Question 1

Figure 8-1 
-Refer to Figure 8-1. Suppose the government imposes a tax of P'-P'''. Total surplus before the tax is measured by the area

Accepted Answer

A)  I + Y.
B)  J + K + L + M.
C)  L + M + Y.
D)  I + J + K + L + M + Y.E) A) and B)
F) A) and D)

Question 2

Figure 8-2
The vertical distance between points C and D represents a tax in the market.
​  ​
​
​
​
-Refer to Figure 8-2. The loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is

Accepted Answer

A)  $4.
B)  $6.
C)  $12.
D)  $8.E) A) and B)
F) C) and D)

Question 3

A tax places a wedge between the price buyers pay and the price sellers receive.

Accepted Answer

A) True 
 B)False

Question 4

A tax on a good

Accepted Answer

A)  raises the price that buyers pay and raises the price that sellers receive.
B)  raises the price that buyers pay and lowers the price that sellers receive.
C)  lowers the price that buyers pay and raises the price that sellers receive.
D)  lowers the price that buyers pay and lowers the price that sellers receive.E) B) and D)
F) B) and C)

Question 5

If the size of a tax triples, the deadweight loss increases by a factor of six.

Accepted Answer

A) True 
 B)False

Question 6

Figure 8-2
The vertical distance between points C and D represents a tax in the market.
​  ​
​
​
​
-Refer to Figure 8-2. The loss of producer surplus for those sellers of the good who continue to sell it after the tax is imposed is

Accepted Answer

A)  $6.
B)  $4.
C)  $8.
D)  $12.E) None of the above
F) All of the above

Question 7

The less freedom young mothers have to work outside the home, the

Accepted Answer

A)  more elastic the supply of labor will be.
B)  less elastic the supply of labor will be.
C)  more horizontal the labor supply curve will be.
D)  larger is the decrease in employment that will result from a tax on labor.E) B) and C)
F) None of the above

Question 8

A tax on insulin is likely to cause a very large deadweight loss to society.

Accepted Answer

A) True 
 B)False

Question 9

Figure 8-2
The vertical distance between points C and D represents a tax in the market.
​  ​
​
​
​
-Refer to Figure 8-2. Consumer surplus without the tax is

Accepted Answer

A)  $24, and consumer surplus with the tax is $6.
B)  $6, and consumer surplus with the tax is $24.
C)  $16, and consumer surplus with the tax is $4.
D)  $4, and consumer surplus with the tax is $16.E) A) and D)
F) C) and D)

Question 10

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

Question 11

Figure 8-10
​
  ​
-Refer to Figure 8-10. How much is consumer surplus at the market equilibrium?

Accepted Answer

Consumer surplus is ...

Question 12

Economists disagree on whether labor taxes have a small or large deadweight loss.

Accepted Answer

A) True 
 B)False

Question 13

Suppose the government increases the size of a tax by 20 percent. The deadweight loss from that tax

Accepted Answer

A)  increases by 20 percent.
B)  increases by more than 20 percent.
C)  increases but by less than 20 percent.
D)  decreases by 20 percent.E) B) and C)
F) A) and B)

Question 14

Figure 8-3
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-3. Suppose a 20th unit of the good were sold by a seller to a buyer. Which of the following statements is correct?

Accepted Answer

A)  For the 20th unit, the difference between the buyer's value and the seller's cost is less than the tax per unit.
B)  For the 20th unit, the difference between the buyer's value and the seller's cost is greater than the tax per unit.
C)  For the 20th unit, the difference between the buyer's value and the seller's cost is equal to the tax per unit.
D)  It makes sense for the buyer to buy and for the seller to sell the 20th unit, with or without the tax in place.E) B) and C)
F) None of the above

Question 15

Figure 8-2
The vertical distance between points C and D represents a tax in the market.
​  ​
​
​
​
-Refer to Figure 8-2. Total surplus without the tax is

Accepted Answer

A)  $30, and total surplus with the tax is $40.
B)  $40, and total surplus with the tax is $30.
C)  $24, and total surplus with the tax is $6.
D)  $6, and total surplus with the tax is $24.E) A) and B)
F) A) and C)

Question 16

Figure 8-9
​
  ​
-Refer to Figure 8-9. Suppose the government places a $4 tax per unit on this good. How much is the deadweight loss from this tax?

Accepted Answer

The deadweight loss ...

Question 17

Suppose that the market for product X is characterized by a typical, downward-sloping, linear demand curve and a typical, upward-sloping, linear supply curve. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $4 tax per unit?

Accepted Answer

The deadweight loss will be $8...

Question 18

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

Accepted Answer

A)  The tax on airline tickets increases from $20 per ticket to $60 per ticket.
B)  The tax on airline tickets increases from $20 per ticket to $90 per ticket.
C)  The tax on airline tickets increases from $15 per ticket to $60 per ticket.
D)  The tax on airline tickets increases from $15 per ticket to $135 per ticket.E) A) and D)
F) B) and D)

Question 19

When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic.

Accepted Answer

A) True 
 B)False

Question 20

When a tax is levied on a good, the buyers and sellers of the good share the burden,

Accepted Answer

A)  provided the tax is levied on the sellers.
B)  provided the tax is levied on the buyers.
C)  provided a portion of the tax is levied on the buyers, with the remaining portion levied on the sellers.
D)  regardless of how the tax is levied.E) All of the above
F) C) and D)

Exam 8: Applications: The Costs of Taxation

A tax on insulin is likely to cause a very large deadweight loss to society.

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Figure 8-10 ​ ​ -Refer to Figure 8-10. How much is consumer surplus at the market equilibrium?

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A tax places a wedge between the price buyers pay and the price sellers receive.

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Economists disagree on whether labor taxes have a small or large deadweight loss.

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

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Figure 8-2 The vertical distance between points C and D represents a tax in the market. ​ ​ ​ ​ ​ -Refer to Figure 8-2. The loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is

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Suppose that the market for product X is characterized by a typical, downward-sloping, linear demand curve and a typical, upward-sloping, linear supply curve. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $4 tax per unit?

Correct AnswerverifiedThe deadweight loss will be $8...View AnswerShow Answer

When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic.

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Suppose the government increases the size of a tax by 20 percent. The deadweight loss from that tax

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When a tax is levied on a good, the buyers and sellers of the good share the burden,

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The less freedom young mothers have to work outside the home, the

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Figure 8-2 The vertical distance between points C and D represents a tax in the market. ​ ​ ​ ​ ​ -Refer to Figure 8-2. Consumer surplus without the tax is

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If the size of a tax triples, the deadweight loss increases by a factor of six.

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Taxes on labor encourage which of the following?

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Figure 8-1 -Refer to Figure 8-1. Suppose the government imposes a tax of P'-P'''. Total surplus before the tax is measured by the area

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Figure 8-2 The vertical distance between points C and D represents a tax in the market. ​ ​ ​ ​ ​ -Refer to Figure 8-2. Total surplus without the tax is

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Figure 8-9 ​ ​ -Refer to Figure 8-9. Suppose the government places a $4 tax per unit on this good. How much is the deadweight loss from this tax?

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A tax on a good

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Figure 8-3 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-3. Suppose a 20th unit of the good were sold by a seller to a buyer. Which of the following statements is correct?

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Figure 8-2 The vertical distance between points C and D represents a tax in the market. ​ ​ ​ ​ ​ -Refer to Figure 8-2. The loss of producer surplus for those sellers of the good who continue to sell it after the tax is imposed is

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Figure 8-10 -Refer to Figure 8-10. How much is consumer surplus at the market equilibrium?

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Consumer surplus is ...
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Figure 8-2 The vertical distance between points C and D represents a tax in the market. -Refer to Figure 8-2. The loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is

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The deadweight loss will be $8...
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Figure 8-2 The vertical distance between points C and D represents a tax in the market. -Refer to Figure 8-2. Consumer surplus without the tax is

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Figure 8-2 The vertical distance between points C and D represents a tax in the market. -Refer to Figure 8-2. Total surplus without the tax is

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Figure 8-9 -Refer to Figure 8-9. Suppose the government places a $4 tax per unit on this good. How much is the deadweight loss from this tax?

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The deadweight loss ...
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Figure 8-2 The vertical distance between points C and D represents a tax in the market. -Refer to Figure 8-2. The loss of producer surplus for those sellers of the good who continue to sell it after the tax is imposed is

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