Question 1

When a tax is levied on a good,

Accepted Answer

A)   government collects revenues which might justify the loss in total welfare.
B)   there is a decrease in the quantity of the good bought and sold in the market.
C)   a wedge is placed between the price buyers pay and the price sellers effectively receive.
D)   All of the above are correct.E) A) and B)
F) None of the above

Question 2

Suppose a tax of $3 per unit is imposed on a good.The supply curve is a typical upward-sloping straight line,and the demand curve is a typical downward-sloping straight line.The tax decreases consumer surplus by $3,900 and decreases producer surplus by $3,000.The tax generates tax revenue of $6,000.The tax decreased the equilibrium quantity of the good from

Accepted Answer

A)   2,000 to 1,500.
B)   2,400 to 2,000.
C)   2,600 to 2,000.
D)   3,000 to 2,400.E) C) and D)
F) A) and C)

Question 3

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

Question 4

An increase in the size of a tax is most likely to increase tax revenue in a market with

Accepted Answer

A)   elastic demand and elastic supply.
B)   elastic demand and inelastic supply.
C)   inelastic demand and elastic supply.
D)   inelastic demand and inelastic supply.E) A) and B)
F) B) and C)

Question 5

The greater the elasticity of demand,the smaller the deadweight loss of a tax.

Accepted Answer

A) True 
 B)False

Question 6

When tires are taxed and sellers of tires are required to pay the tax to the government,

Accepted Answer

A)   the quantity of tires bought and sold in the market is reduced.
B)   the price paid by buyers of tires decreases.
C)   the demand for tires decreases.
D)   there is a movement downward and to the right along the demand curve for tires.E) B) and D)
F) B) and C)

Question 7

Figure 8-3 
-Refer to Figure 8-3.Suppose the government places a $4 tax per unit on this good.How much is total surplus after the tax is imposed?

Accepted Answer

Total surp...

Question 8

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) B) and C)
F) C) and D)

Question 9

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,

Accepted Answer

A)   consumer surplus decreases from $150 to $60.
B)   producer surplus decreases from $125 to $45.
C)   the market experiences a deadweight loss of $45.
D)   All of the above are correct.E) B) and C)
F) A) and D)

Question 10

Relative to a situation in which gasoline is not taxed,the imposition of a tax on gasoline causes the quantity of gasoline demanded to

Accepted Answer

A)   decrease and the quantity of gasoline supplied to decrease.
B)   decrease and the quantity of gasoline supplied to increase.
C)   increase and the quantity of gasoline supplied to decrease.
D)   increase and the quantity of gasoline supplied to increase.E) C) and D)
F) A) and B)

Question 11

A tax levied on the sellers of a good shifts the

Accepted Answer

A)   supply curve upward (or to the left) .
B)   supply curve downward (or to the right) .
C)   demand curve upward (or to the right) .
D)   demand curve downward (or to the left) .E) None of the above
F) B) and D)

Question 12

Scenario 8-1
Suppose the market demand and market supply curves are given by the equations: 
-Refer to Scenario 8-1.Suppose that a tax of T is placed on buyers so that the demand curve becomes:  What will be the deadweight loss from this tax?

Accepted Answer

The deadwe...

Question 13

Figure 8-1 
-Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The area measured by L+M+Y 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 B)
F) A) and C)

Question 14

Diana is a personal trainer whose client Charles pays $80 per hour-long session.Charles values this service at $100 per hour,while the opportunity cost of Diana's time is $75 per hour.The government places a tax of $10 per hour on personal trainers.After the tax,what is likely to happen in the market for personal training?

Accepted Answer

A)   Diana and Charles will agree to a new price somewhere between $85 and $100.
B)   Diana and Charles will agree to a new price somewhere between $70 and $110.
C)   Diana will no longer offer personal training services to Charles because she must charge more than $100 in order to cover her opportunity costs and pay the tax.
D)   The price will remain at $80,and Diana will pay the $10 tax.E) All of the above
F) A) and B)

Question 15

If a tax shifts the demand curve downward (or to the left) ,we can infer that the tax was levied on

Accepted Answer

A)   buyers of the good.
B)   sellers of the good.
C)   both buyers and sellers of the good.
D)   We cannot infer anything because the shift described is not consistent with a tax.E) All of the above
F) A) and B)

Question 16

Total surplus is always equal to the sum of consumer surplus and producer surplus.

Accepted Answer

A) True 
 B)False

Question 17

If T represents the size of the tax on a good and Q represents the quantity of the good that is sold,total tax revenue received by government can be expressed as

Accepted Answer

A)   T/Q.
B)   T+Q.
C)   TxQ.
D)   (TxQ) /Q.E) B) and D)
F) A) and C)

Question 18

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.Without the tax,the total surplus is

Accepted Answer

A)   [x (P0-P5) x Q5] + [x (P5-0) x Q5].
B)   [x (P0-P2) x Q2] +[(P2-P8) x Q2] + [x (P8-0) x Q2].
C)   (P2-P8) x Q2.
D)   x (P2-P8) x (Q5-Q2) .E) B) and C)
F) All of the above

Question 19

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

Question 20

Figure 8-14  
-Refer to Figure 8-14.Panel (a) and Panel (b) each illustrate a $2 tax placed on a market.In comparison to Panel (a) ,Panel (b) illustrates which of the following statements?

Accepted Answer

A)   When demand is relatively inelastic,the deadweight loss of a tax is smaller than when demand is relatively elastic.
B)   When demand is relatively elastic,the deadweight loss of a tax is larger than when demand is relatively inelastic.
C)   When supply is relatively inelastic,the deadweight loss of a tax is smaller than when supply is relatively elastic.
D)   When supply is relatively elastic,the deadweight loss of a tax is larger than when supply is relatively inelastic.E) A) and C)
F) A) and D)

Exam 8: Application: The Costs of Taxation

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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If T represents the size of the tax on a good and Q represents the quantity of the good that is sold,total tax revenue received by government can be expressed as

Correct Answer
verified

An increase in the size of a tax is most likely to increase tax revenue in a market with

Correct Answer
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When a tax is levied on a good,

Correct Answer
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Scenario 8-1 Suppose the market demand and market supply curves are given by the equations: -Refer to Scenario 8-1.Suppose that a tax of T is placed on buyers so that the demand curve becomes: What will be the deadweight loss from this tax?

Correct Answer
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The deadwe...
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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.Without the tax,the total surplus is

Correct Answer
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If a tax shifts the demand curve downward (or to the left) ,we can infer that the tax was levied on

Correct Answer
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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.As a result of the tax,

Correct Answer
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A tax levied on the sellers of a good shifts the

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

Correct Answer
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Correct Answer
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Figure 8-3 -Refer to Figure 8-3.Suppose the government places a $4 tax per unit on this good.How much is total surplus after the tax is imposed?

Correct Answer
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Total surp...
View Answer

When tires are taxed and sellers of tires are required to pay the tax to the government,

Correct Answer
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Relative to a situation in which gasoline is not taxed,the imposition of a tax on gasoline causes the quantity of gasoline demanded to

Correct Answer
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The greater the elasticity of demand,the smaller the deadweight loss of a tax.

Correct Answer
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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
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Correct Answer
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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 L+M+Y represents

Correct Answer
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Total surplus is always equal to the sum of consumer surplus and producer surplus.

Correct Answer
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Figure 8-14 -Refer to Figure 8-14.Panel (a) and Panel (b) each illustrate a $2 tax placed on a market.In comparison to Panel (a) ,Panel (b) illustrates which of the following statements?

Correct Answer
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Exam 8: Application: The Costs of Taxation

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

If T represents the size of the tax on a good and Q represents the quantity of the good that is sold,total tax revenue received by government can be expressed as

Correct AnswerverifiedShow Answer

An increase in the size of a tax is most likely to increase tax revenue in a market with

Correct AnswerverifiedShow Answer

When a tax is levied on a good,

Correct AnswerverifiedShow Answer

Scenario 8-1 Suppose the market demand and market supply curves are given by the equations: -Refer to Scenario 8-1.Suppose that a tax of T is placed on buyers so that the demand curve becomes: What will be the deadweight loss from this tax?

Correct AnswerverifiedThe deadwe...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.Without the tax,the total surplus is

Correct AnswerverifiedShow Answer

If a tax shifts the demand curve downward (or to the left) ,we can infer that the tax was levied on

Correct AnswerverifiedShow Answer

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,

Correct AnswerverifiedShow Answer

A tax levied on the sellers of a good shifts the

Correct AnswerverifiedShow Answer

If the size of a tax increases,tax revenue

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 8-3 -Refer to Figure 8-3.Suppose the government places a $4 tax per unit on this good.How much is total surplus after the tax is imposed?

Correct AnswerverifiedTotal surp...View AnswerShow Answer

When tires are taxed and sellers of tires are required to pay the tax to the government,

Correct AnswerverifiedShow Answer

Relative to a situation in which gasoline is not taxed,the imposition of a tax on gasoline causes the quantity of gasoline demanded to

Correct AnswerverifiedShow Answer

The greater the elasticity of demand,the smaller the deadweight loss of a 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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Total surplus is always equal to the sum of consumer surplus and producer surplus.

Correct AnswerverifiedShow Answer

Figure 8-14 -Refer to Figure 8-14.Panel (a) and Panel (b) each illustrate a $2 tax placed on a market.In comparison to Panel (a) ,Panel (b) illustrates which of the following statements?

Correct AnswerverifiedShow Answer

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The deadwe...
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Total surp...
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