Question 1

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 quantity sold to

Accepted Answer

A)   increase by 20 units.
B)   increase by 500 units.
C)   decrease by 20 units.
D)   decrease by 500 units.E) C) and D)
F) A) and D)

Question 2

Taxes on labor tend to increase the number of hours that people choose to work.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Suppose the government increases the size of a tax by 40 percent.The deadweight loss from that tax

Accepted Answer

A)   increases by 40 percent.
B)   increases by more than 40 percent.
C)   increases but by less than 40 percent.
D)   decreases by 40 percent.E) All of the above
F) C) and D)

Question 5

Figure 8-5
Suppose that the government imposes a tax of P3 - P1.
 
-Refer to Figure 8-5.The tax is levied on

Accepted Answer

A)   buyers only.
B)   sellers only.
C)   both buyers and sellers.
D)   This is impossible to determine from the figure.E) A) and C)
F) None of the above

Question 6

Because taxes distort incentives,they cause markets to allocate resources inefficiently.

Accepted Answer

A) True 
 B)False

Question 7

A tax affects

Accepted Answer

A)   buyers only.
B)   sellers only.
C)   buyers and sellers only.
D)   buyers, sellers, and the government.E) A) and D)
F) A) and C)

Question 8

If the tax on a good is increased from $1 per unit to $3 per unit,the deadweight loss from the tax increases by a factor of

Accepted Answer

A)   2.
B)   3.
C)   9.
D)   18.E) A) and C)
F) All of the above

Question 9

The benefit to buyers of participating in a market is measured by

Accepted Answer

A)   the price elasticity of demand.
B)   consumer surplus.
C)   the maximum amount that buyers are willing to pay for the good.
D)   the equilibrium price.E) A) and C)
F) A) and B)

Question 10

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

Accepted Answer

A)   investment tax.
B)   sales tax.
C)   property tax.
D)   labor tax.E) B) and C)
F) A) and C)

Question 11

The elasticities of the supply and demand curves in the market for cigarettes affect how much a tax distorts that market.

Accepted Answer

A) True 
 B)False

Question 12

A decrease in the size of a tax is most likely to increase tax revenue in a market with

Accepted Answer

A)   elastic demand and elastic supply.
B)   elastic demand and inelastic supply.
C)   inelastic demand and elastic supply.
D)   inelastic demand and inelastic supply.E) A) and B)
F) A) and C)

Question 13

Figure 8-9
The vertical distance between points A and C represent 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.E) B) and C)
F) B) and D)

Question 14

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.E) A) and B)
F) C) and D)

Question 15

Figure 8-12
 
-Refer to Figure 8-12.Which of the following statements is not correct?

Accepted Answer

A)   Supply 2 is more elastic than supply 1.
B)   Demand 2 is more elastic than demand 1.
C)   Supply 1 is more inelastic than supply 2.
D)   Demand 2 is more inelastic than supply 2.E) C) and D)
F) All of the above

Question 16

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.E) B) and D)
F) B) and C)

Question 17

The deadweight loss from a tax of $5 per unit will be smallest in a market with

Accepted Answer

A)   inelastic supply and elastic demand.
B)   inelastic supply and inelastic demand.
C)   elastic supply and elastic demand.
D)   elastic supply and inelastic demand.E) A) and C)
F) B) and C)

Question 18

The demand for bread is less elastic than the demand for donuts; hence,a tax on bread will create a larger deadweight loss than will the same tax on donuts,other things equal.

Accepted Answer

A) True 
 B)False

Question 19

If the tax on a good is doubled,the deadweight loss of the tax

Accepted Answer

A)   increases by 50 percent.
B)   doubles.
C)   triples.
D)   quadruples.E) None of the above
F) A) and C)

Question 20

Figure 8-2
The vertical distance between points A and B represents a tax in the market.
 
-Refer to Figure 8-2.The imposition of the tax causes the price paid by buyers to

Accepted Answer

A)   decrease by $2.
B)   increase by $3.
C)   decrease by $4.
D)   increase by $5.E) B) and C)
F) A) and D)

Exam 8: Application: The Costs of Taxation.

A tax affects

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The demand for bread is less elastic than the demand for donuts; hence,a tax on bread will create a larger deadweight loss than will the same tax on donuts,other things equal.

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Suppose the government increases the size of a tax by 40 percent.The deadweight loss from that tax

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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,

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

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Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2.The imposition of the tax causes the price paid by buyers to

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

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If the tax on a good is increased from $1 per unit to $3 per unit,the deadweight loss from the tax increases by a factor of

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Taxes on labor tend to increase the number of hours that people choose to work.

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The benefit to buyers of participating in a market is measured by

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If the tax on a good is doubled,the deadweight loss of the tax

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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

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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 total surplus with the tax is

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Because taxes distort incentives,they cause markets to allocate resources inefficiently.

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Figure 8-12 -Refer to Figure 8-12.Which of the following statements is not correct?

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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 quantity sold to

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A decrease in the size of a tax is most likely to increase tax revenue in a market with

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The elasticities of the supply and demand curves in the market for cigarettes affect how much a tax distorts that market.

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Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The tax is levied on

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The deadweight loss from a tax of $5 per unit will be smallest in a market with

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