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Exam 8: Application: The Costs of Taxation

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Question 71

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

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

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Question 72

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When a good is taxed,

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

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Question 73

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Taxes are of interest to

The marginal tax rate on labor income for many workers in the United States is almost

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

The Laffer curve illustrates how taxes in markets with greater elasticities of demand compare to taxes in markets with smaller elasticities of supply.

The Laffer curve is the curve showing how tax revenue varies as the size of the tax varies.

When a tax is levied on a good,

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

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The per-unit burden of the tax on buyers is

A tax on a good causes the size of the market to increase.

Scenario 8-3 Suppose the market demand and market supply curves are given by the equations: -Refer to Scenario 8-3. Suppose that a tax of T is placed on buyers so that the demand curve becomes: If T = 40, how many units will be bought and sold after the tax is imposed?

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. When the tax is placed on this good, the quantity sold

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

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. The loss in producer surplus caused by the tax is measured by the area

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. What happens to total surplus in this market when the tax is imposed?

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. The equilibrium price before the tax is imposed is

Which of the following is a tax on labor?

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

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