economic well-being, even though tax revenue could possibly increase. 
A) do little, if anything, to encourage hard work. 
B) result in large increases in deadweight losses. 
C) raise economic well-being and perhaps even tax revenue. 
D) lower economic well-being, even though tax revenue could possibly increase.

Question 14

When a tax is imposed on buyers, consumer surplus and producer surplus both decrease.

Accepted Answer

A) True 
 B)False

Question 15

Figure 8-19. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax.  
-Refer to Figure 8-19. If the economy is at point B on the curve, then an increase in the tax rate will

Accepted Answer

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

Question 16

Economists dismiss the idea that lower tax rates can lead to higher tax revenue, because there is a consensus that the relevant elasticities of demand and supply are very low.

Accepted Answer

A) True 
 B)False

Question 17

Suppose Ashley needs a dog sitter so that she can travel to her sister's wedding. Ashley values dog sitting for the weekend at $200. Cami is willing to dog sit for Ashley so long as she receives at least $175. Ashley and Cami agree on a price of $185. Suppose the government imposes a tax of $30 on dog sitting. What is the deadweight loss of the tax?

Accepted Answer

A) the maximum value that Ashley would pay for dog sitting 
B) the $30 tax 
C) the lost benefit to Ashley and Cami because after the tax, Cami will not dog sit for Ashley 
D) the lost benefit to Ashley of being unable to hire a dog sitter because Ashley is the one who would pay the tax 
A) the maximum value that Ashley would pay for dog sitting 
B) the $30 tax 
C) the lost benefit to Ashley and Cami because after the tax, Cami will not dog sit for Ashley 
D) the lost benefit to Ashley of being unable to hire a dog sitter because Ashley is the one who would pay the tax

Question 18

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 19

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 doubled, the

Accepted Answer

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

Question 20

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, the price sellers effectively receive is

Accepted Answer

A) $4. 
B) $6. 
C) $10. 
D) $16. 
A) $4. 
B) $6. 
C) $10. 
D) $16.

Exam 8: Application: The Costs of Taxation

Figure 8-1 -Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by I+J+K+L+M+Y represents

Figure 8-9 The vertical distance between points A and C represent a tax in the market. -Refer to Figure 8-9. The imposition of the tax causes the price paid by buyers to increase by

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

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2. The imposition of the tax causes the quantity sold to

Suppose the federal government doubles the gasoline tax. The deadweight loss associated with the tax

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 as a result of the tax is

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. The tax revenue is

Which of the following is a tax on labor?

Figure 8-20. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-20. For an economy that is currently at point D on the curve, a decrease in the tax rate would

In which of the following instances would the deadweight loss of the tax on airline tickets increase by a factor of 9?

If the tax on gasoline increases from $2 to $4 per gallon, the deadweight loss from the tax increases by a factor of

Ronald Reagan believed that reducing income tax rates would

When a tax is imposed on buyers, consumer surplus and producer surplus both decrease.

Figure 8-19. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-19. If the economy is at point B on the curve, then an increase in the tax rate will

Economists dismiss the idea that lower tax rates can lead to higher tax revenue, because there is a consensus that the relevant elasticities of demand and supply are very low.

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

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 doubled, the

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, the price sellers effectively receive 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

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 Macroeconomic Models

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

Six Debates Over Macroeconomic Policy

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