Question 1

Anger over British taxes played a significant role in bringing about the

Accepted Answer

A) election of John Adams as the second American president. 
B) American Revolution. 
C) War of 1812. 
D) "no new taxes" clause in the U.S. Constitution. 
A) election of John Adams as the second American president. 
B) American Revolution. 
C) War of 1812. 
D) "no new taxes" clause in the U.S. Constitution.

Question 2

The higher a country's tax rates, the more likely that country will be

Accepted Answer

A) at the top of the Laffer curve. 
B) on the positively sloped part of the Laffer curve. 
C) on the negatively sloped part of the Laffer curve. 
D) experiencing small deadweight losses. 
A) at the top of the Laffer curve. 
B) on the positively sloped part of the Laffer curve. 
C) on the negatively sloped part of the Laffer curve. 
D) experiencing small deadweight losses.

Question 3

Total surplus with a tax is equal to

Accepted Answer

A) consumer surplus plus producer surplus. 
B) consumer surplus minus producer surplus. 
C) consumer surplus plus producer surplus minus tax revenue. 
D) consumer surplus plus producer surplus plus tax revenue. 
A) consumer surplus plus producer surplus. 
B) consumer surplus minus producer surplus. 
C) consumer surplus plus producer surplus minus tax revenue. 
D) consumer surplus plus producer surplus plus tax revenue.

Question 4

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 5

The size of a tax and the deadweight loss that results from the tax are

Accepted Answer

A) positively related. 
B) negatively related. 
C) independent of each other. 
D) equal to each other. 
A) positively related. 
B) negatively related. 
C) independent of each other. 
D) equal to each other.

Question 6

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) larger is the price elasticity of demand. 
B) smaller is the price elasticity of supply. 
C) larger is the amount of the tax. 
D) All of the above are correct. 
A) larger is the price elasticity of demand. 
B) smaller is the price elasticity of supply. 
C) larger is the amount of the tax. 
D) All of the above are correct.

Question 7

The deadweight loss from a tax

Accepted Answer

A) does not vary in amount when the price elasticity of demand changes. 
B) does not vary in amount when the amount of the tax per unit changes. 
C) is larger, the larger is the amount of the tax per unit. 
D) is smaller, the larger is the amount of the tax per unit. 
A) does not vary in amount when the price elasticity of demand changes. 
B) does not vary in amount when the amount of the tax per unit changes. 
C) is larger, the larger is the amount of the tax per unit. 
D) is smaller, the larger is the amount of the tax per unit.

Question 8

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

Accepted Answer

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

Question 9

Figure 8-12  
-Refer to Figure 8-12. Which of the following statements is correct?

Accepted Answer

A) Supply 1 is more elastic than supply 2. 
B) Demand 2 is more elastic than demand 1. 
C) Demand 1 is more elastic than supply 1. 
D) All of the above are correct. 
A) Supply 1 is more elastic than supply 2. 
B) Demand 2 is more elastic than demand 1. 
C) Demand 1 is more elastic than supply 1. 
D) All of the above are correct.

Question 10

Figure 8-6
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-6. When the government imposes the tax in this market, tax revenue is

Accepted Answer

A) $600. 
B) $900. 
C) $1,500. 
D) $3,000. 
A) $600. 
B) $900. 
C) $1,500. 
D) $3,000.

Question 11

Suppose the tax on gasoline is raised from $0.50 per gallon to $2.50 per gallon. As a result,

Accepted Answer

A) tax revenue necessarily increases. 
B) the deadweight loss of the tax necessarily increases. 
C) the demand curve for gasoline necessarily becomes steeper. 
D) All of the above are correct. 
A) tax revenue necessarily increases. 
B) the deadweight loss of the tax necessarily increases. 
C) the demand curve for gasoline necessarily becomes steeper. 
D) All of the above are correct.

Question 12

Figure 8-18  
-Refer to Figure 8-18. Which graph correctly illustrates the relationship between the size of a tax and the size of the deadweight loss associated with the tax?

Accepted Answer

A) Panel (a) 
B) Panel (b) 
C) Panel (c) 
D) Panel (d) 
A) Panel (a) 
B) Panel (b) 
C) Panel (c) 
D) Panel (d)

Question 13

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. Assume Erin is required to pay a tax of $40 when she hires someone to clean her house for a week. Which of the following is correct?

Accepted Answer

A) Erin will now clean her own house. 
B) Ernesto will continue to clean Erin's house, but his producer surplus will decline. 
C) Total economic welfare (consumer surplus plus producer surplus plus tax revenue) will increase. 
D) Erin will continue to hire Ernesto to clean her house, but her consumer surplus will decline. 
A) Erin will now clean her own house. 
B) Ernesto will continue to clean Erin's house, but his producer surplus will decline. 
C) Total economic welfare (consumer surplus plus producer surplus plus tax revenue) will increase. 
D) Erin will continue to hire Ernesto to clean her house, but her consumer surplus will decline.

Question 14

Taxes on labor tend to increase the number of hours that people choose to work.

Accepted Answer

A) True 
 B)False

Question 15

Figure 8-3
The vertical distance between points A and C represents a tax in the market.  
-Refer to Figure 8-3. 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 16

Suppose a tax is imposed on the sellers of fast-food French fries. The burden of the tax will

Accepted Answer

A) fall entirely on the buyers of fast-food French fries. 
B) fall entirely on the sellers of fast-food French fries. 
C) be shared equally by the buyers and sellers of fast-food French fries. 
D) be shared by the buyers and sellers of fast-food French fries but not necessarily equally. 
A) fall entirely on the buyers of fast-food French fries. 
B) fall entirely on the sellers of fast-food French fries. 
C) be shared equally by the buyers and sellers of fast-food French fries. 
D) be shared by the buyers and sellers of fast-food French fries but not necessarily equally.

Question 17

Figure 8-6
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-6. Total surplus with the tax in place is

Accepted Answer

A) $1,500. 
B) $3,600. 
C) $4,500. 
D) $6,000. 
A) $1,500. 
B) $3,600. 
C) $4,500. 
D) $6,000.

Question 18

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 19

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 20

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.

Exam 8: Application: The Costs of Taxation

Anger over British taxes played a significant role in bringing about the

The higher a country's tax rates, the more likely that country will be

Total surplus with a tax is equal to

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

The size of a tax and the deadweight loss that results from the tax are

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

The deadweight loss from a tax

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

Figure 8-12 -Refer to Figure 8-12. Which of the following statements is correct?

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. When the government imposes the tax in this market, tax revenue is

Suppose the tax on gasoline is raised from $0.50 per gallon to $2.50 per gallon. As a result,

Figure 8-18 -Refer to Figure 8-18. Which graph correctly illustrates the relationship between the size of a tax and the size of the deadweight loss associated with the tax?

Taxes on labor tend to increase the number of hours that people choose to work.

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. Which of the following equations is valid for the deadweight loss of the tax?

Suppose a tax is imposed on the sellers of fast-food French fries. The burden of the tax will

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. Total surplus with the tax in place is

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

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 price that sellers effectively receive after the tax is imposed 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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