Question 1

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

Question 2

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 consumer surplus is

Accepted Answer

A)   (P0-P2) x Q2.
B)   x (P0-P2) x Q2.
C)   (P0-P5) x Q5.
D)   x (P0-P5) x Q5.E) None of the above
F) C) and D)

Question 3

If a tax did not induce buyers or sellers to change their behavior,it would not cause a deadweight loss.

Accepted Answer

A) True 
 B)False

Question 4

In which of the following instances would the deadweight loss of the tax on airline tickets increase by a factor of 9?

Accepted Answer

A)   The tax on airline tickets increases from $20 per ticket to $60 per ticket.
B)   The tax on airline tickets increases from $20 per ticket to $90 per ticket.
C)   The tax on airline tickets increases from $15 per ticket to $60 per ticket.
D)   The tax on airline tickets increases from $15 per ticket to $135 per ticket.E) A) and C)
F) A) and B)

Question 5

Which of the following scenarios is not consistent with the Laffer curve?

Accepted Answer

A)   The tax rate is very low,and tax revenue is very low.
B)   The tax rate is very high,and tax revenue is very low.
C)   The tax rate is very high,and tax revenue is very high.
D)   The tax rate is moderate (between very high and very low) ,and tax revenue is relatively high.E) A) and D)
F) A) and B)

Question 6

Figure 8-1 
-Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The area measured by J represents

Accepted Answer

A)   consumer surplus after the tax.
B)   consumer surplus before the tax.
C)   producer surplus after the tax.
D)   producer surplus before the tax.E) None of the above
F) B) and C)

Question 7

Taxes are costly to market participants because they

Accepted Answer

A)   transfer resources from market participants to the government.
B)   alter incentives.
C)   distort market outcomes.
D)   All of the above are correct.E) B) and C)
F) None of the above

Question 8

Figure 8-4
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-4.The amount of tax revenue received by the government is equal to

Accepted Answer

A)   $350.
B)   $490.
C)   $700.
D)   $840.E) A) and B)
F) None of the above

Question 9

The more inelastic are demand and supply,the greater is the deadweight loss of a tax.

Accepted Answer

A) True 
 B)False

Question 10

Figure 8-9
The vertical distance between points A and C represent a tax in the market. 
-Refer to Figure 8-9.The amount of tax revenue received by the government is

Accepted Answer

A)   $4,000.
B)   $6,000.
C)   $10,000.
D)   $24,000.E) B) and C)
F) A) and B)

Question 11

Figure 8-5
Suppose that the government imposes a tax of P3 - P1. 
-Refer to Figure 8-5.The price that sellers effectively receive after the tax is imposed is

Accepted Answer

A)   P1.
B)   P2.
C)   P3.
D)   P4.E) None of the above
F) A) and B)

Question 12

Figure 8-1 
-Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.Total surplus after the tax is measured by the area

Accepted Answer

A)   I+Y.
B)   J+K+L+M.
C)   I+Y+B.
D)   I+J+K+L+M+Y.E) A) and D)
F) C) and D)

Question 13

Figure 8-2 
-Refer to Figure 8-2.Suppose the government changed the per-unit tax from $3.00 to $4.50.Compared to the original tax rate,this higher tax rate would

Accepted Answer

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

Question 14

Figure 8-1 
-Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The area measured by J+K+I represents

Accepted Answer

A)   consumer surplus after the tax.
B)   consumer surplus before the tax.
C)   producer surplus after the tax.
D)   producer surplus before the tax.E) A) and D)
F) None of the above

Question 15

Figure 8-3 
-Refer to Figure 8-3.What are the equilibrium price and equilibrium quantity in this market?

Accepted Answer

The equilibrium pric...

Question 16

The size of a tax and the deadweight loss that results from the tax are

Accepted Answer

A)   positively related.
B)   negatively related.
C)   independent of each other.
D)   equal to each other.E) B) and C)
F) A) and D)

Question 17

Taxes cause deadweight losses because taxes

Accepted Answer

A)   reduce the sum of producer and consumer surpluses by more than the amount of tax revenue.
B)   prevent buyers and sellers from realizing some of the gains from trade.
C)   cause marginal buyers and marginal sellers to leave the market,causing the quantity sold to fall.
D)   All of the above are correct.E) C) and D)
F) None of the above

Question 18

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)   larger is the price elasticity of demand.
B)   smaller is the price elasticity of supply.
C)   larger is the amount of the tax.
D)   All of the above are correct.E) B) and D)
F) All of the above

Question 19

Figure 8-7
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-7.Which of the following statements summarizes the incidence of the tax?

Accepted Answer

A)   For each unit of the good that is sold,buyers bear one-half of the tax burden,and sellers bear one-half of the tax burden.
B)   For each unit of the good that is sold,buyers bear one-third of the tax burden,and sellers bear two-thirds of the tax burden.
C)   For each unit of the good that is sold,buyers bear one-fourth of the tax burden,and sellers bear three-fourths of the tax burden.
D)   For each unit of the good that is sold,buyers bear three-fourths of the tax burden,and sellers bear one-fourth of the tax burden.E) None of the above
F) B) and D)

Question 20

Which of the following events is consistent with an increase in the deadweight loss of the gasoline tax from $30 million to $120 million?

Accepted Answer

A)   The tax on gasoline increases from $0.30 per gallon to $0.45 per gallon.
B)   The tax on gasoline increases from $0.30 per gallon to $0.60 per gallon.
C)   The tax on gasoline increases from $0.25 per gallon to $0.45 per gallon.
D)   The tax on gasoline increases from $0.25 per gallon to $1.00 per gallon.E) B) and C)
F) A) and D)

Exam 8: Application: The Costs of Taxation

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 consumer surplus is

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

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Figure 8-3 -Refer to Figure 8-3.What are the equilibrium price and equilibrium quantity in this market?

Correct AnswerverifiedThe equilibrium pric...View AnswerShow Answer

When a tax is levied on a good,

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The size of a tax and the deadweight loss that results from the tax are

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Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The area measured by J represents

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Taxes are costly to market participants because they

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The more inelastic are demand and supply,the greater is the deadweight loss of a tax.

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Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4.The amount of tax revenue received by the government is equal to

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Which of the following scenarios is not consistent with the Laffer curve?

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Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The price that sellers effectively receive after the tax is imposed is

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Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.Total surplus after the tax is measured by the area

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Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7.Which of the following statements summarizes the incidence of the tax?

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Figure 8-1 -Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The area measured by J+K+I represents

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Figure 8-2 -Refer to Figure 8-2.Suppose the government changed the per-unit tax from $3.00 to $4.50.Compared to the original tax rate,this higher tax rate would

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Which of the following events is consistent with an increase in the deadweight loss of the gasoline tax from $30 million to $120 million?

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If a tax did not induce buyers or sellers to change their behavior,it would not cause a deadweight loss.

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Taxes cause deadweight losses because taxes

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In which of the following instances would the deadweight loss of the tax on airline tickets increase by a factor of 9?

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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 amount of tax revenue received by the government is

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