Question 1

Economists generally agree that the most important tax in the U.S. economy is the

Accepted Answer

A)  income tax. 
B)  tax on labor. 
C)  inheritance or death tax. 
D)  tax on corporate profits. 
A)  income tax. 
B)  tax on labor. 
C)  inheritance or death tax. 
D)  tax on corporate profits.

Question 2

The loss in total surplus resulting from a tax is called

Accepted Answer

A)  a deficit. 
B)  economic loss. 
C)  deadweight loss. 
D)  inefficiency. 
A)  a deficit. 
B)  economic loss. 
C)  deadweight loss. 
D)  inefficiency.

Question 3

Figure 8-3
The vertical distance between points A and C represents a tax in the market.  
-Refer to Figure 8-3. The equilibrium price before the tax is imposed is

Accepted Answer

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

Question 4

The result of the large tax cuts in the first Reagan Administration demonstrated very convincingly that Arthur Laffer was correct when he asserted that cuts in tax rates would increase tax revenue.

Accepted Answer

A) True 
 B)False

Question 5

Taxes are of interest to

Accepted Answer

A)  microeconomists because they consider how to balance equality and efficiency. 
B)  microeconomists because they consider how best to design a tax system. 
C)  macroeconomists because they consider how policymakers can use the tax system to stabilize economic activity. 
D)  All of the above are correct. 
A)  microeconomists because they consider how to balance equality and efficiency. 
B)  microeconomists because they consider how best to design a tax system. 
C)  macroeconomists because they consider how policymakers can use the tax system to stabilize economic activity. 
D)  All of the above are correct.

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 amount of the tax on each unit of the good 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 7

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 paid by buyers to

Accepted Answer

A)  increase from $600 to $800. 
B)  increase from $300 to $800. 
C)  decrease from $600 to $300. 
D)  remain unchanged at $600. 
A)  increase from $600 to $800. 
B)  increase from $300 to $800. 
C)  decrease from $600 to $300. 
D)  remain unchanged at $600.

Question 8

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

Accepted Answer

A)  deadweight loss due to the tax. 
B)  loss in consumer surplus due to the tax. 
C)  loss in producer surplus due to the tax. 
D)  total surplus before the tax. 
A)  deadweight loss due to the tax. 
B)  loss in consumer surplus due to the tax. 
C)  loss in producer surplus due to the tax. 
D)  total surplus before the tax.

Question 9

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 10

When a tax is levied on a good,

Accepted Answer

A)  neither buyers nor sellers are made worse off. 
B)  only sellers are made worse off. 
C)  only buyers are made worse off. 
D)  both buyers and sellers are made worse off. 
A)  neither buyers nor sellers are made worse off. 
B)  only sellers are made worse off. 
C)  only buyers are made worse off. 
D)  both buyers and sellers are made worse off.

Question 11

Figure 8-25  
-Refer to Figure 8-25. What are the equilibrium price and equilibrium quantity in this market?

Accepted Answer

The equilibrium pric

Question 12

Illustrate on three demand-and-supply graphs how the size of a tax (small, medium and large) can alter total revenue and deadweight loss.

Accepted Answer

The answer of Illustrate on three demand-and-supply graphs how the...

Question 13

Figure 8-22  
-Refer to Figure 8-22. Suppose the government changed the per-unit tax from $3.00 to $4.50. Compared to the original tax rate, this higher tax rate would

Accepted Answer

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

Question 14

When a tax is imposed, the loss of consumer surplus and producer surplus as a result of the tax exceeds the tax revenue collected by the government.

Accepted Answer

A) True 
 B)False

Question 15

Figure 8-24. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax.  
-Refer to Figure 8-24. 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 16

The more elastic the supply, the larger the deadweight loss from a tax, all else equal.

Accepted Answer

A) True 
 B)False

Question 17

The price elasticities of supply and demand affect

Accepted Answer

A)  both the size of the deadweight loss from a tax and the tax incidence. 
B)  the size of the deadweight loss from a tax but not the tax incidence. 
C)  the tax incidence but not the size of the deadweight loss from a tax. 
D)  neither the size of the deadweight loss from a tax nor the tax incidence. 
A)  both the size of the deadweight loss from a tax and the tax incidence. 
B)  the size of the deadweight loss from a tax but not the tax incidence. 
C)  the tax incidence but not the size of the deadweight loss from a tax. 
D)  neither the size of the deadweight loss from a tax nor the tax incidence.

Question 18

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, how much is the burden of the tax on the buyers and on the sellers?

Accepted Answer

The burden of the ta

Question 19

Figure 8-6
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-6. Without a tax, producer surplus in this market is

Accepted Answer

A)  $1,500. 
B)  $2,400. 
C)  $3,000. 
D)  $3,600. 
A)  $1,500. 
B)  $2,400. 
C)  $3,000. 
D)  $3,600.

Question 20

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

Accepted Answer

A)  $35. 
B)  $45. 
C)  $70. 
D)  $80. 
A)  $35. 
B)  $45. 
C)  $70. 
D)  $80.

Exam 8: Application: the Costs of Taxation

Economists generally agree that the most important tax in the U.S. economy is the

The loss in total surplus resulting from a tax is called

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. The equilibrium price before the tax is imposed is

The result of the large tax cuts in the first Reagan Administration demonstrated very convincingly that Arthur Laffer was correct when he asserted that cuts in tax rates would increase tax revenue.

Taxes are of interest to

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

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 paid by buyers to

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

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

When a tax is levied on a good,

Figure 8-25 -Refer to Figure 8-25. What are the equilibrium price and equilibrium quantity in this market?

Illustrate on three demand-and-supply graphs how the size of a tax (small, medium and large) can alter total revenue and deadweight loss.

Figure 8-22 -Refer to Figure 8-22. Suppose the government changed the per-unit tax from $3.00 to $4.50. Compared to the original tax rate, this higher tax rate would

When a tax is imposed, the loss of consumer surplus and producer surplus as a result of the tax exceeds the tax revenue collected by the government.

Figure 8-24. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-24. For an economy that is currently at point D on the curve, a decrease in the tax rate would

The more elastic the supply, the larger the deadweight loss from a tax, all else equal.

The price elasticities of supply and demand affect

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, how much is the burden of the tax on the buyers and on the sellers?

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. Without a tax, producer surplus in this market is

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

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

Filters