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Exam 8: Application: The Costs of Taxation

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Question 21

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Figure 8-11 -Refer to Figure 8-11. The price labeled as P2 on the vertical axis represents the

A) difference between the price paid by buyers after the tax is imposed and the price paid by buyers before the tax is imposed.
B) difference between the price received by sellers before the tax is imposed and the price received by sellers after the tax is imposed.
C) price of the good before the tax is imposed.
D) price of the good after the tax is imposed.

E) None of the above
F) C) and D)

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Question 22

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When a tax is placed on the buyers of a product, a result is that buyers effectively pay

A) less than before the tax, and sellers effectively receive less than before the tax.
B) less than before the tax, and sellers effectively receive more than before the tax.
C) more than before the tax, and sellers effectively receive less than before the tax.
D) more than before the tax, and sellers effectively receive more than before the tax.

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

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Question 23

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Economists dismiss the idea that lower tax rates can lead to higher tax revenue, because there is a consensus that the relevant elasticities of demand and supply are very low.

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 imposed in this market, producer surplus is

The most important tax in the U.S. economy is the tax on corporations' profits.

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. The tax revenue is

If the size of a tax increases, tax revenue

Figure 8-23. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-23. If the economy is at point A on the curve, then a decrease in the tax rate will

A tax affects

Which of the following tools help us evaluate how taxes affect economic well-being? i) consumer surplus Ii) producer surplus Iii) tax revenue Iv) deadweight loss

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

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

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, what price will buyers pay and what price will sellers receive?

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2. The loss of producer surplus as a result of the tax is

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. Before the tax, what is the total surplus?

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

Figure 8-26 -Refer to Figure 8-26. How much is consumer surplus at the market equilibrium?

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The imposition of the tax causes the price paid by buyers to increase by

Figure 8-21 -Refer to Figure 8-21. Suppose the government places a $3 per-unit tax on this good. The smallest deadweight loss from the tax would occur in a market where demand is represented by

Suppose a tax of $3 is imposed on each new garden hose that is sold, resulting in a deadweight loss of $22,500. The supply curve is a typical upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. Before the tax was imposed, the equilibrium quantity of garden hoses was 100,000. We can conclude that the equilibrium quantity of garden hoses after the tax is imposed is