Question 1

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 2

Economist Arthur Laffer made the argument that tax rates in the United States were so high that reducing the rates would increase tax revenue.

Accepted Answer

A) True 
 B)False

Question 3

If the labor supply curve is nearly vertical,a tax on labor

Accepted Answer

A)   has a large deadweight loss.
B)   raises a small amount of tax revenue.
C)   has little impact on the amount of work that workers are willing to do.
D)   results in a large tax burden on the firms that hire labor.E) A) and D)
F) A) and B)

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

Question 5

Figure 8-8
Suppose the government imposes a $10 per unit tax on a good. 
-Refer to Figure 8-8.The deadweight loss of the tax is the area

Accepted Answer

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

Question 6

Figure 8-4
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-4.The tax results in a loss of consumer surplus that amounts to

Accepted Answer

A)   $120.
B)   $340.
C)   $450.
D)   $510.E) A) and D)
F) A) and B)

Question 7

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 consumer surplus when the tax is imposed in this market?

Accepted Answer

A)   Consumer surplus falls by $3,600.
B)   Consumer surplus falls by $2,700.
C)   Consumer surplus falls by $1,800.
D)   Consumer surplus falls by $900.E) C) and D)
F) B) and C)

Question 8

Relative to a situation in which gasoline is not taxed,the imposition of a tax on gasoline causes the quantity of gasoline demanded to

Accepted Answer

A)   decrease and the quantity of gasoline supplied to decrease.
B)   decrease and the quantity of gasoline supplied to increase.
C)   increase and the quantity of gasoline supplied to decrease.
D)   increase and the quantity of gasoline supplied to increase.E) B) and D)
F) All of the above

Question 9

The higher a country's tax rates,the more likely that country will be

Accepted Answer

A)   at the top of the Laffer curve.
B)   on the positively sloped part of the Laffer curve.
C)   on the negatively sloped part of the Laffer curve.
D)   experiencing small deadweight losses.E) C) and D)
F) B) and D)

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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

Question 12

When a tax is imposed on buyers,consumer surplus and producer surplus both decrease.

Accepted Answer

A) True 
 B)False

Question 13

Suppose Ashley needs a dog sitter so that she can travel to her sister's wedding.Ashley values dog sitting for the weekend at $200.Cami is willing to dog sit for Ashley so long as she receives at least $175.Ashley and Cami agree on a price of $185.Suppose the government imposes a tax of $30 on dog sitting.What is the deadweight loss of the tax?

Accepted Answer

A)   the maximum value that Ashley would pay for dog sitting
B)   the $30 tax
C)   the lost benefit to Ashley and Cami because after the tax,Cami will not dog sit for Ashley
D)   the lost benefit to Ashley of being unable to hire a dog sitter because Ashley is the one who would pay the taxE) A) and C)
F) A) and B)

Question 14

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 15

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

Question 16

Which of the following would likely have the smallest deadweight loss relative to the tax revenue?

Accepted Answer

A)   a head tax (that is,a tax everyone must pay regardless of what one does or buys) 
B)   an income tax
C)   a tax on compact discs
D)   a tax on caviarE) C) and D)
F) All of the above

Question 17

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

Question 18

Figure 8-16 
-Refer to Figure 8-16.Suppose the government imposes a $1 tax in each of the four markets represented by supply curves S1,S2,S3,and S4.The deadweight will be the smallest in the market represented by

Accepted Answer

A)   S1.
B)   S2.
C)   S3.
D)   S4.E) None of the above
F) B) and C)

Question 19

If a tax shifts the demand curve upward (or to the right) ,we can infer that the tax was levied on

Accepted Answer

A)   buyers of the good.
B)   sellers of the good.
C)   both buyers and sellers of the good.
D)   We cannot infer anything because the shift described is not consistent with a tax.E) B) and C)
F) B) and D)

Question 20

Figure 8-3
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-3.The equilibrium price before the tax is imposed is

Accepted Answer

A)   P1.
B)   P2.
C)   P3.
D)   P4.E) A) and B)
F) B) and D)

Exam 8: Application: the Costs of Taxation

The higher a country's tax rates,the more likely that country will be

Correct Answer
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Correct Answer
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Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3.The equilibrium price before the tax is imposed is

Correct Answer
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If the labor supply curve is nearly vertical,a tax on labor

Correct Answer
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Economist Arthur Laffer made the argument that tax rates in the United States were so high that reducing the rates would increase tax revenue.

Correct Answer
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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.

Correct Answer
verified

Which of the following would likely have the smallest deadweight loss relative to the tax revenue?

Correct Answer
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Figure 8-16 -Refer to Figure 8-16.Suppose the government imposes a $1 tax in each of the four markets represented by supply curves S1,S2,S3,and S4.The deadweight will be the smallest in the market represented by

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 consumer surplus when the tax is imposed in this market?

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

Correct Answer
verified

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8.The deadweight loss of the tax is the area

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Relative to a situation in which gasoline is not taxed,the imposition of a tax on gasoline causes the quantity of gasoline demanded to

Correct Answer
verified

If a tax shifts the demand curve upward (or to the right) ,we can infer that the tax was levied on

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 tax results in a loss of consumer surplus that amounts to

Correct Answer
verified

When a tax is imposed on buyers,consumer surplus and producer surplus both decrease.

Correct Answer
verified

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

Correct Answer
verified

Exam 8: Application: the Costs of Taxation

The higher a country's tax rates,the more likely that country will be

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3.The equilibrium price before the tax is imposed is

Correct AnswerverifiedShow Answer

If the labor supply curve is nearly vertical,a tax on labor

Correct AnswerverifiedShow Answer

Economist Arthur Laffer made the argument that tax rates in the United States were so high that reducing the rates would increase tax revenue.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following would likely have the smallest deadweight loss relative to the tax revenue?

Correct AnswerverifiedShow Answer

Figure 8-16 -Refer to Figure 8-16.Suppose the government imposes a $1 tax in each of the four markets represented by supply curves S1,S2,S3,and S4.The deadweight will be the smallest in the market represented by

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.What happens to consumer surplus when the tax is imposed in this market?

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

Correct AnswerverifiedShow Answer

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8.The deadweight loss of the tax is the area

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Relative to a situation in which gasoline is not taxed,the imposition of a tax on gasoline causes the quantity of gasoline demanded to

Correct AnswerverifiedShow Answer

If a tax shifts the demand curve upward (or to the right) ,we can infer that the tax was levied on

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 tax results in a loss of consumer surplus that amounts to

Correct AnswerverifiedShow Answer

When a tax is imposed on buyers,consumer surplus and producer surplus both decrease.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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