Question 1

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

Accepted Answer

A)  $3. 
B)  $4. 
C)  $5. 
D)  $8. 
A)  $3. 
B)  $4. 
C)  $5. 
D)  $8.

Question 2

As the price elasticities of supply and demand increase, the deadweight loss from a tax increases.

Accepted Answer

A) True 
 B)False

Question 3

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 associated with some sellers dropping out of the market as a result of the tax is

Accepted Answer

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

Question 4

When a tax is imposed on a good for which the demand is relatively elastic and the supply is relatively inelastic,

Accepted Answer

A)  buyers of the good will bear most of the burden of the tax. 
B)  sellers of the good will bear most of the burden of the tax. 
C)  buyers and sellers will each bear 50 percent of the burden of the tax. 
D)  the effective price paid by buyers will decrease as a result of the tax. 
A)  buyers of the good will bear most of the burden of the tax. 
B)  sellers of the good will bear most of the burden of the tax. 
C)  buyers and sellers will each bear 50 percent of the burden of the tax. 
D)  the effective price paid by buyers will decrease as a result of the tax.

Question 5

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:   What price will sellers receive and what price will buyers pay after the tax is imposed?

Accepted Answer

Buyers wil

Question 6

Assume the supply curve for diapers is a typical, upward-sloping straight line, and the demand curve for diapers is a typical, downward-sloping straight line. Suppose the equilibrium quantity in the market for diapers is 1,000 per month when there is no tax. Then a tax of $0.50 per diaper is imposed. The effective price paid by buyers increases from $1.50 to $1.90 and the effective price received by sellers falls from $1.50 to $1.40. The government's tax revenue amounts to $475 per month. Which of the following statements is correct?

Accepted Answer

A)  After the tax is imposed, the equilibrium quantity of diapers is 900 per month. 
B)  The demand for diapers is more elastic than the supply of diapers. 
C)  The deadweight loss of the tax is $12.50. 
D)  The tax causes a decrease in consumer surplus of $380. 
A)  After the tax is imposed, the equilibrium quantity of diapers is 900 per month. 
B)  The demand for diapers is more elastic than the supply of diapers. 
C)  The deadweight loss of the tax is $12.50. 
D)  The tax causes a decrease in consumer surplus of $380.

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 total surplus with the tax is

Accepted Answer

A)  $2,000. 
B)  $3,000. 
C)  $15,000. 
D)  $20,000. 
A)  $2,000. 
B)  $3,000. 
C)  $15,000. 
D)  $20,000.

Question 8

Figure 8-12  
-Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The tax causes the price paid by buyers to

Accepted Answer

A)  decrease by $3. 
B)  increase by $2. 
C)  decrease by $1. 
D)  increase by $6. 
A)  decrease by $3. 
B)  increase by $2. 
C)  decrease by $1. 
D)  increase by $6.

Question 9

It does not matter whether a tax is levied on the buyers or the sellers of a good because

Accepted Answer

A)  sellers always bear the full burden of the tax. 
B)  buyers always bear the full burden of the tax. 
C)  buyers and sellers will share the burden of the tax. 
D)  None of the above is correct; the incidence of the tax does depend on whether the buyers or the sellers are required to pay the tax. 
A)  sellers always bear the full burden of the tax. 
B)  buyers always bear the full burden of the tax. 
C)  buyers and sellers will share the burden of the tax. 
D)  None of the above is correct; the incidence of the tax does depend on whether the buyers or the sellers are required to pay the tax.

Question 10

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 increase by

Accepted Answer

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

Question 11

Figure 8-7
The vertical distance between points A and B represents a tax in the market.  
-Refer to Figure 8-7. The deadweight loss associated with this tax amounts to

Accepted Answer

A)  $80, and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses. 
B)  $80, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers. 
C)  $60, and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses. 
D)  $60, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers. 
A)  $80, and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses. 
B)  $80, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers. 
C)  $60, and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses. 
D)  $60, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers.

Question 12

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. What is the deadweight loss of the tax?

Accepted Answer

A)  the maximum value that Rebecca would pay for dog sitting 
B)  the $30 tax 
C)  the lost benefit to Rebecca and Susan because after the tax, Susan will not dog sit for Rebecca 
D)  the lost benefit to Rebecca of being unable to hire a dog sitter because Rebecca is the one who would pay the tax 
A)  the maximum value that Rebecca would pay for dog sitting 
B)  the $30 tax 
C)  the lost benefit to Rebecca and Susan because after the tax, Susan will not dog sit for Rebecca 
D)  the lost benefit to Rebecca of being unable to hire a dog sitter because Rebecca is the one who would pay the tax

Question 13

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 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 14

The Laffer curve is the curve showing how tax revenue varies as the size of the tax varies.

Accepted Answer

A) True 
 B)False

Question 15

Figure 8-21  
-Refer to Figure 8-21. Suppose the government places a $3 per-unit tax on this good. The largest deadweight loss from the tax would occur in a market where demand is represented by

Accepted Answer

A)  Demand 1, and supply is represented by Supply 1. 
B)  Demand 1, and supply is represented by Supply 2. 
C)  Demand 2, and supply is represented by Supply 1. 
D)  Demand 2, and supply is represented by Supply 2. 
A)  Demand 1, and supply is represented by Supply 1. 
B)  Demand 1, and supply is represented by Supply 2. 
C)  Demand 2, and supply is represented by Supply 1. 
D)  Demand 2, and supply is represented by Supply 2.

Question 16

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 tax revenue received by the government is

Accepted Answer

A)  $2.50. 
B)  $4. 
C)  $5. 
D)  $9. 
A)  $2.50. 
B)  $4. 
C)  $5. 
D)  $9.

Question 17

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

Accepted Answer

Consumer s

Question 18

When a good is taxed, the burden of the tax

Accepted Answer

A)  falls more heavily on the side of the market that is more elastic. 
B)  falls more heavily on the side of the market that is more inelastic. 
C)  falls more heavily on the side of the market that is closer to unit elastic. 
D)  is distributed independently of relative elasticities of supply and demand. 
A)  falls more heavily on the side of the market that is more elastic. 
B)  falls more heavily on the side of the market that is more inelastic. 
C)  falls more heavily on the side of the market that is closer to unit elastic. 
D)  is distributed independently of relative elasticities of supply and demand.

Question 19

Figure 8-25  
-Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is the deadweight loss from this tax?

Accepted Answer

The deadwe

Question 20

Tom walks Bethany's dog once a day for $50 per week. Bethany values this service at $60 per week, while the opportunity cost of Tom's time is $30 per week. The government places a tax of $35 per week on dog walkers. After the tax, what is the total surplus?

Accepted Answer

A)  $50 
B)  $30 
C)  $25 
D)  $0 
A)  $50 
B)  $30 
C)  $25 
D)  $0

Exam 8: Application: the Costs of Taxation

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

As the price elasticities of supply and demand increase, the deadweight loss from a tax increases.

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 associated with some sellers dropping out of the market as a result of the tax is

When a tax is imposed on a good for which the demand is relatively elastic and the supply is relatively inelastic,

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: What price will sellers receive and what price will buyers pay after the tax is imposed?

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The total surplus with the tax is

Figure 8-12 -Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The tax causes the price paid by buyers to

It does not matter whether a tax is levied on the buyers or the sellers of a good because

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 increase by

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7. The deadweight loss associated with this tax amounts to

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 producer surplus is

The Laffer curve is the curve showing how tax revenue varies as the size of the tax varies.

Figure 8-21 -Refer to Figure 8-21. Suppose the government places a $3 per-unit tax on this good. The largest deadweight loss from the tax would occur in a market where demand is represented by

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 tax revenue received by the government is

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

When a good is taxed, the burden of the tax

Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is the deadweight loss from this tax?

Tom walks Bethany's dog once a day for $50 per week. Bethany values this service at $60 per week, while the opportunity cost of Tom's time is $30 per week. The government places a tax of $35 per week on dog walkers. After the tax, what is the total surplus?

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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