Question 1

Who once said that taxes are the price we pay for a civilized society?

Accepted Answer

A)  Milton Friedman 
B)  Theodore Roosevelt 
C)  Arthur Laffer 
D)  Oliver Wendell Holmes, Jr. 
A)  Milton Friedman 
B)  Theodore Roosevelt 
C)  Arthur Laffer 
D)  Oliver Wendell Holmes, Jr.

Question 2

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 3

Figure 8-9
The vertical distance between points A and C represents a tax in the market.  
-Refer to Figure 8-9. The amount of the tax on each unit of the good is

Accepted Answer

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

Question 4

Figure 8-3
The vertical distance between points A and C represents a tax in the market.  
-Refer to Figure 8-3. The per-unit burden of the tax on sellers is

Accepted Answer

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

Question 5

When the government places a tax on a product, the cost of the tax to buyers and sellers

Accepted Answer

A)  is less than the revenue raised from the tax by the government. 
B)  is equal to the revenue raised from the tax by the government. 
C)  exceeds the revenue raised from the tax by the government. 
D)  Without additional information, such as the elasticity of demand for this product, it is impossible to compare the cost of a tax to buyers and sellers with tax revenue. 
A)  is less than the revenue raised from the tax by the government. 
B)  is equal to the revenue raised from the tax by the government. 
C)  exceeds the revenue raised from the tax by the government. 
D)  Without additional information, such as the elasticity of demand for this product, it is impossible to compare the cost of a tax to buyers and sellers with tax revenue.

Question 6

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 7

Suppose the demand curve and the supply curve in a market are both linear. To begin, there was a $5 tax per unit, and the $5 tax resulted in a deadweight loss of $1,500. Now, the tax per unit is higher, with the higher tax resulting in a deadweight loss of $6,000. What is the amount of the new tax per unit?

Accepted Answer

The new tax per unit is $10. D

Question 8

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 9

Suppose a tax of $4 per unit is imposed on a good, and the tax causes the equilibrium quantity of the good to decrease from 2,000 units to 1,700 units. The tax decreases consumer surplus by $3,000 and decreases producer surplus by $4,400. The deadweight loss of the tax is

Accepted Answer

A)  $200. 
B)  $400. 
C)  $600. 
D)  $1,200. 
A)  $200. 
B)  $400. 
C)  $600. 
D)  $1,200.

Question 10

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 11

Figure 8-13  
-Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The loss of consumer surplus resulting from this tax is

Accepted Answer

A)  $80. 
B)  $40. 
C)  $30. 
D)  $10. 
A)  $80. 
B)  $40. 
C)  $30. 
D)  $10.

Question 12

What happens to the total surplus in a market when the government imposes a tax?

Accepted Answer

A)  Total surplus increases by the amount of the tax. 
B)  Total surplus increases but by less than the amount of the tax. 
C)  Total surplus decreases. 
D)  Total surplus is unaffected by the tax. 
A)  Total surplus increases by the amount of the tax. 
B)  Total surplus increases but by less than the amount of the tax. 
C)  Total surplus decreases. 
D)  Total surplus is unaffected by the tax.

Question 13

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 decrease by

Accepted Answer

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

Question 14

The marginal tax rate on labor income for many workers in the United States is almost

Accepted Answer

A)  30 percent. 
B)  40 percent. 
C)  50 percent. 
D)  65 percent. 
A)  30 percent. 
B)  40 percent. 
C)  50 percent. 
D)  65 percent.

Question 15

Figure 8-23. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax.  
-Refer to Figure 8-23. If the economy is at point B on the curve, then a small decrease 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

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 correct?

Accepted Answer

A)  Compared to the original tax, the smaller tax will decrease both tax revenue and deadweight loss. 
B)  Compared to the original tax, the larger tax will increase both tax revenue and deadweight loss. 
C)  Compared to the original tax, the larger tax will decrease tax revenue and increase deadweight loss. 
D)  Both a and b are correct. 
A)  Compared to the original tax, the smaller tax will decrease both tax revenue and deadweight loss. 
B)  Compared to the original tax, the larger tax will increase both tax revenue and deadweight loss. 
C)  Compared to the original tax, the larger tax will decrease tax revenue and increase deadweight loss. 
D)  Both a and b are correct.

Question 17

Figure 8-12  
-Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The amount of deadweight loss resulting from this tax is

Accepted Answer

A)  $7.50. 
B)  $15.00. 
C)  $22.50. 
D)  $45.00. 
A)  $7.50. 
B)  $15.00. 
C)  $22.50. 
D)  $45.00.

Question 18

Figure 8-1  
-Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The consumer surplus before the tax is measured by the area

Accepted Answer

A)  M. 
B)  L+M+Y. 
C)  J. 
D)  J+K+I. 
A)  M. 
B)  L+M+Y. 
C)  J. 
D)  J+K+I.

Question 19

Figure 8-2
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-2. The amount of the tax on each unit of the good is

Accepted Answer

A)  $1. 
B)  $4. 
C)  $5. 
D)  $9. 
A)  $1. 
B)  $4. 
C)  $5. 
D)  $9.

Question 20

Figure 8-14  
-Refer to Figure 8-14. Which of the following statements is not correct?

Accepted Answer

A)  Supply 2 is more elastic than supply 1. 
B)  Demand 2 is more elastic than demand 1. 
C)  Supply 1 is more inelastic than supply 2. 
D)  Demand 2 is more inelastic than supply 2. 
A)  Supply 2 is more elastic than supply 1. 
B)  Demand 2 is more elastic than demand 1. 
C)  Supply 1 is more inelastic than supply 2. 
D)  Demand 2 is more inelastic than supply 2.

Exam 8: Application: the Costs of Taxation

Who once said that taxes are the price we pay for a civilized society?

Taxes on labor encourage all of the following except

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The amount of the tax on each unit of the good is

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. The per-unit burden of the tax on sellers is

When the government places a tax on a product, the cost of the tax to buyers and sellers

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

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

Suppose a tax of $4 per unit is imposed on a good, and the tax causes the equilibrium quantity of the good to decrease from 2,000 units to 1,700 units. The tax decreases consumer surplus by $3,000 and decreases producer surplus by $4,400. The deadweight loss of the tax is

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

Figure 8-13 -Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The loss of consumer surplus resulting from this tax is

What happens to the total surplus in a market when the government imposes a tax?

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 decrease by

The marginal tax rate on labor income for many workers in the United States is almost

Figure 8-23. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-23. If the economy is at point B on the curve, then a small decrease in the tax rate will

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 correct?

Figure 8-12 -Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The amount of deadweight loss resulting from this tax is

Figure 8-1 -Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The consumer surplus before the tax is measured by the area

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2. The amount of the tax on each unit of the good is

Figure 8-14 -Refer to Figure 8-14. Which of the following statements is not correct?

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 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

Six Debates Over Macroeconomic Policy

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