Question 1

Figure 8-26 
-Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. What price will consumers pay for the good after the tax is imposed?

Accepted Answer

Consumers will pay $...

Question 2

Scenario 8-2
Roland mows Karla's lawn for $25. Roland's opportunity cost of mowing Karla's lawn is $20, and Karla's willingness to pay Roland to mow her lawn is $28.
-Refer to Scenario 8-2. If Karla hires Roland to mow her lawn, Roland's producer surplus is

Accepted Answer

A)   $2.
B)   $3.
C)   $5.
D)   $25.E) A) and B)
F) A) and C)

Question 3

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

Accepted Answer

A)   deadweight loss due to the tax.
B)   loss in consumer surplus due to the tax.
C)   loss in producer surplus due to the tax.
D)   total surplus before the tax.E) All of the above
F) B) and C)

Question 4

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 price that buyers pay is

Accepted Answer

A)   P0.
B)   P2.
C)   P5.
D)   P8.E) C) and D)
F) All of the above

Question 5

Figure 8-13 
-Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The per-unit burden of the tax on sellers is

Accepted Answer

A)   $1.
B)   $2.
C)   $3.
D)   $5.E) A) and C)
F) B) and C)

Question 6

Deadweight loss measures the loss

Accepted Answer

A)   in a market to buyers and sellers that is not offset by an increase in government revenue.
B)   in revenue to the government when buyers choose to buy less of the product because of the tax.
C)   of equality in a market due to government intervention.
D)   of total revenue to business firms due to the price wedge caused by the tax.E) A) and B)
F) A) and C)

Question 7

The deadweight loss from a tax of $x per unit will be smallest in a market

Accepted Answer

A)   in which demand is elastic and supply is inelastic.
B)   in which demand is inelastic and supply is elastic.
C)   in which demand is inelastic and supply is inelastic.
D)   None of the above are correct; we need to know the value of x in order to determine the answer.E) All of the above
F) B) and C)

Question 8

Figure 8-5
Suppose that the government imposes a tax of P3 - P1. 
-Refer to Figure 8-5. The tax causes a reduction in producer surplus that is represented by area

Accepted Answer

A)   A.
B)   C+H.
C)   D+H.
D)   F.E) A) and B)
F) A) and C)

Question 9

Labor taxes may distort labor markets greatly if

Accepted Answer

A)   labor supply is highly inelastic.
B)   many workers choose to work 40 hours per week regardless of their earnings.
C)   the number of hours many part-time workers want to work is very sensitive to the wage rate.
D)   "underground" workers do not respond to changes in the wages of legal jobs because they prefer not to pay taxes.E) A) and D)
F) A) and C)

Question 10

Figure 8-7
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-7. 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) None of the above
F) A) and B)

Question 11

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

Accepted Answer

A)   $20.
B)   $200.
C)   $300.
D)   $500.E) B) and C)
F) All of the above

Question 12

The loss in total surplus resulting from a tax is called

Accepted Answer

A)   a deficit.
B)   economic loss.
C)   deadweight loss.
D)   inefficiency.E) A) and C)
F) C) and D)

Question 13

Figure 8-2
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-2. The per-unit burden of the tax on buyers is

Accepted Answer

A)   $2.
B)   $3.
C)   $4.
D)   $5.E) A) and C)
F) B) and C)

Question 14

Figure 8-5
Suppose that the government imposes a tax of P3 - P1. 
-Refer to Figure 8-5. The price that sellers effectively receive after the tax is imposed is

Accepted Answer

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

Question 15

Which of the following is a tax on labor?

Accepted Answer

A)   Medicare tax
B)   inheritance tax
C)   sales tax
D)   All of the above are labor taxes.E) B) and C)
F) C) and D)

Question 16

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The consumer surplus with the tax is

Accepted Answer

A)   $2,000.
B)   $4,000.
C)   $6,000.
D)   $8,000.E) A) and B)
F) B) and D)

Question 17

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 18

Figure 8-3
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-3. Which of the following equations is valid for the deadweight loss of the tax?

Accepted Answer

A)   Deadweight loss = (1/2) (P2 - P1) (Q2 + Q1) 
B)   Deadweight loss = (1/2) (P3 - P1) (Q2 + Q1) 
C)   Deadweight loss = (1/2) (P3 - P2) (Q2 - Q1) 
D)   Deadweight loss = (1/2) (P3 - P1) (Q2 - Q1) E) C) and D)
F) B) and C)

Question 19

Economist Arthur Laffer made the argument that tax rates in the United States were so high that reducing the rates would increase tax revenue.

Accepted Answer

A) True 
 B)False

Question 20

Figure 8-26 
-Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much is producer surplus after the tax is imposed?

Accepted Answer

Producer surplus is ...

Exam 8: Application: The Costs of Taxation

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 price that buyers pay is

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Economist Arthur Laffer made the argument that tax rates in the United States were so high that reducing the rates would increase tax revenue.

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Which of the following is a tax on labor?

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Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. The price that sellers effectively receive after the tax is imposed is

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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 per-unit burden of the tax on buyers is

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Scenario 8-2 Roland mows Karla's lawn for $25. Roland's opportunity cost of mowing Karla's lawn is $20, and Karla's willingness to pay Roland to mow her lawn is $28. -Refer to Scenario 8-2. If Karla hires Roland to mow her lawn, Roland's producer surplus is

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Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. The tax causes a reduction in producer surplus that is represented by area

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The loss in total surplus resulting from a tax is called

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

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Labor taxes may distort labor markets greatly if

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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. Which of the following equations is valid for the deadweight loss of the tax?

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The deadweight loss from a tax of $x per unit will be smallest in a market

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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 I+Y represents the

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Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. What price will consumers pay for the good after the tax is imposed?

Correct AnswerverifiedConsumers will pay $...View AnswerShow Answer

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The consumer surplus with the tax is

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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

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Figure 8-13 -Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The per-unit burden of the tax on sellers is

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Deadweight loss measures the loss

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Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much is producer surplus after the tax is imposed?

Correct AnswerverifiedProducer surplus is ...View AnswerShow Answer

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Consumers will pay $...
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Producer surplus is ...
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