Question 1

In the market for widgets, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. The equilibrium quantity in the market for widgets is 250 per month when there is no tax. Then a tax of $6 per widget is imposed. As a result, the government is able to raise $750 per month in tax revenue. We can conclude that the after-tax quantity of widgets is

Accepted Answer

A)   75 per month.
B)   100 per month.
C)   125 per month.
D)   150 per month.E) A) and B)
F) A) and C)

Question 2

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The amount of amount of deadweight loss as a result of the tax is

Accepted Answer

A)   $4,000.
B)   $5,000.
C)   $6,000.
D)   $10,000.E) A) and D)
F) None of the above

Question 3

The graph that represents the amount of deadweight loss (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 curve.E) A) and B)
F) A) and C)

Question 4

Assume that for good X the supply curve for a good is a typical, upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. If the good is taxed, and the tax is doubled, the

Accepted Answer

A)   base of the triangle that represents the deadweight loss doubles.
B)   height of the triangle that represents the deadweight loss doubles.
C)   deadweight loss of the tax quadruples.
D)   All of the above are correct.E) None of the above
F) C) and D)

Question 5

Total surplus with a tax is equal to

Accepted Answer

A)   consumer surplus plus producer surplus.
B)   consumer surplus minus producer surplus.
C)   consumer surplus plus producer surplus minus tax revenue.
D)   consumer surplus plus producer surplus plus tax revenue.E) All of the above
F) A) and B)

Question 6

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.E) A) and C)
F) All of the above

Question 7

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 sellers is

Accepted Answer

A)   $7.
B)   $5.
C)   $4.
D)   $3.E) None of the above
F) A) and D)

Question 8

Figure 8-6
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-6. When the tax is imposed in this market, sellers effectively pay what amount of the $10 tax?

Accepted Answer

A)   $0
B)   $4
C)   $6
D)   $10E) B) and C)
F) A) and D)

Question 9

Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, the

Accepted Answer

A)   less elastic is the demand for the good.
B)   less elastic is the supply of the good.
C)   smaller is the amount of the tax.
D)   All of the above are correct.E) C) and D)
F) B) and C)

Question 10

Figure 8-26 
-Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How many units of this good will be bought and sold after the tax is imposed?

Accepted Answer

60 units will be bou...

Question 11

When a tax is imposed on a good for which both demand and supply are very elastic,

Accepted Answer

A)   sellers effectively pay the majority of the tax.
B)   buyers effectively pay the majority of the tax.
C)   the tax burden is equally divided between buyers and sellers.
D)   None of the above is correct; further information would be required to determine how the burden of the tax is distributed between buyers and sellers.E) B) and C)
F) A) and D)

Question 12

Figure 8-11 
-Refer to Figure 8-11. The price labeled as P2 on the vertical axis represents the

Accepted Answer

A)   difference between the price paid by buyers after the tax is imposed and the price paid by buyers before the tax is imposed.
B)   difference between the price received by sellers before the tax is imposed and the price received by sellers after the tax is imposed.
C)   price of the good before the tax is imposed.
D)   price of the good after the tax is imposed.E) None of the above
F) B) and C)

Question 13

Taxes drive a wedge into the market by raising the price that sellers receive and lowering the price that buyers pay.

Accepted Answer

A) True 
 B)False

Question 14

Figure 8-25 
-Refer to Figure 8-25. 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 15

Assume that for good X the supply curve for a good is a typical, upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. If the good is taxed, and the tax is tripled, the

Accepted Answer

A)   base of the triangle that represents the deadweight loss triples.
B)   height of the triangle that represents the deadweight loss triples.
C)   deadweight loss of the tax increases by a factor of nine.
D)   All of the above are correct.E) None of the above
F) B) and C)

Question 16

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.E) None of the above
F) C) and D)

Question 17

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) C) and D)

Question 18

Taxes create deadweight losses.

Accepted Answer

A) True 
 B)False

Question 19

Suppose the government places a per-unit tax on a good. The smaller 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)   less efficient is the tax.
D)   more equitable is the distribution of the tax burden between buyers and sellers.E) B) and C)
F) A) and C)

Question 20

Anger over British taxes played a significant role in bringing about the

Accepted Answer

A)   election of John Adams as the second American president.
B)   American Revolution.
C)   War of 1812.
D)   "no new taxes" clause in the U.S. Constitution.E) A) and C)
F) C) and D)

Exam 8: Application: The Costs of Taxation

Taxes create deadweight losses.

Correct Answer
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Assume that for good X the supply curve for a good is a typical, upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. If the good is taxed, and the tax is doubled, the

Correct Answer
verified

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The amount of amount of deadweight loss as a result of the tax is

Correct Answer
verified

Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, the

Correct Answer
verified

A tax levied on the buyers of a good shifts the

Correct Answer
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Taxes drive a wedge into the market by raising the price that sellers receive and lowering the price that buyers pay.

Correct Answer
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When a tax is imposed on a good for which both demand and supply are very elastic,

Correct Answer
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When a good is taxed, the burden of the tax

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. When the tax is imposed in this market, sellers effectively pay what amount of the $10 tax?

Correct Answer
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Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How many units of this good will be bought and sold after the tax is imposed?

Correct Answer
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60 units will be bou...
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Total surplus with a tax is equal to

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. Without the tax, the producer surplus is

Correct Answer
verified

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 sellers is

Correct Answer
verified

Anger over British taxes played a significant role in bringing about the

Correct Answer
verified

Correct Answer
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Figure 8-11 -Refer to Figure 8-11. The price labeled as P2 on the vertical axis represents the

Correct Answer
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Figure 8-25 -Refer to Figure 8-25. 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...
View Answer

Suppose the government places a per-unit tax on a good. The smaller the price elasticities of demand and supply for the good, the

Correct Answer
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The graph that represents the amount of deadweight loss (measured on the vertical axis) as a function of the size of the tax (measured on the horizontal axis) looks like

Correct Answer
verified

Assume that for good X the supply curve for a good is a typical, upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. If the good is taxed, and the tax is tripled, the

Correct Answer
verified

Exam 8: Application: The Costs of Taxation

Taxes create deadweight losses.

Correct AnswerverifiedShow Answer

Assume that for good X the supply curve for a good is a typical, upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. If the good is taxed, and the tax is doubled, the

Correct AnswerverifiedShow Answer

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The amount of amount of deadweight loss as a result of the tax is

Correct AnswerverifiedShow Answer

Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, the

Correct AnswerverifiedShow Answer

A tax levied on the buyers of a good shifts the

Correct AnswerverifiedShow Answer

Taxes drive a wedge into the market by raising the price that sellers receive and lowering the price that buyers pay.

Correct AnswerverifiedShow Answer

When a tax is imposed on a good for which both demand and supply are very elastic,

Correct AnswerverifiedShow Answer

When a good is taxed, the burden of the tax

Correct AnswerverifiedShow Answer

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. When the tax is imposed in this market, sellers effectively pay what amount of the $10 tax?

Correct AnswerverifiedShow Answer

Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How many units of this good will be bought and sold after the tax is imposed?

Correct Answerverified60 units will be bou...View AnswerShow Answer

Total surplus with a tax is equal to

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. Without the tax, the producer surplus is

Correct AnswerverifiedShow Answer

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 sellers is

Correct AnswerverifiedShow Answer

Anger over British taxes played a significant role in bringing about the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 8-11 -Refer to Figure 8-11. The price labeled as P2 on the vertical axis represents the

Correct AnswerverifiedShow Answer

Figure 8-25 -Refer to Figure 8-25. 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

Suppose the government places a per-unit tax on a good. The smaller the price elasticities of demand and supply for the good, the

Correct AnswerverifiedShow Answer

The graph that represents the amount of deadweight loss (measured on the vertical axis) as a function of the size of the tax (measured on the horizontal axis) looks like

Correct AnswerverifiedShow Answer

Assume that for good X the supply curve for a good is a typical, upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. If the good is taxed, and the tax is tripled, the

Correct AnswerverifiedShow Answer

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60 units will be bou...
View Answer

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Total tax revenue is...
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