Question 1

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.

Question 2

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, consumer surplus is

Accepted Answer

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

Question 3

When a tax is levied on buyers, the

Accepted Answer

A)  supply curves shifts upward by the amount of the tax. 
B)  tax creates a wedge between the price buyers effectively pay and the price sellers receive. 
C)  tax has no effect on the well-being of sellers. 
D)  All of the above are correct. 
A)  supply curves shifts upward by the amount of the tax. 
B)  tax creates a wedge between the price buyers effectively pay and the price sellers receive. 
C)  tax has no effect on the well-being of sellers. 
D)  All of the above are correct.

Question 4

Figure 8-25  
-Refer to Figure 8-25. How much is producer surplus at the market equilibrium?

Accepted Answer

Producer s

Question 5

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 deadweight loss as a result of the tax is

Accepted Answer

A)  $35.00. 
B)  $45.25. 
C)  $52.50. 
D)  $105.00. 
A)  $35.00. 
B)  $45.25. 
C)  $52.50. 
D)  $105.00.

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 loss in consumer surplus caused by the tax is measured by the area

Accepted Answer

A)  P1P3AC. 
B)  P3ABP2. 
C)  P1P3ABC. 
D)  ABC. 
A)  P1P3AC. 
B)  P3ABP2. 
C)  P1P3ABC. 
D)  ABC.

Question 7

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

Accepted Answer

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

Question 8

Figure 8-7
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-7. Which of the following statements summarizes the incidence of the tax?

Accepted Answer

A)  For each unit of the good that is sold, buyers bear one-half of the tax burden, and sellers bear one-half of the tax burden. 
B)  For each unit of the good that is sold, buyers bear one-third of the tax burden, and sellers bear two-thirds of the tax burden. 
C)  For each unit of the good that is sold, buyers bear one-fourth of the tax burden, and sellers bear three-fourths of the tax burden. 
D)  For each unit of the good that is sold, buyers bear three-fourths of the tax burden, and sellers bear one-fourth of the tax burden. 
A)  For each unit of the good that is sold, buyers bear one-half of the tax burden, and sellers bear one-half of the tax burden. 
B)  For each unit of the good that is sold, buyers bear one-third of the tax burden, and sellers bear two-thirds of the tax burden. 
C)  For each unit of the good that is sold, buyers bear one-fourth of the tax burden, and sellers bear three-fourths of the tax burden. 
D)  For each unit of the good that is sold, buyers bear three-fourths of the tax burden, and sellers bear one-fourth of the tax burden.

Question 9

Scenario 8-3
Suppose the market demand and market supply curves are given by the equations:  
-Refer to Scenario 8-3. Suppose that a tax of T is placed on buyers so that the demand curve becomes:   If T = 40, what price will buyers pay and what price will sellers receive?

Accepted Answer

Buyers will pay $80

Question 10

The benefit to buyers of participating in a market is measured by

Accepted Answer

A)  consumer surplus. 
B)  producer surplus. 
C)  total surplus. 
D)  deadweight loss. 
A)  consumer surplus. 
B)  producer surplus. 
C)  total surplus. 
D)  deadweight loss.

Question 11

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

Accepted Answer

A)  $120. 
B)  $80. 
C)  $50. 
D)  $25. 
A)  $120. 
B)  $80. 
C)  $50. 
D)  $25.

Question 12

Suppose a tax is imposed on baseball bats. In which of the following cases will the tax cause the equilibrium quantity of baseball bats to shrink by the smallest amount?

Accepted Answer

A)  The response of buyers to a change in the price of baseball bats is strong, and the response of sellers to a change in the price of baseball bats is weak. 
B)  The response of sellers to a change in the price of baseball bats is strong, and the response of buyers to a change in the price of baseball bats is weak. 
C)  The response of buyers and sellers to a change in the price of baseball bats is strong. 
D)  The response of buyers and sellers to a change in the price of baseball bats is weak. 
A)  The response of buyers to a change in the price of baseball bats is strong, and the response of sellers to a change in the price of baseball bats is weak. 
B)  The response of sellers to a change in the price of baseball bats is strong, and the response of buyers to a change in the price of baseball bats is weak. 
C)  The response of buyers and sellers to a change in the price of baseball bats is strong. 
D)  The response of buyers and sellers to a change in the price of baseball bats is weak.

Question 13

Taxes on labor encourage which of the following?

Accepted Answer

A)  labor demand to be more inelastic 
B)  mothers to stay at home rather than work in the labor force 
C)  workers to work overtime 
D)  fathers to take on second jobs 
A)  labor demand to be more inelastic 
B)  mothers to stay at home rather than work in the labor force 
C)  workers to work overtime 
D)  fathers to take on second jobs

Question 14

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 placed on this good, the quantity sold

Accepted Answer

A)  is 600, and buyers effectively pay $10. 
B)  is 300, and buyers effectively pay $10. 
C)  is 600, and buyers effectively pay $16. 
D)  is 300, and buyers effectively pay $16. 
A)  is 600, and buyers effectively pay $10. 
B)  is 300, and buyers effectively pay $10. 
C)  is 600, and buyers effectively pay $16. 
D)  is 300, and buyers effectively pay $16.

Question 15

In the market for widgets, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. The equilibrium quantity in the market for widgets is 200 per month when there is no tax. Then a tax of $5 per widget is imposed. The price paid by buyers increases by $2 and the after-tax price received by sellers falls by $3. The government is able to raise $750 per month in revenue from the tax. The deadweight loss from the tax is

Accepted Answer

A)  $250. 
B)  $125. 
C)  $75. 
D)  $50. 
A)  $250. 
B)  $125. 
C)  $75. 
D)  $50.

Question 16

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

Accepted Answer

A)  consumer surplus to the producer surplus. 
B)  price paid by buyers to the price received by sellers. 
C)  reduced welfare of buyers and sellers to the revenue raised by the government. 
D)  consumer surplus to the deadweight loss. 
A)  consumer surplus to the producer surplus. 
B)  price paid by buyers to the price received by sellers. 
C)  reduced welfare of buyers and sellers to the revenue raised by the government. 
D)  consumer surplus to the deadweight loss.

Question 17

Figure 8-13  
-Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The per-unit burden of the tax on buyers is

Accepted Answer

A)  $1. 
B)  $2. 
C)  $3. 
D)  $5. 
A)  $1. 
B)  $2. 
C)  $3. 
D)  $5.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Figure 8-9
The vertical distance between points A and C represents a tax in the market.  
-Refer to Figure 8-9. The loss of consumer surplus as a result of the tax is

Accepted Answer

A)  $2,000. 
B)  $4,000. 
C)  $6,000. 
D)  $8,000. 
A)  $2,000. 
B)  $4,000. 
C)  $6,000. 
D)  $8,000.

Question 20

Which of the following events is consistent with an increase in the deadweight loss of the gasoline tax from $30 million to $120 million?

Accepted Answer

A)  The tax on gasoline increases from $0.30 per gallon to $0.45 per gallon. 
B)  The tax on gasoline increases from $0.30 per gallon to $0.60 per gallon. 
C)  The tax on gasoline increases from $0.25 per gallon to $0.45 per gallon. 
D)  The tax on gasoline increases from $0.25 per gallon to $1.00 per gallon. 
A)  The tax on gasoline increases from $0.30 per gallon to $0.45 per gallon. 
B)  The tax on gasoline increases from $0.30 per gallon to $0.60 per gallon. 
C)  The tax on gasoline increases from $0.25 per gallon to $0.45 per gallon. 
D)  The tax on gasoline increases from $0.25 per gallon to $1.00 per gallon.

Exam 8: Application: the Costs of Taxation

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

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, consumer surplus is

When a tax is levied on buyers, the

Figure 8-25 -Refer to Figure 8-25. How much is producer surplus at the market equilibrium?

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 deadweight loss as a result of the tax is

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. The loss in consumer surplus caused by the tax is measured by the area

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

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7. Which of the following statements summarizes the incidence of the tax?

Scenario 8-3 Suppose the market demand and market supply curves are given by the equations: -Refer to Scenario 8-3. Suppose that a tax of T is placed on buyers so that the demand curve becomes: If T = 40, what price will buyers pay and what price will sellers receive?

The benefit to buyers of participating in a market is measured by

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

Suppose a tax is imposed on baseball bats. In which of the following cases will the tax cause the equilibrium quantity of baseball bats to shrink by the smallest amount?

Taxes on labor encourage which of the following?

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 placed on this good, the quantity sold

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

Figure 8-13 -Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The per-unit burden of the tax on buyers is

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

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The loss of consumer surplus as a result of the tax is

Which of the following events is consistent with an increase in the deadweight loss of the gasoline tax from $30 million to $120 million?

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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