Question 1

Figure 8-11 
-Refer to Figure 8-11. The price labeled as P1 on the vertical axis represents the price

Accepted Answer

A)   received by sellers before the tax is imposed.
B)   received by sellers after the tax is imposed.
C)   paid by buyers before the tax is imposed.
D)   paid by buyers after the tax is imposed.E) A) and B)
F) B) and D)

Question 2

If the tax on a good is increased from $0.30 per unit to $0.90 per unit, the deadweight loss from the tax

Accepted Answer

A)   remains constant.
B)   increases by a factor of 4.
C)   increases by a factor of 9.
D)   increases by a factor of 16.E) A) and B)
F) A) and C)

Question 3

The deadweight loss of a tax rises even more rapidly than the size of the tax.

Accepted Answer

A) True 
 B)False

Question 4

When a tax is imposed on a good, the resulting decrease in consumer surplus is always larger than the resulting decrease in producer surplus.

Accepted Answer

A) True 
 B)False

Question 5

Buyers of a product will bear the larger part of the tax burden, and sellers will bear a smaller part of the tax burden, when the

Accepted Answer

A)   tax is placed on the sellers of the product.
B)   tax is placed on the buyers of the product.
C)   supply of the product is more elastic than the demand for the product.
D)   demand for the product is more elastic than the supply of the product.E) None of the above
F) B) and C)

Question 6

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 received by sellers 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)

Question 7

When the government imposes taxes on buyers or sellers of a good, society

Accepted Answer

A)   loses some of the benefits of market efficiency.
B)   gains efficiency but loses equality.
C)   is better off because the government's tax revenues exceed the deadweight loss.
D)   moves from an elastic supply curve to an inelastic supply curve.E) A) and C)
F) B) and D)

Question 8

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 quadruples.
B)   height of the triangle that represents the deadweight loss doubles.
C)   deadweight loss of the tax doubles.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 9

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. The price that buyers pay is

Accepted Answer

A)   P0.
B)   P2.
C)   P5.
D)   P8.E) A) and B)
F) A) and C)

Question 10

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. With 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) B) and C)
F) C) and D)

Question 11

Figure 8-3
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-3. The amount of tax revenue received by the government is equal to the area

Accepted Answer

A)   P3ACP1.
B)   ABC.
C)   P2DAP3.
D)   P1CDP2.E) C) and D)
F) All of the above

Question 12

Suppose the price of milk is $2.39 per gallon, and the equilibrium quantity of milk is 100 thousand gallons per day with no tax on milk. Starting from this initial situation, which of the following scenarios would result in the smallest deadweight loss?

Accepted Answer

A)   The price elasticity of demand for milk is 0.3, the price elasticity of supply for milk is 0.7, and the milk tax amounts to $0.40 per gallon.
B)   The price elasticity of demand for milk is 0.2, the price elasticity of supply for milk is 0.5, and the milk tax amounts to $0.30 per gallon.
C)   The price elasticity of demand for milk is 0.2, the price elasticity of supply for milk is 0.7, and the milk tax amounts to $0.30 per gallon.
D)   The price elasticity of demand for milk is 0.1, the price elasticity of supply for milk is 0.5, and the milk tax amounts to $0.20 per gallon.E) C) and D)
F) All of the above

Question 13

Suppose a tax is imposed on each new hearing aid that is sold. The supply curve is a typical upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. As a result of the tax, the equilibrium quantity of hearing aids decreases from 10,000 to 9,000, and the deadweight loss of the tax is $60,000. We can conclude that the tax on each hearing aid is

Accepted Answer

A)   $60.
B)   $120.
C)   $160.
D)   $200.E) None of the above
F) A) and B)

Question 14

Figure 8-1 
-Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The deadweight loss due to the tax is measured by the area

Accepted Answer

A)   J+K+L+M.
B)   J+K+L+M+N.
C)   I+Y.
D)   I+Y+B.E) All of the above
F) B) and D)

Question 15

When a tax is levied on a good,

Accepted Answer

A)   government revenues exceed the loss in total welfare.
B)   there is a decrease in the quantity of the good bought and sold in the market.
C)   the price that sellers receive exceeds the price that buyers pay.
D)   All of the above are correct.E) A) and B)
F) All of the above

Question 16

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) All of the above
F) C) and D)

Question 17

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 B)
F) A) and C)

Question 18

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

Accepted Answer

120 units will be bo...

Question 19

Figure 8-18 
-Refer to Figure 8-18. 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 largest in the market represented by

Accepted Answer

A)   S1.
B)   S2.
C)   S3.
D)   S4.E) A) and C)
F) A) and D)

Question 20

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

Accepted Answer

A)   consumer surplus.
B)   producer surplus.
C)   total surplus.
D)   deadweight loss.E) A) and D)
F) B) and C)

Exam 8: Application: The Costs of Taxation

When a tax is imposed on a good, the resulting decrease in consumer surplus is always larger than the resulting decrease in producer surplus.

Correct Answer
verified

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

Correct Answer
verified

Figure 8-11 -Refer to Figure 8-11. The price labeled as P1 on the vertical axis represents the price

Correct Answer
verified

When a tax is levied on a good,

Correct Answer
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When the government imposes taxes on buyers or sellers of a good, society

Correct Answer
verified

Figure 8-18 -Refer to Figure 8-18. 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 largest in the market represented by

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

Correct Answer
verified
120 units will be bo...
View 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. The price that buyers pay is

Correct Answer
verified

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

Correct Answer
verified

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 doubled, the

Correct Answer
verified

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 received by sellers to

Correct Answer
verified

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. With the tax, the producer surplus is

Correct Answer
verified

If the tax on a good is increased from $0.30 per unit to $0.90 per unit, the deadweight loss from the tax

Correct Answer
verified

Figure 8-1 -Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The deadweight loss due to the tax is measured by the area

Correct Answer
verified

Suppose the price of milk is $2.39 per gallon, and the equilibrium quantity of milk is 100 thousand gallons per day with no tax on milk. Starting from this initial situation, which of the following scenarios would result in the smallest deadweight loss?

Correct Answer
verified

Buyers of a product will bear the larger part of the tax burden, and sellers will bear a smaller part of the tax burden, when the

Correct Answer
verified

The deadweight loss of a tax rises even more rapidly than the size of the tax.

Correct Answer
verified

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

Correct Answer
verified

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. The amount of tax revenue received by the government is equal to the area

Correct Answer
verified

Exam 8: Application: The Costs of Taxation

When a tax is imposed on a good, the resulting decrease in consumer surplus is always larger than the resulting decrease in producer surplus.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 8-11 -Refer to Figure 8-11. The price labeled as P1 on the vertical axis represents the price

Correct AnswerverifiedShow Answer

When a tax is levied on a good,

Correct AnswerverifiedShow Answer

When the government imposes taxes on buyers or sellers of a good, society

Correct AnswerverifiedShow Answer

Figure 8-18 -Refer to Figure 8-18. 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 largest in the market represented by

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: 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

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. The price that buyers pay is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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 8-2 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 received by sellers 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. With the tax, the producer surplus is

Correct AnswerverifiedShow Answer

If the tax on a good is increased from $0.30 per unit to $0.90 per unit, the deadweight loss from the tax

Correct AnswerverifiedShow Answer

Figure 8-1 -Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The deadweight loss due to the tax is measured by the area

Correct AnswerverifiedShow Answer

Suppose the price of milk is $2.39 per gallon, and the equilibrium quantity of milk is 100 thousand gallons per day with no tax on milk. Starting from this initial situation, which of the following scenarios would result in the smallest deadweight loss?

Correct AnswerverifiedShow Answer

Buyers of a product will bear the larger part of the tax burden, and sellers will bear a smaller part of the tax burden, when the

Correct AnswerverifiedShow Answer

The deadweight loss of a tax rises even more rapidly than the size of the tax.

Correct AnswerverifiedShow Answer

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

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 amount of tax revenue received by the government is equal to the area

Correct AnswerverifiedShow Answer

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120 units will be bo...
View Answer

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