Question 1

As more people become self-employed, which allows them to determine how many hours they work per week, we would expect the deadweight loss from the Social Security tax to

Accepted Answer

A)  increase, and the revenue generated from the tax to increase.
B)  increase, and the revenue generated from the tax to decrease.
C)  decrease, and the revenue generated from the tax to increase.
D)  decrease, and the revenue generated from the tax to decrease.E) B) and C)
F) A) and D)

Question 2

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

Question 3

Taxes on labor tend to encourage second earners to stay at home rather than work in the labor force.

Accepted Answer

A) True 
 B)False

Question 4

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) All of the above
F) A) and C)

Question 5

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

Accepted Answer

A)  tax revenue.
B)  consumer surplus before the tax.
C)  producer surplus after the tax.
D)  total surplus before the tax.E) None of the above
F) All of the above

Question 6

Andre walks Julia's dog once a day for $50 per week. Julia values this service at $60 per week, while the opportunity cost of Andre'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) None of the above
F) B) and D)

Question 7

To fully understand how taxes affect economic well-being, we must

Accepted Answer

A)  assume that economic well-being is not affected if all tax revenue is spent on goods and services for the people who are being taxed.
B)  compare the taxes raised in the United States with those raised in other countries, especially France.
C)  compare the reduced welfare of buyers and sellers to the amount of revenue the government raises.
D)  take into account the fact that almost all taxes reduce the welfare of buyers, increase the welfare of sellers, and raise revenue for the government.E) B) and C)
F) A) and B)

Question 8

The graph that represents the amount of deadweight loss (measured on the vertical axis)  as a function of the size of the tax (measured on the horizontal axis)  looks like

Accepted Answer

A)  a U.
B)  an upside-down U.
C)  a horizontal straight line.
D)  an upward-sloping curve.E) A) and C)
F) C) and D)

Question 9

When a tax is imposed, the loss of consumer surplus and producer surplus as a result of the tax exceeds the tax revenue collected by the government.

Accepted Answer

A) True 
 B)False

Question 10

Figure 8-12 
-Refer to Figure 8-12. Which of the following combinations will minimize the deadweight loss from a tax?

Accepted Answer

A)  supply 1 and demand 1
B)  supply 2 and demand 2
C)  supply 1 and demand 2
D)  supply 2 and demand 1E) All of the above
F) C) and D)

Question 11

When a tax is levied on buyers, the

Accepted Answer

A)  supply curves shifts upward by the amount of the tax.
B)  tax creates a wedge between the price buyers effectively pay and the price sellers receive.
C)  tax has no effect on the well-being of sellers.
D)  All of the above are correct.E) A) and B)
F) A) and C)

Question 12

The result of the large tax cuts in the first Reagan Administration demonstrated very convincingly that Arthur Laffer was correct when he asserted that cuts in tax rates would increase tax revenue.

Accepted Answer

A) True 
 B)False

Question 13

The larger the deadweight loss from taxation, the larger the cost of government programs.

Accepted Answer

A) True 
 B)False

Question 14

When a tax is imposed on sellers, producer surplus decreases but consumer surplus increases.

Accepted Answer

A) True 
 B)False

Question 15

The deadweight loss from a tax of $5 per unit will be smallest in a market with

Accepted Answer

A)  inelastic supply and elastic demand.
B)  inelastic supply and inelastic demand.
C)  elastic supply and elastic demand.
D)  elastic supply and inelastic demand.E) A) and B)
F) B) and D)

Question 16

Suppose a tax of $3 per unit is imposed on a good. The supply curve is a typical upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. The tax decreases consumer surplus by $3,900 and decreases producer surplus by $3,000. The tax generates tax revenue of $6,000. The tax decreased the equilibrium quantity of the good from

Accepted Answer

A)  2,000 to 1,500.
B)  2,400 to 2,000.
C)  2,600 to 2,000.
D)  3,000 to 2,400.E) A) and D)
F) A) and C)

Question 17

Figure 8-19. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. 
-Refer to Figure 8-19. If the economy is at point A on the curve, then a decrease in the tax rate will

Accepted Answer

A)  increase the deadweight loss of the tax and increase tax revenue.
B)  increase the deadweight loss of the tax and decrease tax revenue.
C)  decrease the deadweight loss of the tax and increase tax revenue.
D)  decrease the deadweight loss of the tax and decrease tax revenue.E) All of the above
F) A) and B)

Question 18

Figure 8-5
Suppose that the government imposes a tax of P3 - P1. 
-Refer to Figure 8-5. The benefit to the government is measured by

Accepted Answer

A)  tax revenue and is represented by area A+B.
B)  tax revenue and is represented by area B+D.
C)  the net gain in total surplus and is represented by area B+D.
D)  the net gain in total surplus and is represented by area C+H.E) A) and B)
F) All of the above

Question 19

Scenario 8-2
Tom mows Stephanie's lawn for $25. Tom's opportunity cost of mowing Stephanie's lawn is $20, and Stephanie's willingness to pay Tom to mow her lawn is $28.
-Refer to Scenario 8-2. Assume Tom is required to pay a tax of $10 each time he mows a lawn. Which of the following results is most likely?

Accepted Answer

A)  Stephanie now will decide to mow her own lawn, and Tom will decide it is no longer in his interest to mow Stephanie's lawn.
B)  Stephanie still is willing to pay Tom to mow her lawn, but Tom will decline her offer.
C)  Tom still is willing to mow Stephanie's lawn, but Stephanie will decide to mow her own lawn.
D)  Tom and Stephanie still can engage in a mutually-agreeable trade.E) B) and D)
F) C) and D)

Question 20

Illustrate on three demand-and-supply graphs how the size of a tax (small, medium and large) can alter total revenue and deadweight loss.

Accepted Answer

The answer of Illustrate on three demand-and-supply graphs how the...

Exam 8: Application: The Costs of Taxation

When a tax is imposed on sellers, producer surplus decreases but consumer surplus increases.

Correct Answer
verified

As more people become self-employed, which allows them to determine how many hours they work per week, we would expect the deadweight loss from the Social Security tax to

Correct Answer
verified

The result of the large tax cuts in the first Reagan Administration demonstrated very convincingly that Arthur Laffer was correct when he asserted that cuts in tax rates would increase tax revenue.

Correct Answer
verified

Correct Answer
verified

The deadweight loss from a tax of $5 per unit will be smallest in a market with

Correct Answer
verified

The graph that represents the amount of deadweight loss (measured on the vertical axis) as a function of the size of the tax (measured on the horizontal axis) looks like

Correct Answer
verified

Figure 8-19. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-19. If the economy is at point A on the curve, then a decrease in the tax rate will

Correct Answer
verified

When a tax is imposed, the loss of consumer surplus and producer surplus as a result of the tax exceeds the tax revenue collected by the government.

Correct Answer
verified

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. The benefit to the government is measured by

Correct Answer
verified

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
verified

To fully understand how taxes affect economic well-being, we must

Correct Answer
verified

The larger the deadweight loss from taxation, the larger the cost of government programs.

Correct Answer
verified

Taxes on labor tend to encourage second earners to stay at home rather than work in the labor force.

Correct Answer
verified

Illustrate on three demand-and-supply graphs how the size of a tax (small, medium and large) can alter total revenue and deadweight loss.

Correct Answer
verified

Andre walks Julia's dog once a day for $50 per week. Julia values this service at $60 per week, while the opportunity cost of Andre'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
verified

Figure 8-12 -Refer to Figure 8-12. Which of the following combinations will minimize the deadweight loss from a tax?

Correct Answer
verified

When a tax is levied on buyers, the

Correct Answer
verified

Correct Answer
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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

Correct Answer
verified

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

Correct Answer
verified

Exam 8: Application: The Costs of Taxation

When a tax is imposed on sellers, producer surplus decreases but consumer surplus increases.

Correct AnswerverifiedShow Answer

As more people become self-employed, which allows them to determine how many hours they work per week, we would expect the deadweight loss from the Social Security tax to

Correct AnswerverifiedShow Answer

The result of the large tax cuts in the first Reagan Administration demonstrated very convincingly that Arthur Laffer was correct when he asserted that cuts in tax rates would increase tax revenue.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The deadweight loss from a tax of $5 per unit will be smallest in a market with

Correct AnswerverifiedShow Answer

The graph that represents the amount of deadweight loss (measured on the vertical axis) as a function of the size of the tax (measured on the horizontal axis) looks like

Correct AnswerverifiedShow Answer

Figure 8-19. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-19. If the economy is at point A on the curve, then a decrease in the tax rate will

Correct AnswerverifiedShow Answer

When a tax is imposed, the loss of consumer surplus and producer surplus as a result of the tax exceeds the tax revenue collected by the government.

Correct AnswerverifiedShow Answer

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. The benefit to the government is measured by

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

To fully understand how taxes affect economic well-being, we must

Correct AnswerverifiedShow Answer

The larger the deadweight loss from taxation, the larger the cost of government programs.

Correct AnswerverifiedShow Answer

Taxes on labor tend to encourage second earners to stay at home rather than work in the labor force.

Correct AnswerverifiedShow Answer

Illustrate on three demand-and-supply graphs how the size of a tax (small, medium and large) can alter total revenue and deadweight loss.

Correct AnswerverifiedShow Answer

Andre walks Julia's dog once a day for $50 per week. Julia values this service at $60 per week, while the opportunity cost of Andre'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

Figure 8-12 -Refer to Figure 8-12. Which of the following combinations will minimize the deadweight loss from a tax?

Correct AnswerverifiedShow Answer

When a tax is levied on buyers, the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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