Question 1

Figure 8-26  
-Refer to Figure 8-26. What are the equilibrium price and equilibrium quantity in this market?

Accepted Answer

The equilibrium pric

Question 2

Figure 8-11  
-Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then, when the tax is imposed,

Accepted Answer

A)  consumer surplus decreases by $11. 
B)  producer surplus decreases by $11. 
C)  the deadweight loss amounts to $6. 
D)  All of the above are correct. 
A)  consumer surplus decreases by $11. 
B)  producer surplus decreases by $11. 
C)  the deadweight loss amounts to $6. 
D)  All of the above are correct.

Question 3

Tax revenues increase in direct proportion to increases in the size of the tax.

Accepted Answer

A) True 
 B)False

Question 4

For widgets, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. A tax of $15 per unit is imposed on widgets. The tax reduces the equilibrium quantity in the market by 300 units. The deadweight loss from the tax is

Accepted Answer

A)  $1,750. 
B)  $2,250. 
C)  $3,000. 
D)  $4,500. 
A)  $1,750. 
B)  $2,250. 
C)  $3,000. 
D)  $4,500.

Question 5

Figure 8-8
Suppose the government imposes a $10 per unit tax on a good.  
-Refer to Figure 8-8. The government collects tax revenue that is the area

Accepted Answer

A)  L. 
B)  B+D. 
C)  C+F. 
D)  F+G+L. 
A)  L. 
B)  B+D. 
C)  C+F. 
D)  F+G+L.

Question 6

Economists use the government's tax revenue to measure the public benefit from a tax.

Accepted Answer

A) True 
 B)False

Question 7

Figure 8-5
Suppose that the government imposes a tax of P3 - P1.  
-Refer to Figure 8-5. The tax causes a reduction in producer surplus that is represented by area

Accepted Answer

A)  A. 
B)  C+H. 
C)  D+H. 
D)  F. 
A)  A. 
B)  C+H. 
C)  D+H. 
D)  F.

Question 8

Which of the following statements is correct regarding the imposition of a tax on gasoline?

Accepted Answer

A)  The incidence of the tax depends upon whether the buyers or the sellers are required to remit tax payments to the government. 
B)  The incidence of the tax depends upon the price elasticities of demand and supply. 
C)  The amount of tax revenue raised by the tax depends upon whether the buyers or the sellers are required to remit tax payments to the government. 
D)  The amount of tax revenue raised by the tax does not depend upon the amount of the tax per unit. 
A)  The incidence of the tax depends upon whether the buyers or the sellers are required to remit tax payments to the government. 
B)  The incidence of the tax depends upon the price elasticities of demand and supply. 
C)  The amount of tax revenue raised by the tax depends upon whether the buyers or the sellers are required to remit tax payments to the government. 
D)  The amount of tax revenue raised by the tax does not depend upon the amount of the tax per unit.

Question 9

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 amount of deadweight loss as a result of the tax is

Accepted Answer

A)  $4,000. 
B)  $5,000. 
C)  $6,000. 
D)  $10,000. 
A)  $4,000. 
B)  $5,000. 
C)  $6,000. 
D)  $10,000.

Question 10

When the price of a good is measured in dollars, then the size of the deadweight loss that results from taxing that good is measured in

Accepted Answer

A)  units of the good that is being taxed. 
B)  units of a related good that is not being taxed. 
C)  dollars. 
D)  percentage change. 
A)  units of the good that is being taxed. 
B)  units of a related good that is not being taxed. 
C)  dollars. 
D)  percentage change.

Question 11

The more inelastic are demand and supply, the greater is the deadweight loss of a tax.

Accepted Answer

A) True 
 B)False

Question 12

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, consumer 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 13

Labor taxes may distort labor markets greatly if

Accepted Answer

A)  labor supply is highly inelastic. 
B)  many workers choose to work 40 hours per week regardless of their earnings. 
C)  the number of hours many part-time workers want to work is very sensitive to the wage rate. 
D)  "underground" workers do not respond to changes in the wages of legal jobs because they prefer not to pay taxes. 
A)  labor supply is highly inelastic. 
B)  many workers choose to work 40 hours per week regardless of their earnings. 
C)  the number of hours many part-time workers want to work is very sensitive to the wage rate. 
D)  "underground" workers do not respond to changes in the wages of legal jobs because they prefer not to pay taxes.

Question 14

Figure 8-2
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-2. The loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is

Accepted Answer

A)  $0. 
B)  $1.50. 
C)  $3. 
D)  $4.50. 
A)  $0. 
B)  $1.50. 
C)  $3. 
D)  $4.50.

Question 15

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. Without the tax, the total surplus is

Accepted Answer

A)  [1/2 x (P0-P5) x Q5] + [1/2 x (P5-0) x Q5]. 
B)  [1/2 x (P0-P2) x Q2] +[(P2-P8) x Q2] + [1/2 x (P8-0) x Q2]. 
C)  (P2-P8) x Q2. 
D)  1/2 x (P2-P8) x (Q5-Q2). 
A)  [1/2 x (P0-P5) x Q5] + [1/2 x (P5-0) x Q5]. 
B)  [1/2 x (P0-P2) x Q2] +[(P2-P8) x Q2] + [1/2 x (P8-0) x Q2]. 
C)  (P2-P8) x Q2. 
D)  1/2 x (P2-P8) x (Q5-Q2).

Question 16

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, buyers effectively pay what amount of the $10 tax?

Accepted Answer

A)  $0 
B)  $4 
C)  $6 
D)  $10 
A)  $0 
B)  $4 
C)  $6 
D)  $10

Question 17

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 18

Figure 8-2
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-2. The loss of producer surplus for those sellers of the good who continue to sell it after the tax is imposed is

Accepted Answer

A)  $0. 
B)  $1. 
C)  $2. 
D)  $3. 
A)  $0. 
B)  $1. 
C)  $2. 
D)  $3.

Question 19

If a tax shifts the supply curve upward (or to the left), 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 20

Suppose Rebecca needs a dog sitter so that she can travel to her sister's wedding. Rebecca values dog sitting for the weekend at $200. Susan is willing to dog sit for Rebecca so long as she receives at least $175. Rebecca and Susan agree on a price of $185. Suppose the government imposes a tax of $30 on dog sitting. The tax has made Rebecca and Susan worse off by a total of

Accepted Answer

A)  $30. 
B)  $25. 
C)  $10. 
D)  $5. 
A)  $30. 
B)  $25. 
C)  $10. 
D)  $5.

Exam 8: Application: the Costs of Taxation

Figure 8-26 -Refer to Figure 8-26. What are the equilibrium price and equilibrium quantity in this market?

Figure 8-11 -Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then, when the tax is imposed,

Tax revenues increase in direct proportion to increases in the size of the tax.

For widgets, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. A tax of $15 per unit is imposed on widgets. The tax reduces the equilibrium quantity in the market by 300 units. The deadweight loss from the tax is

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. The government collects tax revenue that is the area

Economists use the government's tax revenue to measure the public benefit from a tax.

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. The tax causes a reduction in producer surplus that is represented by area

Which of the following statements is correct regarding the imposition of a tax on gasoline?

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 amount of deadweight loss as a result of the tax is

When the price of a good is measured in dollars, then the size of the deadweight loss that results from taxing that good is measured in

The more inelastic are demand and supply, the greater is the deadweight loss of a tax.

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, consumer surplus in this market is

Labor taxes may distort labor markets greatly if

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2. The loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is

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. Without the tax, the total surplus is

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, buyers effectively pay what amount of the $10 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 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2. The loss of producer surplus for those sellers of the good who continue to sell it after the tax is imposed is

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

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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