Question 1

Economists disagree on whether labor taxes have a small or large deadweight loss.

Accepted Answer

A) True 
 B)False

Question 2

The deadweight loss from a $3 tax will be largest in a market with

Accepted Answer

A)  inelastic supply and elastic demand. 
B)  inelastic supply and inelastic demand. 
C)  elastic supply and elastic demand. 
D)  elastic supply and inelastic demand. 
A)  inelastic supply and elastic demand. 
B)  inelastic supply and inelastic demand. 
C)  elastic supply and elastic demand. 
D)  elastic supply and inelastic demand.

Question 3

Taxes cause deadweight losses because they prevent buyers and sellers from realizing some of the gains from trade.

Accepted Answer

A) True 
 B)False

Question 4

In which of the following cases is it most likely that an increase in the size of a tax will decrease tax revenue?

Accepted Answer

A)  The price elasticity of demand is small, and the price elasticity of supply is large. 
B)  The price elasticity of demand is large, and the price elasticity of supply is small. 
C)  The price elasticity of demand and the price elasticity of supply are both small. 
D)  The price elasticity of demand and the price elasticity of supply are both large. 
A)  The price elasticity of demand is small, and the price elasticity of supply is large. 
B)  The price elasticity of demand is large, and the price elasticity of supply is small. 
C)  The price elasticity of demand and the price elasticity of supply are both small. 
D)  The price elasticity of demand and the price elasticity of supply are both large.

Question 5

Figure 8-21  
-Refer to Figure 8-21. Suppose the market is represented by Demand 1 and Supply 1. At first the government places a $3 per-unit tax on this good. Then the government decides to raise the tax to $6 per unit. How would you characterize the decision to raise the tax rate from $3 to $6 per unit? The decision is

Accepted Answer

A)  a good one because it increases tax revenue while decreasing the deadweight loss from the tax. 
B)  a bad one because it does not increase tax revenue yet increases the deadweight loss from the tax. 
C)  a bad one because it decreases tax revenue while increasing the deadweight loss from the tax. 
D)  unclear because it increases tax revenue yet also increases the deadweight loss from the tax. 
A)  a good one because it increases tax revenue while decreasing the deadweight loss from the tax. 
B)  a bad one because it does not increase tax revenue yet increases the deadweight loss from the tax. 
C)  a bad one because it decreases tax revenue while increasing the deadweight loss from the tax. 
D)  unclear because it increases tax revenue yet also increases the deadweight loss from the tax.

Question 6

Figure 8-19
The vertical distance between points A and B represents the original tax.  
-Refer to Figure 8-19. If the government changed the per-unit tax from $5.00 to $7.50, then the price paid by buyers would be $10.50, the price received by sellers would be $3, and the quantity sold in the market would be 0.5 units. Compared to the original tax rate, this higher tax rate would

Accepted Answer

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

Question 7

A tax affects

Accepted Answer

A)  buyers only. 
B)  sellers only. 
C)  buyers and sellers only. 
D)  buyers, sellers, and the government. 
A)  buyers only. 
B)  sellers only. 
C)  buyers and sellers only. 
D)  buyers, sellers, and the government.

Question 8

Figure 8-6
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-6. The tax results in a deadweight loss that amounts to

Accepted Answer

A)  $600. 
B)  $900. 
C)  $1,500. 
D)  $1,800. 
A)  $600. 
B)  $900. 
C)  $1,500. 
D)  $1,800.

Question 9

Figure 8-11  
-Refer to Figure 8-11. The length of the line segment connecting points A and B represents

Accepted Answer

A)  the difference between the price paid by buyers after the tax is imposed and the price received by sellers after the tax is imposed. 
B)  the size of the tax. 
C)  the "tax wedge." 
D)  All of the above are correct. 
A)  the difference between the price paid by buyers after the tax is imposed and the price received by sellers after the tax is imposed. 
B)  the size of the tax. 
C)  the "tax wedge." 
D)  All of the above are correct.

Question 10

Suppose that a university charges students a $100 "tax" to register for business classes. The next year the university raises the "tax" to $150. The deadweight loss from the "tax" triples.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A)  $5. 
B)  $7. 
C)  $8. 
D)  $12. 
A)  $5. 
B)  $7. 
C)  $8. 
D)  $12.

Question 12

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 price received by sellers to

Accepted Answer

A)  decrease by $2. 
B)  increase by $3. 
C)  decrease by $4. 
D)  increase by $5. 
A)  decrease by $2. 
B)  increase by $3. 
C)  decrease by $4. 
D)  increase by $5.

Question 13

Figure 8-12  
-Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The amount of tax revenue collected by the government 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 14

Figure 8-25  
-Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much tax revenue is collected after the tax is imposed?

Accepted Answer

Total tax revenue is

Question 15

A tax on insulin is likely to cause a very large deadweight loss to society.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

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

Question 17

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. With the tax, the producer surplus is

Accepted Answer

A)  (P5-0) x Q5. 
B)  1/2 x (P5-0) x Q5. 
C)  (P8-0) x Q2. 
D)  1/2 x (P8-0) x Q2. 
A)  (P5-0) x Q5. 
B)  1/2 x (P5-0) x Q5. 
C)  (P8-0) x Q2. 
D)  1/2 x (P8-0) x Q2.

Question 18

Which of the following ideas is the most plausible?

Accepted Answer

A)  Reducing a high tax rate is less likely to increase tax revenue than is reducing a low tax rate. 
B)  Reducing a high tax rate is more likely to increase tax revenue than is reducing a low tax rate. 
C)  Reducing a high tax rate will have the same effect on tax revenue as reducing a low tax rate. 
D)  Reducing a tax rate can never increase tax revenue. 
A)  Reducing a high tax rate is less likely to increase tax revenue than is reducing a low tax rate. 
B)  Reducing a high tax rate is more likely to increase tax revenue than is reducing a low tax rate. 
C)  Reducing a high tax rate will have the same effect on tax revenue as reducing a low tax rate. 
D)  Reducing a tax rate can never increase tax revenue.

Question 19

When the government imposes taxes on buyers and sellers of a good, society loses some of the benefits of market efficiency.

Accepted Answer

A) True 
 B)False

Question 20

When the government imposes taxes on buyers or sellers of a good, society

Accepted Answer

A)  loses some of the benefits of market efficiency. 
B)  gains efficiency but loses equality. 
C)  is better off because the government's tax revenues exceed the deadweight loss. 
D)  moves from an elastic supply curve to an inelastic supply curve. 
A)  loses some of the benefits of market efficiency. 
B)  gains efficiency but loses equality. 
C)  is better off because the government's tax revenues exceed the deadweight loss. 
D)  moves from an elastic supply curve to an inelastic supply curve.

Exam 8: Application: the Costs of Taxation

Economists disagree on whether labor taxes have a small or large deadweight loss.

The deadweight loss from a $3 tax will be largest in a market with

Taxes cause deadweight losses because they prevent buyers and sellers from realizing some of the gains from trade.

In which of the following cases is it most likely that an increase in the size of a tax will decrease tax revenue?

A tax affects

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. The tax results in a deadweight loss that amounts to

Figure 8-11 -Refer to Figure 8-11. The length of the line segment connecting points A and B represents

Suppose that a university charges students a $100 "tax" to register for business classes. The next year the university raises the "tax" to $150. The deadweight loss from the "tax" triples.

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

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 price received by sellers to

Figure 8-12 -Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The amount of tax revenue collected by the government is

Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much tax revenue is collected after the tax is imposed?

A tax on insulin is likely to cause a very large deadweight loss to society.

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

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. With the tax, the producer surplus is

Which of the following ideas is the most plausible?

When the government imposes taxes on buyers and sellers of a good, society loses some of the benefits of market efficiency.

When the government imposes taxes on buyers or sellers of a good, society

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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