Question 1

As more people become self-employed,which allows them to determine how many hours they work per week,we would expect the deadweight loss from the Social Security tax to

Accepted Answer

A)   increase,and the revenue generated from the tax to increase.
B)   increase,and the revenue generated from the tax to decrease.
C)   decrease,and the revenue generated from the tax to increase.
D)   decrease,and the revenue generated from the tax to decrease.E) A) and C)
F) A) and D)

Question 2

If the size of a tax doubles,the deadweight loss doubles.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A)   income tax.
B)   tax on labor.
C)   inheritance or death tax.
D)   tax on corporate profits.E) None of the above
F) B) and C)

Question 4

When a tax is imposed on the buyers of a good,the demand curve shifts

Accepted Answer

A)   downward by the amount of the tax.
B)   upward by the amount of the tax.
C)   downward by less than the amount of the tax.
D)   upward by more than the amount of the tax.E) B) and D)
F) C) and D)

Question 5

When a tax is levied on a good,

Accepted Answer

A)   neither buyers nor sellers are made worse off.
B)   only sellers are made worse off.
C)   only buyers are made worse off.
D)   both buyers and sellers are made worse off.E) A) and C)
F) A) and B)

Question 6

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) A) and B)
F) A) and C)

Question 7

A tax places a wedge between the price buyers pay and the price sellers receive.

Accepted Answer

A) True 
 B)False

Question 8

A tax levied on the buyers 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 downward (or to the left) .
D)   demand curve upward (or to the right) .E) None of the above
F) A) and B)

Question 9

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:  If T = 40,how many units will be bought and sold after the tax is imposed?

Accepted Answer

120 units will be bo...

Question 10

Figure 8-3 
-Refer to Figure 8-3.Suppose the government places a $4 tax per unit on this good.What price will consumers pay for the good after the tax is imposed?

Accepted Answer

Consumers will pay $...

Question 11

A tax of $0.25 is imposed on each bag of potato chips that is sold.The tax decreases producer surplus by $600 per day,generates tax revenue of $1,220 per day,and decreases the equilibrium quantity of potato chips by 120 bags per day.The tax

Accepted Answer

A)   decreases consumer surplus by $645 per day.
B)   decreases the equilibrium quantity from 6,000 bags per day to 5,880 bags per day.
C)   decreases total surplus from $3,000 to $1,800 per day.
D)   creates a deadweight loss of $15 per day.E) All of the above
F) C) and D)

Question 12

Supply-side economics is a term associated with the views of

Accepted Answer

A)   Ronald Reagan and Arthur Laffer.
B)   Karl Marx.
C)   Bill Clinton and Greg Mankiw.
D)   Milton Friedman.E) A) and B)
F) All of the above

Question 13

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) A) and B)
F) A) and C)

Question 14

When a tax is imposed on a good,consumer surplus decreases and producer surplus remains unchanged.

Accepted Answer

A) True 
 B)False

Question 15

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 quantity sold to

Accepted Answer

A)   increase by 1 unit.
B)   decrease by 1 unit.
C)   increase by 2 units.
D)   decrease by 2 units.E) All of the above
F) None of the above

Question 16

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 17

Figure 8-19.The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. 
-Refer to Figure 8-19.If the economy is at point B on the curve,then an increase in the tax rate will

Accepted Answer

A)   increase the deadweight loss of the tax and increase tax revenue.
B)   increase the deadweight loss of the tax and decrease tax revenue.
C)   decrease the deadweight loss of the tax and increase tax revenue.
D)   decrease the deadweight loss of the tax and decrease tax revenue.E) A) and B)
F) A) and C)

Question 18

Figure 8-1 
-Refer to Figure 8-1.Suppose a $3 per-unit tax is placed on this good.The amount of tax revenue collected by the government is

Accepted Answer

A)   $7.50.
B)   $15.00.
C)   $22.50.
D)   $45.00.E) All of the above
F) A) and B)

Question 19

Figure 8-14  
-Refer to Figure 8-14.Panel (a) and Panel (b) each illustrate a $2 tax placed on a market.In comparison to Panel (b) ,Panel (a) illustrates which of the following statements?

Accepted Answer

A)   When demand is relatively inelastic,the deadweight loss of a tax is smaller than when demand is relatively elastic.
B)   When demand is relatively elastic,the deadweight loss of a tax is larger than when demand is relatively inelastic.
C)   When supply is relatively inelastic,the deadweight loss of a tax is smaller than when supply is relatively elastic.
D)   When supply is relatively elastic,the deadweight loss of a tax is larger than when supply is relatively inelastic.E) B) and D)
F) A) and D)

Question 20

The decrease in total surplus that results from a market distortion,such as a tax,is called a

Accepted Answer

A)   wedge loss.
B)   revenue loss.
C)   deadweight loss.
D)   consumer surplus loss.E) A) and C)
F) A) and D)

Exam 8: Application: The Costs of Taxation

A tax levied on the buyers of a good shifts the

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A tax places a wedge between the price buyers pay and the price sellers receive.

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Figure 8-1 -Refer to Figure 8-1.Suppose a $3 per-unit tax is placed on this good.The amount of tax revenue collected by the government is

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

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Supply-side economics is a term associated with the views of

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When a tax is levied on a good,

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Figure 8-19.The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-19.If the economy is at point B on the curve,then an increase in the tax rate will

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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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When a tax is imposed on the buyers of a good,the demand curve shifts

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

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When a tax is imposed on a good,consumer surplus decreases and producer surplus remains unchanged.

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A tax of $0.25 is imposed on each bag of potato chips that is sold.The tax decreases producer surplus by $600 per day,generates tax revenue of $1,220 per day,and decreases the equilibrium quantity of potato chips by 120 bags per day.The tax

Correct AnswerverifiedShow Answer

The decrease in total surplus that results from a market distortion,such as a tax,is called a

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Figure 8-3 -Refer to Figure 8-3.Suppose the government places a $4 tax per unit on this good.What price will consumers pay for the good after the tax is imposed?

Correct AnswerverifiedConsumers will pay $...View AnswerShow Answer

As more people become self-employed,which allows them to determine how many hours they work per week,we would expect the deadweight loss from the Social Security tax to

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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 quantity sold to

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

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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: If T = 40,how many units will be bought and sold after the tax is imposed?

Correct Answerverified120 units will be bo...View AnswerShow Answer

If the size of a tax doubles,the deadweight loss doubles.

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Figure 8-14 -Refer to Figure 8-14.Panel (a) and Panel (b) each illustrate a $2 tax placed on a market.In comparison to Panel (b) ,Panel (a) illustrates which of the following statements?

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Consumers will pay $...
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120 units will be bo...
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