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Exam 8: Applications: the Costs of Taxation

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Question 51

Multiple Choice

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Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. One effect of the tax is to

A) reduce consumer surplus from $180 to $72.
B) reduce producer surplus from $96 to $24.
C) create a deadweight loss of $72.
D) All of the above are correct.

E) A) and B)
F) None of the above

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Question 52

Multiple Choice

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The benefit to sellers of participating in a market is measured by the

A) amount of taxes collected on sales of the good.
B) producer surplus.
C) amount sellers receive for their product.
D) sellers' willingness to sell.

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

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Question 53

Multiple Choice

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Taxes on labor encourage all of the following except

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

Illustrate on three demand-and-supply graphs how the size of a tax (small, medium and large) can alter total revenue and deadweight loss.

When the government imposes taxes on buyers and sellers of a good, society loses some of the benefits of market efficiency.

Scenario 8-3 Suppose the market demand and market supply curves are given by the equations: -Refer to Scenario 8-3. What are the equilibrium price and equilibrium quantity in this market?

Total surplus with a tax is equal to

As the price elasticities of supply and demand increase, the deadweight loss from a tax increases.

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The total surplus with the tax is

Figure 8-28 -Refer to Figure 8-28. Suppose that Market A is characterized by Demand 1 and Supply 1, and Market B is characterized by Demand 1 and Supply 2. If an identical tax is imposed on each market, the tax will create a larger deadweight loss in which market? Explain.

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

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The loss of producer surplus as a result of the tax is

Which of the following statements correctly describes the relationship between the size of the deadweight loss and the amount of tax revenue as the size of a tax increases from a small tax to a medium tax and finally to a large tax?

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7. As a result of the tax, buyers effectively pay

If the government imposes a $3 tax in a market, the buyers and sellers will share an equal burden of the tax.

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 $175. Rebecca and Susan agree on a price of $185. Suppose the government imposes a tax of $30 on dog sitting. The tax has made Rebecca and Susan worse off by a total of

Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much is total surplus after the tax is imposed?

Figure 8-29 -Refer to Figure 8-29. If you were a policymaker choosing between a $3, $6, or $9 tax, which would you choose and why?

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