Question 1

When a tax is levied on a good,the buyers and sellers of the good share the burden,

Accepted Answer

A)  provided the tax is levied on the sellers.
B)  provided the tax is levied on the buyers.
C)  provided a portion of the tax is levied on the buyers,with the remaining portion levied on the sellers.
D)  regardless of how the tax is levied.E) B) and C)
F) A) and D)

Question 2

The demand for potted plants is more elastic than the demand for wallpaper.Suppose the government levies an equivalent tax on potted plants and wallpaper.The deadweight loss would be larger in the market for

Accepted Answer

A)  potted plants than in the market for wallpaper because the quantity of potted plants would fall by more than the quantity of wallpaper.
B)  potted plants than in the market for wallpaper because the quantity of wallpaper would fall by more than the quantity of potted plants.
C)  wallpaper than in the market for potted plants because the quantity of potted plants would fall by more than the quantity of wallpaper.
D)  wallpaper than in the market for potted plants because the quantity of wallpaper would fall by more than the quantity of potted plants.E) A) and D)
F) All of the above

Question 3

The price elasticities of supply and demand affect

Accepted Answer

A)  both the size of the deadweight loss from a tax and the tax incidence.
B)  the size of the deadweight loss from a tax but not the tax incidence.
C)  the tax incidence but not the size of the deadweight loss from a tax.
D)  neither the size of the deadweight loss from a tax nor the tax incidence.E) A) and C)
F) C) and D)

Question 4

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

Question 5

A decrease in the size of a tax is most likely to increase tax revenue in a market with

Accepted Answer

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

Question 6

Taxes are costly to market participants because they

Accepted Answer

A)  transfer resources from market participants to the government.
B)  alter incentives.
C)  distort market outcomes.
D)  All of the above are correct.E) A) and D)
F) C) and D)

Question 7

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) A) and D)

Question 8

Total surplus is always equal to the sum of consumer surplus and producer surplus.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements is correct?

Accepted Answer

A)  A decrease in the size of a tax always decreases the tax revenue raised by that tax.
B)  A decrease in the size of a tax always decreases the deadweight loss of that tax.
C)  Tax revenue decreases when there is a small decrease in the tax rate and the economy is on the downward-sloping part of the Laffer curve.
D)  An increase in the size of a tax leads to an increase in the deadweight loss of the tax only if the economy is on the upward-sloping part of the Laffer curve.E) None of the above
F) C) and D)

Exam 8: Application: The Costs of Taxation

Taxes are costly to market participants because they

Correct Answer
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The demand for potted plants is more elastic than the demand for wallpaper.Suppose the government levies an equivalent tax on potted plants and wallpaper.The deadweight loss would be larger in the market for

Correct Answer
verified

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

Correct Answer
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The price elasticities of supply and demand affect

Correct Answer
verified

A decrease in the size of a tax is most likely to increase tax revenue in a market with

Correct Answer
verified

Total surplus is always equal to the sum of consumer surplus and producer surplus.

Correct Answer
verified

Which of the following statements is correct?

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

Correct Answer
verified

When a tax is levied on a good,the buyers and sellers of the good share the burden,

Correct Answer
verified

Exam 8: Application: The Costs of Taxation

Taxes are costly to market participants because they

Correct AnswerverifiedShow Answer

The demand for potted plants is more elastic than the demand for wallpaper.Suppose the government levies an equivalent tax on potted plants and wallpaper.The deadweight loss would be larger in the market for

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The price elasticities of supply and demand affect

Correct AnswerverifiedShow Answer

A decrease in the size of a tax is most likely to increase tax revenue in a market with

Correct AnswerverifiedShow Answer

Total surplus is always equal to the sum of consumer surplus and producer surplus.

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When a tax is levied on a good,the buyers and sellers of the good share the burden,

Correct AnswerverifiedShow Answer

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