Question 1

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

Accepted Answer

A)   supply curve shifts upward by the amount of the tax.
B)   quantity demanded decreases for all conceivable prices of the good.
C)   quantity supplied increases for all conceivable prices of the good.
D)   None of the above is correct.E) A) and B)
F) All of the above

Question 2

David walks Carolyn's dog once a day for $50 per week.Carolyn values this service at $60 per week,while the opportunity cost of David's time is $30 per week.The government places a tax of $35 per week on dog walkers.Before the tax,what is the total surplus?

Accepted Answer

A)   $60
B)   $50
C)   $30
D)   $25E) B) and D)
F) B) and C)

Question 3

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 paid by buyers to

Accepted Answer

A)   decrease by $2.
B)   increase by $3.
C)   decrease by $4.
D)   increase by $5.E) All of the above
F) None of the above

Question 4

Taxes on labor encourage which of the following?

Accepted Answer

A)   labor demand to be more inelastic
B)   mothers to stay at home rather than work in the labor force
C)   workers to work overtime
D)   fathers to take on second jobsE) A) and C)
F) None of the above

Question 5

A tax placed on buyers of tires shifts the

Accepted Answer

A)   demand curve for tires downward,decreasing the price received by sellers of tires and causing the quantity of tires to increase.
B)   demand curve for tires downward,decreasing the price received by sellers of tires and causing the quantity of tires to decrease.
C)   supply curve for tires upward,decreasing the effective price paid by buyers of tires and causing the quantity of tires to increase.
D)   supply curve for tires upward,increasing the effective price paid by buyers of tires and causing the quantity of tires to decrease.E) A) and C)
F) All of the above

Question 6

Figure 8-10
The vertical distance between points A and B represents the original tax. 
-Refer to Figure 8-10.The original tax can be represented by the vertical distance AB.Suppose the government is deciding whether to lower the tax to CD or raise it to FG.Which of the following statements is not correct?

Accepted Answer

A)   Compared to the original tax,the larger tax will increase 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) None of the above
F) A) and B)

Question 7

For the purpose of analyzing the gains and losses from a tax on a good,we use tax revenue as a direct measure of the

Accepted Answer

A)   government's benefit from the tax.
B)   government's loss from the tax.
C)   deadweight loss of the tax.
D)   overall net gain to society of the tax.E) A) and B)
F) C) and D)

Question 8

Figure 8-10
The vertical distance between points A and B represents the original tax. 
-Refer to Figure 8-10.The original tax can be represented by the vertical distance AB.Suppose the government is deciding whether to lower the tax to CD or raise it to FG.Which of the following statements is correct?

Accepted Answer

A)   Compared to the original tax,the larger tax will decrease both tax revenue and deadweight loss.
B)   Compared to the original tax,the smaller tax will increase both tax revenue and deadweight loss.
C)   Compared to the original tax,the larger tax will decrease tax revenue and increase deadweight loss.
D)   Both a and b are correct.E) A) and D)
F) A) and C)

Question 9

Figure 8-5
Suppose that the government imposes a tax of P3 - P1. 
-Refer to Figure 8-5.The loss in total welfare that results from the tax is represented by area

Accepted Answer

A)   A+B+D+F.
B)   A+B+C.
C)   D+H+F.
D)   C+H.E) A) and B)
F) A) and C)

Question 10

When a tax on a good is enacted,

Accepted Answer

A)   buyers and sellers share the burden of the tax regardless of whether the tax is levied on buyers or on sellers.
B)   buyers always bear the full burden of the tax.
C)   sellers always bear the full burden of the tax.
D)   sellers bear the full burden of the tax if the tax is levied on them;buyers bear the full burden of the tax if the tax is levied on them.E) B) and D)
F) A) and D)

Question 11

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 tripled,the

Accepted Answer

A)   base of the triangle that represents the deadweight loss triples.
B)   height of the triangle that represents the deadweight loss triples.
C)   deadweight loss of the tax increases by a factor of nine.
D)   All of the above are correct.E) B) and D)
F) None of the above

Question 12

When a good is taxed,

Accepted Answer

A)   both buyers and sellers of the good are made worse off.
B)   only buyers are made worse off,because they ultimately bear the burden of the tax.
C)   only sellers are made worse off,because they ultimately bear the burden of the tax.
D)   neither buyers nor sellers are made worse off,since tax revenue is used to provide goods and services that would otherwise not be provided in a market economy.E) All of the above
F) B) and C)

Question 13

Figure 8-8
Suppose the government imposes a $10 per unit tax on a good. 
-Refer to Figure 8-8.The deadweight loss of the tax is the area

Accepted Answer

A)   B+D.
B)   C+F.
C)   A+C+F+J.
D)   B+C+D+F.E) A) and B)
F) A) and C)

Question 14

Scenario 8-1
Claudia would be willing to pay as much as $100 per week to have her house cleaned.John's opportunity cost of cleaning Claudia's house is $70 per week.
-Refer to Scenario 8-1.If John cleans Claudia's house for $80,John's producer surplus is

Accepted Answer

A)   $80.
B)   $30.
C)   $20.
D)   $10.E) A) and B)
F) B) and C)

Question 15

If the size of a tax increases,tax revenue

Accepted Answer

A)   increases.
B)   decreases.
C)   remains the same.
D)   may increase,decrease,or remain the same.E) A) and C)
F) All of the above

Question 16

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

Question 17

When the government places a tax on a product,the cost of the tax to buyers and sellers

Accepted Answer

A)   is less than the revenue raised from the tax by the government.
B)   is equal to the revenue raised from the tax by the government.
C)   exceeds the revenue raised from the tax by the government.
D)   Without additional information,such as the elasticity of demand for this product,it is impossible to compare the cost of a tax to buyers and sellers with tax revenue.E) B) and C)
F) None of the above

Question 18

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

Accepted Answer

A)   The tax on cartons of cigarettes increases from $10 to $11.11.
B)   The tax on cartons of cigarettes increases from $10 to $20.
C)   The tax on cartons of cigarettes increases from $10 to $30.
D)   The tax on cartons of cigarettes increases from $10 to $90.E) A) and D)
F) C) and D)

Question 19

Taxes affect market participants by increasing the price paid by the buyer and decreasing the price received by the seller.

Accepted Answer

A) True 
 B)False

Question 20

Suppose a tax of $5 per unit is imposed on a good,and the tax causes the equilibrium quantity of the good to decrease from 200 units to 100 units.The tax decreases consumer surplus by $800 and decreases producer surplus by $700.The deadweight loss from the tax is

Accepted Answer

A)   $500.
B)   $1,000.
C)   $1,500.
D)   $2,000.E) A) and D)
F) A) and C)

Exam 8: Application: The Costs of Taxation

Taxes on labor encourage which of the following?

Correct Answer
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If the size of a tax increases,tax revenue

Correct Answer
verified

For the purpose of analyzing the gains and losses from a tax on a good,we use tax revenue as a direct measure of the

Correct Answer
verified

David walks Carolyn's dog once a day for $50 per week.Carolyn values this service at $60 per week,while the opportunity cost of David's time is $30 per week.The government places a tax of $35 per week on dog walkers.Before the tax,what is the total surplus?

Correct Answer
verified

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

Correct Answer
verified

When a tax on a good is enacted,

Correct Answer
verified

Suppose a tax of $5 per unit is imposed on a good,and the tax causes the equilibrium quantity of the good to decrease from 200 units to 100 units.The tax decreases consumer surplus by $800 and decreases producer surplus by $700.The deadweight loss from the tax is

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 tripled,the

Correct Answer
verified

Correct Answer
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Correct Answer
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A tax placed on buyers of tires shifts the

Correct Answer
verified

Taxes affect market participants by increasing the price paid by the buyer and decreasing the price received by the seller.

Correct Answer
verified

Scenario 8-1 Claudia would be willing to pay as much as $100 per week to have her house cleaned.John's opportunity cost of cleaning Claudia's house is $70 per week. -Refer to Scenario 8-1.If John cleans Claudia's house for $80,John's producer surplus is

Correct Answer
verified

When the government places a tax on a product,the cost of the tax to buyers and sellers

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 paid by buyers to

Correct Answer
verified

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

Correct Answer
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Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8.The deadweight loss of the tax is the area

Correct Answer
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Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The loss in total welfare that results from the tax is represented by area

Correct Answer
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In which of the following instances would the deadweight loss of the tax on cartons of cigarettes increase by a factor of 9?

Correct Answer
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When a good is taxed,

Correct Answer
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Exam 8: Application: The Costs of Taxation

Taxes on labor encourage which of the following?

Correct AnswerverifiedShow Answer

If the size of a tax increases,tax revenue

Correct AnswerverifiedShow Answer

For the purpose of analyzing the gains and losses from a tax on a good,we use tax revenue as a direct measure of the

Correct AnswerverifiedShow Answer

David walks Carolyn's dog once a day for $50 per week.Carolyn values this service at $60 per week,while the opportunity cost of David's time is $30 per week.The government places a tax of $35 per week on dog walkers.Before the tax,what is the total surplus?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When a tax on a good is enacted,

Correct AnswerverifiedShow Answer

Suppose a tax of $5 per unit is imposed on a good,and the tax causes the equilibrium quantity of the good to decrease from 200 units to 100 units.The tax decreases consumer surplus by $800 and decreases producer surplus by $700.The deadweight loss from the tax is

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 tripled,the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A tax placed on buyers of tires shifts the

Correct AnswerverifiedShow Answer

Taxes affect market participants by increasing the price paid by the buyer and decreasing the price received by the seller.

Correct AnswerverifiedShow Answer

Scenario 8-1 Claudia would be willing to pay as much as $100 per week to have her house cleaned.John's opportunity cost of cleaning Claudia's house is $70 per week. -Refer to Scenario 8-1.If John cleans Claudia's house for $80,John's producer surplus is

Correct AnswerverifiedShow Answer

When the government places a tax on a product,the cost of the tax to buyers and sellers

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 paid by buyers to

Correct AnswerverifiedShow Answer

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

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Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8.The deadweight loss of the tax is the area

Correct AnswerverifiedShow Answer

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The loss in total welfare that results from the tax is represented by area

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When a good is taxed,

Correct AnswerverifiedShow Answer

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