Question 1

When a tax is levied on the sellers of a good,how does the supply curve shift

Accepted Answer

A)  up by the amount of the tax
B)  down by the amount of the tax
C)  up by less than the tax
D)  down by less than the taxE) A) and C)
F) None of the above

Question 2

Why does a tax have a deadweight loss

Accepted Answer

A)  because it induces the government to run a deficit
B)  because it induces buyers to consume less and sellers to produce less
C)  because it causes a disequilibrium in the market
D)  because the loss to buyers is greater than the loss to sellersE) None of the above
F) C) and D)

Question 3

How is the amount of deadweight loss that will result from a tax determined

Accepted Answer

A)  by the price elasticity of demand and supply
B)  by the number of buyers of the product in the market
C)  by the number of suppliers of the product in the market
D)  by the percentage of the purchase price that the tax representsE) C) and D)
F) All of the above

Question 4

Figure 8-2
 
-Refer to Figure 8-2.What is the amount of the tax imposed

Accepted Answer

A)  P₃ - P₁
B)  P₃
C)  P₂ - P₁
D)  P₁E) B) and D)
F) B) and C)

Question 5

Figure 8-6
 
-Refer to Figure 8-6.What would producer surplus be after the tax is levied

Accepted Answer

A)  $45
B)  $75
C)  $125
D)  $150E) B) and D)
F) B) and C)

Question 6

When a country is on the downward-sloping side of the Laffer curve,what will cutting tax rates do

Accepted Answer

A)  lower tax revenues and increase deadweight loss
B)  lower both tax revenues and deadweight loss
C)  increase tax revenues and decrease deadweight loss
D)  increase both tax revenues and deadweight lossE) All of the above
F) A) and B)

Question 7

What does the deadweight loss of taxation measure

Accepted Answer

A)  the loss in benefit to buyers and sellers in a market due to the tax
B)  the loss in revenue to the government when buyers choose to buy less of the product
C)  the loss of efficiency in a market as a result of government intervention
D)  the lost revenue to businesses because of higher prices to consumers from the taxE) None of the above
F) A) and D)

Question 8

Figure 8-3
 
-Refer to Figure 8-3.What is the amount of tax revenue received by the government

Accepted Answer

A)  $210
B)  $420
C)  $560
D)  $980E) A) and B)
F) A) and C)

Question 9

Figure 8-5
 
-Refer to Figure 8-5.What would happen to producer surplus if the tax were imposed in this market

Accepted Answer

A)  It would fall by $600.
B)  It would fall by $900.
C)  It would fall by $1800.
D)  It would fall by $2400.E) A) and B)
F) B) and C)

Question 10

A tax raises the price received by sellers and lowers the price paid by buyers.

Accepted Answer

A) True 
 B)False

Question 11

Figure 8-4
 
-Refer to Figure 8-4.Assume the tax was levied on the producer.Which area represents the reduction in consumer surplus

Accepted Answer

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

Question 12

Figure 8-2
 
-Refer to Figure 8-2.What area represents the amount of deadweight loss associated with the tax

Accepted Answer

A)  P₃ACP₁
B)  ABC
C)  P₂DAP₃
D)  P₁CDP₂E) B) and C)
F) C) and D)

Question 13

On which factor does the amount of deadweight loss from taxes depend

Accepted Answer

A)  the price elasticity of demand and supply
B)  how much of the tax revenue the government plans to spend
C)  the product the government is planning to tax
D)  market price before the tax was leviedE) A) and D)
F) All of the above

Question 14

Figure 8-5
 
-Refer to Figure 8-5.If the tax is imposed on the seller,what would total surplus in this market be

Accepted Answer

A)  $1500
B)  $3600
C)  $4500
D)  $6000E) A) and B)
F) A) and C)

Question 15

A tax is imposed on a market with an inelastic demand and an elastic supply.How is the burden of the tax divided

Accepted Answer

A)  sellers pay the majority of the tax
B)  buyers pay the majority of the tax
C)  the tax burden is equally divided between buyers and sellers
D)  the tax burden is divided, but it cannot be determined howE) B) and C)
F) A) and B)

Question 16

Figure 8-5
 
-Refer to Figure 8-5.What is the amount of the tax placed on this product

Accepted Answer

A)  $4
B)  $6
C)  $8
D)  $10E) C) and D)
F) A) and D)

Question 17

How is tax burden related to the elasticity of the market

Accepted Answer

A)  A tax burden falls most heavily on the side of the market that is elastic.
B)  A tax burden falls most heavily on the side of the market that is inelastic.
C)  A tax burden falls most heavily on the side of the market that is closer to unit elastic.
D)  A tax burden is not influenced by the relative elasticities of supply and demand.E) A) and B)
F) B) and C)

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Scenario 8-1
Assume that Kierra cleans Cate's house weekly for $100.Cate would be willing to pay as much as $125 weekly to have her house cleaned.Kierra's opportunity cost is $80.
-Refer to Scenario 8-1.What would happen if Cate is required to pay a tax of $40 when she hires someone to clean her house

Accepted Answer

A)  Cate will now clean her own house.
B)  Kierra will continue to clean Cate's house but the producer surplus will decline.
C)  Total economic welfare (consumer surplus plus producer surplus plus tax revenue)  will increase.
D)  Kierra will continue to clean Cate's house, but the consumer surplus will decline.E) B) and D)
F) None of the above

Question 20

Figure 8-5
 
-Refer to Figure 8-5.Without the tax,what would thetotal surplus be in this market

Accepted Answer

A)  $2400
B)  $3000
C)  $3600
D)  $6000E) C) and D)
F) A) and B)

Exam 8: Application: the Costs of Taxation

Figure 8-5 -Refer to Figure 8-5.What would happen to producer surplus if the tax were imposed in this market

Correct Answer
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Figure 8-5 -Refer to Figure 8-5.What is the amount of the tax placed on this product

Correct Answer
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When a tax is levied on the sellers of a good,how does the supply curve shift

Correct Answer
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How is tax burden related to the elasticity of the market

Correct Answer
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When a country is on the downward-sloping side of the Laffer curve,what will cutting tax rates do

Correct Answer
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Figure 8-4 -Refer to Figure 8-4.Assume the tax was levied on the producer.Which area represents the reduction in consumer surplus

Correct Answer
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Correct Answer
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How is the amount of deadweight loss that will result from a tax determined

Correct Answer
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Why does a tax have a deadweight loss

Correct Answer
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What does the deadweight loss of taxation measure

Correct Answer
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Figure 8-5 -Refer to Figure 8-5.If the tax is imposed on the seller,what would total surplus in this market be

Correct Answer
verified

A tax raises the price received by sellers and lowers the price paid by buyers.

Correct Answer
verified

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

Correct Answer
verified

A tax is imposed on a market with an inelastic demand and an elastic supply.How is the burden of the tax divided

Correct Answer
verified

Figure 8-5 -Refer to Figure 8-5.Without the tax,what would thetotal surplus be in this market

Correct Answer
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Figure 8-3 -Refer to Figure 8-3.What is the amount of tax revenue received by the government

Correct Answer
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On which factor does the amount of deadweight loss from taxes depend

Correct Answer
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Figure 8-6 -Refer to Figure 8-6.What would producer surplus be after the tax is levied

Correct Answer
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Figure 8-2 -Refer to Figure 8-2.What is the amount of the tax imposed

Correct Answer
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Figure 8-2 -Refer to Figure 8-2.What area represents the amount of deadweight loss associated with the tax

Correct Answer
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Exam 8: Application: the Costs of Taxation

Figure 8-5 -Refer to Figure 8-5.What would happen to producer surplus if the tax were imposed in this market

Correct AnswerverifiedShow Answer

Figure 8-5 -Refer to Figure 8-5.What is the amount of the tax placed on this product

Correct AnswerverifiedShow Answer

When a tax is levied on the sellers of a good,how does the supply curve shift

Correct AnswerverifiedShow Answer

How is tax burden related to the elasticity of the market

Correct AnswerverifiedShow Answer

When a country is on the downward-sloping side of the Laffer curve,what will cutting tax rates do

Correct AnswerverifiedShow Answer

Figure 8-4 -Refer to Figure 8-4.Assume the tax was levied on the producer.Which area represents the reduction in consumer surplus

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

How is the amount of deadweight loss that will result from a tax determined

Correct AnswerverifiedShow Answer

Why does a tax have a deadweight loss

Correct AnswerverifiedShow Answer

What does the deadweight loss of taxation measure

Correct AnswerverifiedShow Answer

Figure 8-5 -Refer to Figure 8-5.If the tax is imposed on the seller,what would total surplus in this market be

Correct AnswerverifiedShow Answer

A tax raises the price received by sellers and lowers the price paid by buyers.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A tax is imposed on a market with an inelastic demand and an elastic supply.How is the burden of the tax divided

Correct AnswerverifiedShow Answer

Figure 8-5 -Refer to Figure 8-5.Without the tax,what would thetotal surplus be in this market

Correct AnswerverifiedShow Answer

Figure 8-3 -Refer to Figure 8-3.What is the amount of tax revenue received by the government

Correct AnswerverifiedShow Answer

On which factor does the amount of deadweight loss from taxes depend

Correct AnswerverifiedShow Answer

Figure 8-6 -Refer to Figure 8-6.What would producer surplus be after the tax is levied

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Figure 8-2 -Refer to Figure 8-2.What is the amount of the tax imposed

Correct AnswerverifiedShow Answer

Figure 8-2 -Refer to Figure 8-2.What area represents the amount of deadweight loss associated with the tax

Correct AnswerverifiedShow Answer

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