Question 1

A tax on a good

Accepted Answer

A)   gives buyers an incentive to buy more of the good than they otherwise would buy.
B)   gives sellers an incentive to produce less of the good than they otherwise would produce.
C)   creates a benefit to the government,the size of which exceeds the loss in surplus to buyers and sellers.
D)   All of the above are correct.E) C) and D)
F) A) and D)

Question 2

If the government imposes a $3 tax in a market,the buyers and sellers will share an equal burden of the tax.

Accepted Answer

A) True 
 B)False

Question 3

The size of the deadweight loss generated from a tax is affected by the

Accepted Answer

A)   elasticities of both supply and demand.
B)   elasticity of demand only.
C)   elasticity of supply only.
D)   total revenue collected by the government.E) All of the above
F) None of the above

Question 4

Figure 8-2 
-Refer to Figure 8-2.Suppose the government changed the per-unit tax on this good from $3.00 to $1.50.Compared to the original tax rate,this lower 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.E) A) and D)
F) A) and C)

Question 5

Taxes affect market participants by increasing the price paid by the buyer and decreasing the price received by the seller.

Accepted Answer

A) True 
 B)False

Question 6

Figure 8-5
Suppose that the government imposes a tax of P3 - P1. 
-Refer to Figure 8-5.Consumer surplus before the tax was levied is represented by area

Accepted Answer

A)   A.
B)   A+B+C.
C)   D+H+F.
D)   F.E) None of the above
F) B) and C)

Question 7

According to Arthur Laffer,the graph that represents the amount of tax revenue (measured on the vertical axis) as a function of the size of the tax (measured on the horizontal axis) looks like

Accepted Answer

A)   a U.
B)   an upside-down U.
C)   a horizontal straight line.
D)   an upward-sloping line or curve.E) A) and C)
F) All of the above

Question 8

Figure 8-6
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-6.What happens to producer surplus when the tax is imposed in this market?

Accepted Answer

A)   Producer surplus falls by $600.
B)   Producer surplus falls by $900.
C)   Producer surplus falls by $1,800.
D)   Producer surplus falls by $2,100.E) None of the above
F) A) and D)

Question 9

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 10

Figure 8-3 
-Refer to Figure 8-3.How much is consumer surplus at the market equililbrium?

Accepted Answer

Consumer s...

Question 11

John has been in the habit of mowing Willa's lawn each week for $20.John's opportunity cost is $15,and Willa would be willing to pay $25 to have her lawn mowed.What is the maximum tax the government can impose on lawn mowing without discouraging John and Willa from continuing their mutually beneficial arrangement?

Accepted Answer

If the tax is less than $10,there will e...

Question 12

Figure 8-7
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-7.As a result of the tax,consumer surplus decreases by

Accepted Answer

A)   $65,producer surplus decreases by $85,tax revenue is $120,and deadweight loss is $30.
B)   $75,producer surplus decreases by $75,tax revenue is $120,and deadweight loss is $30.
C)   $80,producer surplus decreases by $80,tax revenue is $120,and deadweight loss is $40.
D)   $120,producer surplus decreases by $120,tax revenue is $200,and deadweight loss is $40.E) A) and C)
F) A) and B)

Question 13

Which of the following is not correct?

Accepted Answer

A)   Economists who argue that labor taxes are highly distorting believe that labor supply is fairly elastic.
B)   Economists who argue that labor taxes are not highly distorting believe that labor supply is fairly inelastic.
C)   Economists who argue that labor supply is fairly inelastic cite elderly workers who adjust the date they retire as an example.
D)   Economists who argue that labor supply is fairly elastic cite workers who adjust the hours of overtime that they work as an example.E) C) and D)
F) B) and C)

Question 14

The Laffer curve illustrates how taxes in markets with greater elasticities of demand compare to taxes in markets with smaller elasticities of supply.

Accepted Answer

A) True 
 B)False

Question 15

Figure 8-3 
-Refer to Figure 8-3.Suppose the government places a $4 tax per unit on this good.How much tax revenue is collected after the tax is imposed?

Accepted Answer

Total tax revenue is...

Question 16

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 price that sellers receive is

Accepted Answer

A)   P0.
B)   P2.
C)   P5.
D)   P8.E) B) and C)
F) None of the above

Question 17

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)   [x (P0-P5) x Q5] + [x (P5-0) x Q5].
B)   [x (P0-P2) x Q2] +[(P2-P8) x Q2] + [x (P8-0) x Q2].
C)   (P2-P8) x Q2.
D)   x (P2-P8) x (Q5-Q2) .E) C) and D)
F) B) and C)

Question 18

Scenario 8-1
Suppose the market demand and market supply curves are given by the equations: 
-Refer to Scenario 8-1.Suppose that a tax of T is placed on buyers so that the demand curve becomes:  How much tax revenue will be collected after this tax is imposed?

Accepted Answer

The tax re...

Question 19

Figure 8-9
The vertical distance between points A and C represent a tax in the market. 
-Refer to Figure 8-9.The imposition of the tax causes the price received by sellers to

Accepted Answer

A)   increase from $600 to $800.
B)   decrease from $800 to $300.
C)   decrease from $600 to $300.
D)   remain unchanged at $600.E) C) and D)
F) None of the above

Question 20

As the size of a tax increases,the government's tax revenue rises,then falls.

Accepted Answer

A) True 
 B)False

Exam 8: Application: The Costs of Taxation

The Laffer curve illustrates how taxes in markets with greater elasticities of demand compare to taxes in markets with smaller elasticities of supply.

Correct Answer
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According to Arthur Laffer,the graph that represents the amount of tax revenue (measured on the vertical axis) as a function of the size of the tax (measured on the horizontal axis) looks like

Correct Answer
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Correct Answer
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If the tax is less than $10,there will e...
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As the size of a tax increases,the government's tax revenue rises,then falls.

Correct Answer
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Scenario 8-1 Suppose the market demand and market supply curves are given by the equations: -Refer to Scenario 8-1.Suppose that a tax of T is placed on buyers so that the demand curve becomes: How much tax revenue will be collected after this tax is imposed?

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The tax re...
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Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7.As a result of the tax,consumer surplus decreases by

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Figure 8-3 -Refer to Figure 8-3.How much is consumer surplus at the market equililbrium?

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Consumer s...
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Figure 8-9 The vertical distance between points A and C represent a tax in the market. -Refer to Figure 8-9.The imposition of the tax causes the price received by sellers to

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Which of the following is not correct?

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If the government imposes a $3 tax in a market,the buyers and sellers will share an equal burden of the tax.

Correct Answer
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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

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

Correct Answer
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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 price that sellers receive is

Correct Answer
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Figure 8-3 -Refer to Figure 8-3.Suppose the government places a $4 tax per unit on this good.How much tax revenue is collected after the tax is imposed?

Correct Answer
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Total tax revenue is...
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A tax on a good

Correct Answer
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Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.What happens to producer surplus when the tax is imposed in this market?

Correct Answer
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Taxes affect market participants by increasing the price paid by the buyer and decreasing the price received by the seller.

Correct Answer
verified

Figure 8-2 -Refer to Figure 8-2.Suppose the government changed the per-unit tax on this good from $3.00 to $1.50.Compared to the original tax rate,this lower tax rate would

Correct Answer
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The size of the deadweight loss generated from a tax is affected by the

Correct Answer
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Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.Consumer surplus before the tax was levied is represented by area

Correct Answer
verified

Exam 8: Application: The Costs of Taxation

The Laffer curve illustrates how taxes in markets with greater elasticities of demand compare to taxes in markets with smaller elasticities of supply.

Correct AnswerverifiedShow Answer

According to Arthur Laffer,the graph that represents the amount of tax revenue (measured on the vertical axis) as a function of the size of the tax (measured on the horizontal axis) looks like

Correct AnswerverifiedShow Answer

Correct AnswerverifiedIf the tax is less than $10,there will e...View AnswerShow Answer

As the size of a tax increases,the government's tax revenue rises,then falls.

Correct AnswerverifiedShow Answer

Scenario 8-1 Suppose the market demand and market supply curves are given by the equations: -Refer to Scenario 8-1.Suppose that a tax of T is placed on buyers so that the demand curve becomes: How much tax revenue will be collected after this tax is imposed?

Correct AnswerverifiedThe tax re...View AnswerShow Answer

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7.As a result of the tax,consumer surplus decreases by

Correct AnswerverifiedShow Answer

Figure 8-3 -Refer to Figure 8-3.How much is consumer surplus at the market equililbrium?

Correct AnswerverifiedConsumer s...View AnswerShow Answer

Figure 8-9 The vertical distance between points A and C represent a tax in the market. -Refer to Figure 8-9.The imposition of the tax causes the price received by sellers to

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Which of the following is not correct?

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If the government imposes a $3 tax in a market,the buyers and sellers will share an equal burden of the tax.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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 price that sellers receive is

Correct AnswerverifiedShow Answer

Figure 8-3 -Refer to Figure 8-3.Suppose the government places a $4 tax per unit on this good.How much tax revenue is collected after the tax is imposed?

Correct AnswerverifiedTotal tax revenue is...View AnswerShow Answer

A tax on a good

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Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.What happens to producer surplus when the tax is imposed in this market?

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Taxes affect market participants by increasing the price paid by the buyer and decreasing the price received by the seller.

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Figure 8-2 -Refer to Figure 8-2.Suppose the government changed the per-unit tax on this good from $3.00 to $1.50.Compared to the original tax rate,this lower tax rate would

Correct AnswerverifiedShow Answer

The size of the deadweight loss generated from a tax is affected by the

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Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.Consumer surplus before the tax was levied is represented by area

Correct AnswerverifiedShow Answer

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If the tax is less than $10,there will e...
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The tax re...
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Consumer s...
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Total tax revenue is...
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