Question 1

In 1776, the American Revolution was sparked by anger over

Accepted Answer

A)  the extravagant lifestyle of British royalty. 
B)  the crimes of British soldiers stationed in the American colonies. 
C)  British taxes imposed on the American colonies. 
D)  the failure of the British to protect American colonists from attack by hostile Native Americans. 
A)  the extravagant lifestyle of British royalty. 
B)  the crimes of British soldiers stationed in the American colonies. 
C)  British taxes imposed on the American colonies. 
D)  the failure of the British to protect American colonists from attack by hostile Native Americans.

Question 2

When a tax is imposed on a good, the resulting decrease in consumer surplus is always larger than the resulting decrease in producer surplus.

Accepted Answer

A) True 
 B)False

Question 3

Suppose a tax of $5 per unit is imposed on a good. The supply curve is a typical upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. The tax decreases consumer surplus by $10,000 and decreases producer surplus by $15,000. The deadweight loss of the tax is $2,500. The tax decreased the equilibrium quantity of the good from

Accepted Answer

A)  6,500 to 5,500. 
B)  5,500 to 4,500. 
C)  5,000 to 3,000. 
D)  6,000 to 4,000. 
A)  6,500 to 5,500. 
B)  5,500 to 4,500. 
C)  5,000 to 3,000. 
D)  6,000 to 4,000.

Question 4

Consider a good to which a per-unit tax applies. The greater the price elasticities of demand and supply for the good, the

Accepted Answer

A)  smaller the deadweight loss from the tax. 
B)  greater the deadweight loss from the tax. 
C)  more efficient is the tax. 
D)  more equitable is the distribution of the tax burden between buyers and sellers. 
A)  smaller the deadweight loss from the tax. 
B)  greater the deadweight loss from the tax. 
C)  more efficient is the tax. 
D)  more equitable is the distribution of the tax burden between buyers and sellers.

Question 5

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. The deadweight loss of the tax 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 6

A tax on a good causes the size of the market to shrink.

Accepted Answer

A) True 
 B)False

Question 7

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 is correct?

Accepted Answer

A)  Total surplus before the tax is imposed is $500. 
B)  After the tax is imposed, consumer surplus is 45 percent of its pre-tax value. 
C)  After the tax is imposed, producer surplus is 45 percent of its pre-tax value. 
D)  All of the above are correct. 
A)  Total surplus before the tax is imposed is $500. 
B)  After the tax is imposed, consumer surplus is 45 percent of its pre-tax value. 
C)  After the tax is imposed, producer surplus is 45 percent of its pre-tax value. 
D)  All of the above are correct.

Question 8

Figure 8-5
Suppose that the government imposes a tax of P3 - P1.  
-Refer to Figure 8-5. The total surplus with the tax is represented by area

Accepted Answer

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

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, how much tax revenue will be collected from this tax?

Accepted Answer

Tax revenu

Question 10

Which of the following statements is correct regarding a tax on a good and the resulting deadweight loss?

Accepted Answer

A)  The greater are the price elasticities of supply and demand, the greater is the deadweight loss. 
B)  The greater is the price elasticity of supply and the smaller is the price elasticity of demand, the greater is the deadweight loss. 
C)  The smaller are the decreases in quantity demanded and quantity supplied, the greater the deadweight loss. 
D)  The smaller is the wedge between the effective price to sellers and the effective price to buyers, the greater is the deadweight loss. 
A)  The greater are the price elasticities of supply and demand, the greater is the deadweight loss. 
B)  The greater is the price elasticity of supply and the smaller is the price elasticity of demand, the greater is the deadweight loss. 
C)  The smaller are the decreases in quantity demanded and quantity supplied, the greater the deadweight loss. 
D)  The smaller is the wedge between the effective price to sellers and the effective price to buyers, the greater is the deadweight loss.

Question 11

Which of the following ideas is the most plausible?

Accepted Answer

A)  Tax revenue is more likely to increase when a low tax rate is increased than when a high tax rate is increased. 
B)  Tax revenue is less likely to increase when a low tax rate is increased than when a high tax rate is increased. 
C)  Tax revenue is likely to increase by the same amount when a low tax rate is increased and when a high tax rate is increased. 
D)  Decreasing a tax rate can never increase tax revenue. 
A)  Tax revenue is more likely to increase when a low tax rate is increased than when a high tax rate is increased. 
B)  Tax revenue is less likely to increase when a low tax rate is increased than when a high tax rate is increased. 
C)  Tax revenue is likely to increase by the same amount when a low tax rate is increased and when a high tax rate is increased. 
D)  Decreasing a tax rate can never increase tax revenue.

Question 12

A tax levied on the sellers of a good shifts the

Accepted Answer

A)  supply curve upward (or to the left). 
B)  supply curve downward (or to the right). 
C)  demand curve upward (or to the right). 
D)  demand curve downward (or to the left). 
A)  supply curve upward (or to the left). 
B)  supply curve downward (or to the right). 
C)  demand curve upward (or to the right). 
D)  demand curve downward (or to the left).

Question 13

The idea that tax cuts would increase the quantity of labor supplied, thus increasing tax revenue, became known as supply-side economics.

Accepted Answer

A) True 
 B)False

Exam 8: Application: the Costs of Taxation

In 1776, the American Revolution was sparked by anger over

When a tax is imposed on a good, the resulting decrease in consumer surplus is always larger than the resulting decrease in producer surplus.

Consider a good to which a per-unit tax applies. The greater the price elasticities of demand and supply for the good, the

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. The deadweight loss of the tax is

A tax on a good causes the size of the market to shrink.

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 is correct?

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. The total surplus with the tax is represented by area

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 tax revenue will be collected from this tax?

Which of the following statements is correct regarding a tax on a good and the resulting deadweight loss?

Which of the following ideas is the most plausible?

A tax levied on the sellers of a good shifts the

The idea that tax cuts would increase the quantity of labor supplied, thus increasing tax revenue, became known as supply-side economics.

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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