Question 1

Relative to a situation in which gasoline is not taxed, the imposition of a tax on gasoline causes the quantity of gasoline demanded to

Accepted Answer

A)   decrease and the quantity of gasoline supplied to decrease.
B)   decrease and the quantity of gasoline supplied to increase.
C)   increase and the quantity of gasoline supplied to decrease.
D)   increase and the quantity of gasoline supplied to increase.E) All of the above
F) A) and B)

Question 2

Normally, both buyers and sellers of a good become worse off when the good is taxed.

Accepted Answer

A) True 
 B)False

Question 3

Taxes cause deadweight losses because they prevent buyers and sellers from realizing some of the gains from trade.

Accepted Answer

A) True 
 B)False

Question 4

If a tax shifts the demand curve upward or to the right) , we can infer that the tax was levied on

Accepted Answer

A)   buyers of the good.
B)   sellers of the good.
C)   both buyers and sellers of the good.
D)   We cannot infer anything because the shift described is not consistent with a tax.E) B) and D)
F) All of the above

Question 5

Sellers of a product will bear the larger part of the tax burden, and buyers will bear a smaller part of the tax burden, when the

Accepted Answer

A)   tax is placed on the sellers of the product.
B)   tax is placed on the buyers of the product.
C)   supply of the product is more elastic than the demand for the product.
D)   demand for the product is more elastic than the supply of the product.E) C) and D)
F) B) and C)

Question 6

Suppose a tax of $3 is imposed on each new garden hose that is sold, resulting in a deadweight loss of $22,500. The supply curve is a typical upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. Before the tax was imposed, the equilibrium quantity of garden hoses was 100,000. We can conclude that the equilibrium quantity of garden hoses after the tax is imposed is

Accepted Answer

A)   75,000.
B)   85,000.
C)   90,000.
D)   95,000.E) B) and D)
F) None of the above

Question 7

For a good that is taxed, the area on the relevant supply­and­demand graph that represents government's tax revenue is

Accepted Answer

A)   smaller than the area that represents the loss of consumer surplus and producer surplus caused by the tax.
B)   bounded by the supply curve, the demand curve, the effective price paid by buyers, and the effective price received by sellers.
C)   a right triangle.
D)   a triangle, but not necessarily a right triangle.E) A) and C)
F) A) and D)

Question 8

One result of a tax, regardless of whether the tax is placed on the buyers or the sellers, is that the

Accepted Answer

A)   equilibrium quantity of the good is unchanged.
B)   price the buyer effectively pays is lower.
C)   supply curve for the good shifts upward by the amount of the tax.
D)   tax reduces the welfare of both buyers and sellers.E) A) and B)
F) All of the above

Question 9

Figure 8-13 
-Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The loss of consumer surplus resulting from this tax is

Accepted Answer

A)   $80.
B)   $40.
C)   $30.
D)   $10.E) A) and C)
F) C) and D)

Question 10

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) A) and C)

Question 11

Figure 8-14 
-Refer to Figure 8-14. 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) A) and D)
F) C) and D)

Question 12

Figure 8-6
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-6. Without a tax, producer surplus in this market is

Accepted Answer

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

Question 13

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

Accepted Answer

A)   total surplus after the tax.
B)   total surplus before the tax.
C)   deadweight loss from the tax.
D)   tax revenue.E) C) and D)
F) B) and C)

Question 14

A tax levied on the buyers of a good shifts the

Accepted Answer

A)   supply curve upward or to the left) .
B)   supply curve downward or to the right) .
C)   demand curve downward or to the left) .
D)   demand curve upward or to the right) .E) B) and C)
F) A) and C)

Question 15

Figure 8-20
On the vertical axis of each graph, DWL is deadweight loss.
-Refer to Figure 8-20. Which graph correctly illustrates the relationship between the size of a tax and the size of the deadweight loss associated with the tax?

Accepted Answer

A)   Panel a) 
B)   Panel b) 
C)   Panel c) 
D)   Panel d) E) All of the above
F) A) and B)

Question 16

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) All of the above

Question 17

Figure 8-25 
-Refer to Figure 8-25. How much is total surplus at the market equilibrium?

Accepted Answer

Total surp...

Question 18

When a tax is imposed on sellers, consumer surplus and producer surplus both decrease.

Accepted Answer

A) True 
 B)False

Question 19

Figure 8-16
-Refer to Figure 8-16. Panel a)  and Panel b)  each illustrate a $2 tax placed on a market. In comparison to Panel a) , Panel b)  illustrates which of the following statements?

Accepted Answer

A)   When demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic.
B)   When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic.
C)   When supply is relatively inelastic, the deadweight loss of a tax is smaller than when supply is relatively elastic.
D)   When supply is relatively elastic, the deadweight loss of a tax is larger than when supply is relatively inelastic.E) B) and D)
F) A) and D)

Question 20

The idea that tax cuts would increase the quantity of labor supplied, thus increasing tax revenue, became known as supply-side economics.

Accepted Answer

A) True 
 B)False

Exam 8: Application: the Costs of Taxation

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

Correct Answer
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If a tax shifts the demand curve upward or to the right) , we can infer that the tax was levied on

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 J+K+L+M represents

Correct Answer
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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 loss of consumer surplus resulting from this tax is

Correct Answer
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One result of a tax, regardless of whether the tax is placed on the buyers or the sellers, is that the

Correct Answer
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A tax levied on the buyers of a good shifts the

Correct Answer
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Normally, both buyers and sellers of a good become worse off when the good is taxed.

Correct Answer
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Figure 8-25 -Refer to Figure 8-25. How much is total surplus at the market equilibrium?

Correct Answer
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Total surp...
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Figure 8-14 -Refer to Figure 8-14. Which of the following combinations will minimize the deadweight loss from a tax?

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

Correct Answer
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The idea that tax cuts would increase the quantity of labor supplied, thus increasing tax revenue, became known as supply-side economics.

Correct Answer
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For a good that is taxed, the area on the relevant supplyanddemand graph that represents government's tax revenue is

Correct Answer
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When a tax is imposed on sellers, consumer surplus and producer surplus both decrease.

Correct Answer
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Figure 8-16 -Refer to Figure 8-16. Panel a) and Panel b) each illustrate a $2 tax placed on a market. In comparison to Panel a) , Panel b) illustrates which of the following statements?

Correct Answer
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Figure 8-20 On the vertical axis of each graph, DWL is deadweight loss. -Refer to Figure 8-20. Which graph correctly illustrates the relationship between the size of a tax and the size of the deadweight loss associated with the tax?

Correct Answer
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Correct Answer
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Taxes cause deadweight losses because they prevent buyers and sellers from realizing some of the gains from trade.

Correct Answer
verified

Relative to a situation in which gasoline is not taxed, the imposition of a tax on gasoline causes the quantity of gasoline demanded to

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. Without a tax, producer surplus in this market is

Correct Answer
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Sellers of a product will bear the larger part of the tax burden, and buyers will bear a smaller part of the tax burden, when the

Correct Answer
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Exam 8: Application: the Costs of Taxation

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

Correct AnswerverifiedShow Answer

If a tax shifts the demand curve upward or to the right) , we can infer that the tax was levied on

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 8-13 -Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The loss of consumer surplus resulting from this tax is

Correct AnswerverifiedShow Answer

One result of a tax, regardless of whether the tax is placed on the buyers or the sellers, is that the

Correct AnswerverifiedShow Answer

A tax levied on the buyers of a good shifts the

Correct AnswerverifiedShow Answer

Normally, both buyers and sellers of a good become worse off when the good is taxed.

Correct AnswerverifiedShow Answer

Figure 8-25 -Refer to Figure 8-25. How much is total surplus at the market equilibrium?

Correct AnswerverifiedTotal surp...View AnswerShow Answer

Figure 8-14 -Refer to Figure 8-14. Which of the following combinations will minimize the deadweight loss from a tax?

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

Correct AnswerverifiedShow Answer

The idea that tax cuts would increase the quantity of labor supplied, thus increasing tax revenue, became known as supply-side economics.

Correct AnswerverifiedShow Answer

For a good that is taxed, the area on the relevant supply­and­demand graph that represents government's tax revenue is

Correct AnswerverifiedShow Answer

When a tax is imposed on sellers, consumer surplus and producer surplus both decrease.

Correct AnswerverifiedShow Answer

Figure 8-16 -Refer to Figure 8-16. Panel a) and Panel b) each illustrate a $2 tax placed on a market. In comparison to Panel a) , Panel b) illustrates which of the following statements?

Correct AnswerverifiedShow Answer

Figure 8-20 On the vertical axis of each graph, DWL is deadweight loss. -Refer to Figure 8-20. Which graph correctly illustrates the relationship between the size of a tax and the size of the deadweight loss associated with the tax?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Taxes cause deadweight losses because they prevent buyers and sellers from realizing some of the gains from trade.

Correct AnswerverifiedShow Answer

Relative to a situation in which gasoline is not taxed, the imposition of a tax on gasoline causes the quantity of gasoline demanded to

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. Without a tax, producer surplus in this market is

Correct AnswerverifiedShow Answer

Sellers of a product will bear the larger part of the tax burden, and buyers will bear a smaller part of the tax burden, when the

Correct AnswerverifiedShow Answer

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Total surp...
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For a good that is taxed, the area on the relevant supplyanddemand graph that represents government's tax revenue is

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