Question 1

When a tax is levied on the buyers of a good, the

Accepted Answer

A)   supply curve shifts upward by the amount of the tax.
B)   quantity supplied increases for all conceivable prices of the good.
C)   buyers of the good will send tax payments to the government.
D)   demand curve shifts to the right by the horizontal distance of the tax.E) None of the above
F) A) and B)

Question 2

Figure 8-13 
-Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The loss of producer surplus resulting from this tax is

Accepted Answer

A)   $60.
B)   $45.
C)   $30.
D)   $15.E) B) and D)
F) A) and C)

Question 3

Scenario 8-3
Suppose the market demand and market supply curves are given by the equations: 
-Refer to Scenario 8-3. Suppose that a tax of T is placed on buyers so that the demand curve becomes:  What quantity will be bought and sold after the tax is imposed?

Accepted Answer

The quanti...

Question 4

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

Accepted Answer

A)   in which demand is elastic and supply is inelastic.
B)   in which demand is inelastic and supply is elastic.
C)   in which demand is inelastic and supply is inelastic.
D)   None of the above are correct; we need to know the value of x in order to determine the answer.E) B) and D)
F) A) and D)

Question 5

The benefit that government receives from a tax is measured by

Accepted Answer

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

Question 6

If the government imposes a $3 tax in a market, the equilibrium price will rise by $3.

Accepted Answer

A) True 
 B)False

Question 7

The Social Security tax is a tax on

Accepted Answer

A)   capital.
B)   labor.
C)   land.
D)   savings.E) A) and B)
F) A) and C)

Question 8

Figure 8-24. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. 
-Refer to Figure 8-24. Tax revenue would

Accepted Answer

A)   decrease if the economy began at point B and then the tax rate was decreased.
B)   increase if the economy began at point F and then the tax rate was decreased.
C)   decrease if the economy began at point C and then the tax rate was increased.
D)   All of the above are correct.E) B) and C)
F) A) and C)

Question 9

Scenario 8-1
Erin would be willing to pay as much as $100 per week to have her house cleaned. Ernesto's opportunity cost of cleaning Erin's house is $70 per week.
-Refer to Scenario 8-1. Assume Erin is required to pay a tax of $5 when she hires someone to clean her house. Which of the following is true?

Accepted Answer

A)   Erin will continue to hire Ernesto to clean her house, but her consumer surplus will decline.
B)   Ernesto will continue to clean Erin's house, and his producer surplus will increase.
C)   Total economic welfare consumer surplus plus producer surplus plus tax revenue)  will decrease.
D)   All of the above are correct.E) A) and B)
F) C) and D)

Question 10

To fully understand how taxes affect economic well-being, we must compare the

Accepted Answer

A)   benefit to buyers with the loss to sellers.
B)   price paid by buyers to the price received by sellers.
C)   profits earned by firms to the losses incurred by consumers.
D)   decrease in total surplus to the increase in revenue raised by the government.E) None of the above
F) A) and D)

Question 11

Suppose Rebecca needs a dog sitter so that she can travel to her sister's wedding. Rebecca values dog sitting for the weekend at $200. Susan is willing to dog sit for Rebecca so long as she receives at least $150. Rebecca and Susan agree on a price of $175. Suppose the government imposes a tax of $10 on dog sitting. The tax has made Rebecca and Susan worse off by a total of

Accepted Answer

A)   $50.
B)   $40.
C)   $20.
D)   $10.E) None of the above
F) A) and B)

Question 12

If a tax shifts the supply curve upward or to the left) , 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) A) and B)

Question 13

In which of the following cases is it most likely that an increase in the size of a tax will decrease tax revenue?

Accepted Answer

A)   The price elasticity of demand is small, and the price elasticity of supply is large.
B)   The price elasticity of demand is large, and the price elasticity of supply is small.
C)   The price elasticity of demand and the price elasticity of supply are both small.
D)   The price elasticity of demand and the price elasticity of supply are both large.E) A) and C)
F) None of the above

Question 14

The more elastic are supply and demand in a market, the greater are the distortions caused by a tax on that market, and the more likely it is that a tax cut in that market will raise tax revenue.

Accepted Answer

A) True 
 B)False

Question 15

Figure 8-22 
-Refer to Figure 8-22. Suppose the government initially imposes a $3 per-unit tax on this good. Now suppose the government is deciding whether to lower the tax to $1.50 or raise it to $4.50. Which of the following statements is not correct?

Accepted Answer

A)   Compared to the original tax, the larger tax will decrease tax revenue.
B)   Compared to the original tax, the smaller tax will decrease deadweight loss.
C)   Compared to the original tax, the smaller tax will decrease tax revenue.
D)   Compared to the original tax, the larger tax will increase deadweight loss.E) B) and C)
F) None of the above

Question 16

Figure 8-7
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-7. Before the tax is imposed, the equilibrium price is

Accepted Answer

A)   $32, and the equilibrium quantity is 15.
B)   $24, and the equilibrium quantity is 15.
C)   $24, and the equilibrium quantity is 25.
D)   $16, and the equilibrium quantity is 15.E) B) and C)
F) A) and D)

Question 17

Suppose a tax is imposed on the sellers of fast-food French fries. The burden of the tax will

Accepted Answer

A)   fall entirely on the buyers of fast-food French fries.
B)   fall entirely on the sellers of fast-food French fries.
C)   be shared equally by the buyers and sellers of fast-food French fries.
D)   be shared by the buyers and sellers of fast-food French fries but not necessarily equally.E) C) and D)
F) A) and B)

Question 18

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) None of the above
F) All of the above

Question 19

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, producer surplus is

Accepted Answer

A)   $450.
B)   $600.
C)   $900.
D)   $1,500.E) B) and C)
F) A) and B)

Question 20

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 the tax on each unit of the good is

Accepted Answer

A)   $20.
B)   $200.
C)   $300.
D)   $500.E) A) and C)
F) B) and D)

Exam 8: Application: the Costs of Taxation

When a tax is levied on the buyers of a good, the

Correct Answer
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The more elastic are supply and demand in a market, the greater are the distortions caused by a tax on that market, and the more likely it is that a tax cut in that market will raise tax revenue.

Correct Answer
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If the government imposes a $3 tax in a market, the equilibrium price will rise by $3.

Correct Answer
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If a tax shifts the supply curve upward or to the left) , we can infer that the tax was levied on

Correct Answer
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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 the tax on each unit of the good is

Correct Answer
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Scenario 8-3 Suppose the market demand and market supply curves are given by the equations: -Refer to Scenario 8-3. Suppose that a tax of T is placed on buyers so that the demand curve becomes: What quantity will be bought and sold after the tax is imposed?

Correct Answer
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The quanti...
View Answer

The Social Security tax is a tax on

Correct Answer
verified

Suppose a tax is imposed on the sellers of fast-food French fries. The burden of the tax will

Correct Answer
verified

Figure 8-13 -Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The loss of producer surplus resulting from this tax is

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

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7. Before the tax is imposed, the equilibrium price is

Correct Answer
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The benefit that government receives from a tax is measured by

Correct Answer
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Figure 8-24. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-24. Tax revenue would

Correct Answer
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In which of the following cases is it most likely that an increase in the size of a tax will decrease tax revenue?

Correct Answer
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Figure 8-22 -Refer to Figure 8-22. Suppose the government initially imposes a $3 per-unit tax on this good. Now suppose the government is deciding whether to lower the tax to $1.50 or raise it to $4.50. Which of the following statements is not correct?

Correct Answer
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The deadweight loss from a tax of $x per unit will be smallest in a market

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, producer surplus is

Correct Answer
verified

To fully understand how taxes affect economic well-being, we must compare the

Correct Answer
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Correct Answer
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Exam 8: Application: the Costs of Taxation

When a tax is levied on the buyers of a good, the

Correct AnswerverifiedShow Answer

The more elastic are supply and demand in a market, the greater are the distortions caused by a tax on that market, and the more likely it is that a tax cut in that market will raise tax revenue.

Correct AnswerverifiedShow Answer

If the government imposes a $3 tax in a market, the equilibrium price will rise by $3.

Correct AnswerverifiedShow Answer

If a tax shifts the supply curve upward or to the left) , we can infer that the tax was levied on

Correct AnswerverifiedShow Answer

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 the tax on each unit of the good is

Correct AnswerverifiedShow Answer

Scenario 8-3 Suppose the market demand and market supply curves are given by the equations: -Refer to Scenario 8-3. Suppose that a tax of T is placed on buyers so that the demand curve becomes: What quantity will be bought and sold after the tax is imposed?

Correct AnswerverifiedThe quanti...View AnswerShow Answer

The Social Security tax is a tax on

Correct AnswerverifiedShow Answer

Suppose a tax is imposed on the sellers of fast-food French fries. The burden of the tax will

Correct AnswerverifiedShow Answer

Figure 8-13 -Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The loss of producer surplus resulting from this tax is

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

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7. Before the tax is imposed, the equilibrium price is

Correct AnswerverifiedShow Answer

The benefit that government receives from a tax is measured by

Correct AnswerverifiedShow Answer

Figure 8-24. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-24. Tax revenue would

Correct AnswerverifiedShow Answer

In which of the following cases is it most likely that an increase in the size of a tax will decrease tax revenue?

Correct AnswerverifiedShow Answer

Figure 8-22 -Refer to Figure 8-22. Suppose the government initially imposes a $3 per-unit tax on this good. Now suppose the government is deciding whether to lower the tax to $1.50 or raise it to $4.50. Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

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

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, producer surplus is

Correct AnswerverifiedShow Answer

To fully understand how taxes affect economic well-being, we must compare the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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The quanti...
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