Question 1

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)   [1/2 x (P0-P5)  x Q5] + [1/2 x (P5-0)  x Q5].
B)   [1/2 x (P0-P2)  x Q2] +[(P2-P8)  x Q2] + [1/2 x (P8-0)  x Q2].
C)   (P2-P8)  x Q2.
D)   1/2 x (P2-P8)  x (Q5-Q2) .E) A) and B)
F) None of the above

Question 2

Figure 8-11 
-Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then, when the tax is imposed,

Accepted Answer

A)   consumer surplus decreases by $11.
B)   producer surplus decreases by $11.
C)   the deadweight loss amounts to $6.
D)   All of the above are correct.E) A) and D)
F) A) and C)

Question 3

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

Accepted Answer

A)   Demand 1, and supply is represented by Supply 1.
B)   Demand 1, and supply is represented by Supply 2.
C)   Demand 2, and supply is represented by Supply 1.
D)   Demand 2, and supply is represented by Supply 2.E) B) and D)
F) B) and C)

Question 4

The benefit to sellers of participating in a market is measured by the

Accepted Answer

A)   amount of taxes collected on sales of the good.
B)   producer surplus.
C)   amount sellers receive for their product.
D)   sellers' willingness to sell.E) All of the above
F) C) and D)

Question 5

Figure 8-24. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. 
-Refer to Figure 8-24. Tax revenue would

Accepted Answer

A)   decrease if the economy began at point B and then the tax rate was decreased.
B)   increase if the economy began at point F and then the tax rate was decreased.
C)   decrease if the economy began at point C and then the tax rate was increased.
D)   All of the above are correct.E) C) and D)
F) A) and B)

Question 6

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?

Accepted Answer

A)   Total surplus increases by $1,500.
B)   Total surplus increases by $3,000.
C)   Total surplus decreases by $1,500.
D)   Total surplus decreases by $,3000.E) A) and C)
F) A) and B)

Question 7

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

Accepted Answer

A)   $2.50.
B)   $5.
C)   $7.50.
D)   $10.E) B) and D)
F) None of the above

Question 8

Figure 8-12 
-Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The per-unit burden of the tax on buyers is

Accepted Answer

A)   $1.
B)   $2.
C)   $3.
D)   $4.E) C) and D)
F) B) and D)

Question 9

Figure 8-3
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-3. The equilibrium price before the tax is imposed is

Accepted Answer

A)   P1.
B)   P2.
C)   P3.
D)   P4.E) B) and D)
F) C) and D)

Question 10

Figure 8-7
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-7. Which of the following statements is correct?

Accepted Answer

A)   The loss of producer surplus that is associated with some sellers dropping out of the market as a result of the tax is $60.
B)   The loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is $120.
C)   The loss of consumer surplus caused by this tax exceeds the loss of producer surplus caused by this tax.
D)   This tax produces $320 in tax revenue for the government.E) None of the above
F) A) and C)

Question 11

Which of the following statements is correct regarding the imposition of a tax on gasoline?

Accepted Answer

A)   The incidence of the tax depends upon whether the buyers or the sellers are required to remit tax payments to the government.
B)   The incidence of the tax depends upon the price elasticities of demand and supply.
C)   The amount of tax revenue raised by the tax depends upon whether the buyers or the sellers are required to remit tax payments to the government.
D)   The amount of tax revenue raised by the tax does not depend upon the amount of the tax per unit.E) All of the above
F) A) and B)

Question 12

A tax on a good

Accepted Answer

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

Question 13

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:  What quantity will be bought and sold after the tax is imposed?

Accepted Answer

The quanti...

Question 14

When the price of a good is measured in dollars, then the size of the deadweight loss that results from taxing that good is measured in

Accepted Answer

A)   units of the good that is being taxed.
B)   units of a related good that is not being taxed.
C)   dollars.
D)   percentage change.E) B) and C)
F) A) and B)

Question 15

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

Accepted Answer

A)   (i)  and (ii)  only
B)   (i) , (ii) , and (iii)  only
C)   (iii)  and (iv)  only
D)   (i) , (ii) , (iii) , and (iv) E) A) and B)
F) A) and C)

Question 16

A tax raises the price received by sellers and lowers the price paid by buyers.

Accepted Answer

A) True 
 B)False

Question 17

Supply-side economics is a term associated with the views of

Accepted Answer

A)   Ronald Reagan and Arthur Laffer.
B)   Karl Marx.
C)   Bill Clinton and Greg Mankiw.
D)   Milton Friedman.E) A) and B)
F) B) and D)

Question 18

Figure 8-7
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-7. Which of the following statements is correct?

Accepted Answer

A)   Total surplus before the tax is imposed is $180.
B)   After the tax is imposed, consumer surplus is 25 percent of its pre-tax value.
C)   After the tax is imposed, producer surplus is 36 percent of its pre-tax value.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 19

Figure 8-8
Suppose the government imposes a $10 per unit tax on a good. 
-Refer to Figure 8-8. One effect of the tax is to

Accepted Answer

A)   reduce consumer surplus from $180 to $72.
B)   reduce producer surplus from $96 to $24.
C)   create a deadweight loss of $72.
D)   All of the above are correct.E) None of the above
F) A) and C)

Question 20

The demand for beer is more elastic than the demand for milk, so a tax on beer would have a smaller deadweight loss than an equivalent tax on milk, all else equal.

Accepted Answer

A) True 
 B)False

Exam 8: Application: The Costs of Taxation

The benefit to sellers of participating in a market is measured by the

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Figure 8-11 -Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then, when the tax is imposed,

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

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Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. One effect of the tax is to

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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

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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. Which of the following statements is correct?

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A tax raises the price received by sellers and lowers the price paid by buyers.

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Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. The equilibrium price before the tax is imposed is

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When the price of a good is measured in dollars, then the size of the deadweight loss that results from taxing that good is measured in

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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

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Which of the following statements is correct regarding the imposition of a tax on gasoline?

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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. Which of the following statements is correct?

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Figure 8-12 -Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The per-unit burden of the tax on buyers is

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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

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Figure 8-24. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-24. Tax revenue would

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The demand for beer is more elastic than the demand for milk, so a tax on beer would have a smaller deadweight loss than an equivalent tax on milk, all else equal.

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Supply-side economics is a term associated with the views of

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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?

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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: What quantity will be bought and sold after the tax is imposed?

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A tax on a good

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