Question 1

Figure 8-14 
-Refer to Figure 8-14. Which of the following statements is correct?

Accepted Answer

A)  Supply 1 is more elastic than supply 2.
B)  Demand 2 is more elastic than demand 1.
C)  Demand 1 is more elastic than supply 1.
D)  All of the above are correct.E) None of the above
F) All of the above

Question 2

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 3

In terms of gains from trade, why is it true that taxes cause deadweight losses?

Accepted Answer

Taxes cause deadweight losses ...

Question 4

If a tax did not induce buyers or sellers to change their behavior, it would not cause a deadweight loss.

Accepted Answer

A) True 
 B)False

Question 5

Figure 8-11 1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then the deadweight loss of the tax is A) $6. B) $8. C) $9. D) $12." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then the deadweight loss of the tax is

Accepted Answer

A)  $6.
B)  $8.
C)  $9.
D)  $12.E) A) and D)
F) B) and C)

Question 6

If the labor supply curve is very elastic, a tax on labor

Accepted Answer

A)  has a large deadweight loss.
B)  raises enough tax revenue to offset the loss in welfare.
C)  has a relatively small impact on the number of hours that workers choose to work.
D)  results in a large tax burden on the firms that hire labor.E) B) and C)
F) C) and D)

Question 7

Concerning the labor market and taxes on labor, economists disagree about

Accepted Answer

A)  the size of the tax on labor.
B)  the size of the deadweight loss of the tax on labor.
C)  whether or not a tax on labor places a wedge between the wage that firms pay and the wage that workers receive.
D)  All of the above are correct.E) None of the above
F) B) and D)

Question 8

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

Accepted Answer

A)  (P0-P2)  x Q2.
B)  (P2-P8)  x Q2.
C)  (P2-P5)  x Q5.
D)  (P5-P8)  x Q5.E) C) and D)
F) A) and B)

Question 9

Figure 8-5
Suppose that the government imposes a tax of P3 - P1. 
-Refer to Figure 8-5. Consumer surplus before the tax was levied is represented by area

Accepted Answer

A)  A.
B)  A+B+C.
C)  D+H+F.
D)  F.E) None of the above
F) A) and B)

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Taxes drive a wedge into the market by raising the price that sellers receive and lowering the price that buyers pay.

Accepted Answer

A) True 
 B)False

Question 12

Tom walks Bethany's dog once a day for $50 per week. Bethany values this service at $60 per week, while the opportunity cost of Tom's time is $30 per week. The government places a tax of $35 per week on dog walkers. After the tax, what is the total surplus?

Accepted Answer

A)  $50
B)  $30
C)  $25
D)  $0E) A) and B)
F) All of the above

Question 13

Assume that for good X the supply curve for a good is a typical, upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. If the good is taxed, and the tax is doubled, the

Accepted Answer

A)  base of the triangle that represents the deadweight loss quadruples.
B)  height of the triangle that represents the deadweight loss doubles.
C)  deadweight loss of the tax doubles.
D)  All of the above are correct.E) None of the above
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 total surplus with the tax is represented by area

Accepted Answer

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

Question 15

Figure 8-3
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-3. The amount of deadweight loss associated with the tax is equal to

Accepted Answer

A)  P3ACP1.
B)  ABC.
C)  P2ADP3.
D)  P1DCP2.E) B) and C)
F) A) and B)

Question 16

The more inelastic are demand and supply, the greater is the deadweight loss of a tax.

Accepted Answer

A) True 
 B)False

Question 17

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, buyers effectively pay what amount of the $10 tax?

Accepted Answer

A)  $0
B)  $4
C)  $6
D)  $10E) All of the above
F) None of the above

Question 18

Suppose the demand curve and the supply curve in a market are both linear. To begin, there was a $5 tax per unit, and the $5 tax resulted in a deadweight loss of $1,500. Now, the tax per unit is higher, with the higher tax resulting in a deadweight loss of $6,000. What is the amount of the new tax per unit?

Accepted Answer

The new tax per unit is $10. D...

Question 19

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, sellers effectively pay what amount of the $10 tax?

Accepted Answer

A)  $0
B)  $4
C)  $6
D)  $10E) A) and D)
F) None of the above

Question 20

Figure 8-8
Suppose the government imposes a $10 per unit tax on a good. 
-Refer to Figure 8-8. The deadweight loss of the tax is the area

Accepted Answer

A)  B+D.
B)  C+F.
C)  A+C+F+J.
D)  B+C+D+F.E) All of the above
F) C) and D)

Exam 8: Application: The Costs of Taxation

If a tax did not induce buyers or sellers to change their behavior, it would not cause a deadweight loss.

Correct Answer
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Tom walks Bethany's dog once a day for $50 per week. Bethany values this service at $60 per week, while the opportunity cost of Tom's time is $30 per week. The government places a tax of $35 per week on dog walkers. After the tax, what is the total surplus?

Correct Answer
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In terms of gains from trade, why is it true that taxes cause deadweight losses?

Correct Answer
verified
Taxes cause deadweight losses ...
View Answer

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

Correct Answer
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The more inelastic are demand and supply, the greater is the deadweight loss of a tax.

Correct Answer
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Assume that for good X the supply curve for a good is a typical, upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. If the good is taxed, and the tax is doubled, the

Correct Answer
verified

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, sellers effectively pay what amount of the $10 tax?

Correct Answer
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Correct Answer
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The new tax per unit is $10. D...
View Answer

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?

Correct Answer
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Taxes drive a wedge into the market by raising the price that sellers receive and lowering the price that buyers pay.

Correct Answer
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Figure 8-14 -Refer to Figure 8-14. Which of the following statements is correct?

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

Correct Answer
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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 amount of deadweight loss associated with the tax is equal to

Correct Answer
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Concerning the labor market and taxes on labor, economists disagree about

Correct Answer
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Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. The deadweight loss of the tax is the area

Correct Answer
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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. When the tax is imposed in this market, buyers effectively pay what amount of the $10 tax?

Correct Answer
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Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. Consumer surplus before the tax was levied is represented by area

Correct Answer
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Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. The total surplus with the tax is represented by area

Correct Answer
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If the labor supply curve is very elastic, a tax on labor

Correct Answer
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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 the deadweight loss of the tax is

Correct Answer
verified

Exam 8: Application: The Costs of Taxation

If a tax did not induce buyers or sellers to change their behavior, it would not cause a deadweight loss.

Correct AnswerverifiedShow Answer

Tom walks Bethany's dog once a day for $50 per week. Bethany values this service at $60 per week, while the opportunity cost of Tom's time is $30 per week. The government places a tax of $35 per week on dog walkers. After the tax, what is the total surplus?

Correct AnswerverifiedShow Answer

In terms of gains from trade, why is it true that taxes cause deadweight losses?

Correct AnswerverifiedTaxes cause deadweight losses ...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

The more inelastic are demand and supply, the greater is the deadweight loss of a tax.

Correct AnswerverifiedShow Answer

Assume that for good X the supply curve for a good is a typical, upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. If the good is taxed, and the tax is doubled, the

Correct AnswerverifiedShow Answer

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, sellers effectively pay what amount of the $10 tax?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe new tax per unit is $10. D...View AnswerShow Answer

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?

Correct AnswerverifiedShow Answer

Taxes drive a wedge into the market by raising the price that sellers receive and lowering the price that buyers pay.

Correct AnswerverifiedShow Answer

Figure 8-14 -Refer to Figure 8-14. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. The amount of deadweight loss associated with the tax is equal to

Correct AnswerverifiedShow Answer

Concerning the labor market and taxes on labor, economists disagree about

Correct AnswerverifiedShow Answer

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. The deadweight loss of the tax is the area

Correct AnswerverifiedShow Answer

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, buyers effectively pay what amount of the $10 tax?

Correct AnswerverifiedShow Answer

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. Consumer surplus before the tax was levied is represented by area

Correct AnswerverifiedShow Answer

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. The total surplus with the tax is represented by area

Correct AnswerverifiedShow Answer

If the labor supply curve is very elastic, a tax on labor

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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Taxes cause deadweight losses ...
View Answer

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The new tax per unit is $10. D...
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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 the deadweight loss of the tax is

Correct Answer
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