Question 1

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. Before the tax, what is the total surplus?

Accepted Answer

A)  $60
B)  $50
C)  $30
D)  $25E) C) and D)
F) A) and C)

Question 2

Suppose the government increases the size of a tax by 40 percent. The deadweight loss from that tax

Accepted Answer

A)  increases by 40 percent.
B)  increases by more than 40 percent.
C)  increases but by less than 40 percent.
D)  decreases by 40 percent.E) C) and D)
F) A) and C)

Question 3

Taxes cause deadweight losses because they

Accepted Answer

A)  lead to losses in surplus for consumers and for producers that, when taken together, exceed tax revenue collected by the government.
B)  distort incentives to both buyers and sellers.
C)  prevent buyers and sellers from realizing some of the gains from trade.
D)  All of the above are correct.E) A) and B)
F) None of the above

Question 4

The Social Security tax is a labor tax.

Accepted Answer

A) True 
 B)False

Question 5

If T represents the size of the tax on a good and Q represents the quantity of the good that is sold, total tax revenue received by government can be expressed as

Accepted Answer

A)  T/Q.
B)  T+Q.
C)  TxQ.
D)  (TxQ) /Q.E) C) and D)
F) A) and B)

Question 6

For a good that is taxed, the area on the relevant supply-and-demand graph that represents government's tax revenue is a

Accepted Answer

A)  triangle.
B)  rectangle.
C)  trapezoid.
D)  None of the above is correct; government's tax revenue is the area between the supply and demand curves, above the horizontal axis, and below the effective price to buyers.E) C) and D)
F) A) and D)

Question 7

The elasticities of the supply and demand curves in the market for cigarettes affect how much a tax distorts that market.

Accepted Answer

A) True 
 B)False

Question 8

The more elastic the supply, the larger the deadweight loss from a tax, all else equal.

Accepted Answer

A) True 
 B)False

Question 9

If the labor supply curve is nearly vertical, a tax on labor

Accepted Answer

A)  has a large deadweight loss.
B)  raises a small amount of tax revenue.
C)  has little impact on the amount of work that workers are willing to do.
D)  results in a large tax burden on the firms that hire labor.E) All of the above
F) None of the above

Question 10

Figure 8-9
The vertical distance between points A and C represent a tax in the market. 
-Refer to Figure 8-9. The loss of consumer surplus as a result of the tax is

Accepted Answer

A)  $2,000.
B)  $4,000.
C)  $6,000.
D)  $8,000.E) None of the above
F) All of the above

Question 11

In the market for widgets, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. The equilibrium quantity in the market for widgets is 200 per month when there is no tax. Then a tax of $5 per widget is imposed. As a result, the government is able to raise $750 per month in tax revenue. We can conclude that the equilibrium quantity of widgets has fallen by

Accepted Answer

A)  25 per month.
B)  50 per month.
C)  75 per month.
D)  100 per month.E) B) and D)
F) B) and C)

Question 12

The Social Security tax is a tax on

Accepted Answer

A)  capital.
B)  labor.
C)  consumption expenditures.
D)  earnings during retirement.E) A) and C)
F) A) and B)

Question 13

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

Question 14

Figure 8-2
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-2. The loss of producer surplus for those sellers of the good who continue to sell it after the tax is imposed is

Accepted Answer

A)  $0.
B)  $1.
C)  $2.
D)  $3.E) C) and D)
F) B) and D)

Question 15

When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic,

Accepted Answer

A)  buyers of the good will bear most of the burden of the tax.
B)  sellers of the good will bear most of the burden of the tax.
C)  buyers and sellers will each bear 50 percent of the burden of the tax.
D)  both equilibrium price and quantity will increase.E) A) and B)
F) A) and C)

Question 16

Figure 8-9
The vertical distance between points A and C represent a tax in the market. 
-Refer to Figure 8-9. The loss of producer surplus as a result of the tax is

Accepted Answer

A)  $3,000.
B)  $6,000.
C)  $9,000.
D)  $12,000.E) A) and B)
F) A) and C)

Question 17

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

Question 18

When a tax is levied on the buyers of a good, the

Accepted Answer

A)  supply curve shifts upward by the amount of the tax.
B)  quantity supplied increases for all conceivable prices of the good.
C)  buyers of the good will send tax payments to the government.
D)  demand curve shifts to the right by the horizontal distance of the tax.E) B) and C)
F) None of the above

Question 19

Suppose a tax of $1 per unit is imposed on a good. The more elastic the supply of the good, other things equal, the

Accepted Answer

A)  smaller is the response of quantity supplied to the tax.
B)  larger is the tax burden on sellers relative to the tax burden on buyers.
C)  larger is the deadweight loss of the tax.
D)  All of the above are correct.E) All of the above
F) B) and C)

Question 20

Figure 8-1 
-Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by J+K+I 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) B) and C)

Exam 8: Application: The Costs of Taxation

Taxes cause deadweight losses because they

Correct Answer
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The Social Security tax is a tax on

Correct Answer
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When a tax is levied on the buyers of a good, the

Correct Answer
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When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic,

Correct Answer
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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

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+I represents

Correct Answer
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Figure 8-9 The vertical distance between points A and C represent a tax in the market. -Refer to Figure 8-9. The loss of consumer surplus as a result of the tax is

Correct Answer
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The more elastic the supply, the larger the deadweight loss from a tax, all else equal.

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

Correct Answer
verified

The Social Security tax is a labor tax.

Correct Answer
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Suppose the government increases the size of a tax by 40 percent. The deadweight loss from that tax

Correct Answer
verified

If the labor supply curve is nearly vertical, a tax on labor

Correct Answer
verified

Figure 8-9 The vertical distance between points A and C represent a tax in the market. -Refer to Figure 8-9. The loss of producer surplus as a result of the tax is

Correct Answer
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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. Before the tax, what is the total surplus?

Correct Answer
verified

Suppose a tax of $1 per unit is imposed on a good. The more elastic the supply of the good, other things equal, the

Correct Answer
verified

Correct Answer
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If T represents the size of the tax on a good and Q represents the quantity of the good that is sold, total tax revenue received by government can be expressed as

Correct Answer
verified

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2. The loss of producer surplus for those sellers of the good who continue to sell it after the tax is imposed is

Correct Answer
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Which of the following statements is correct?

Correct Answer
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The elasticities of the supply and demand curves in the market for cigarettes affect how much a tax distorts that market.

Correct Answer
verified

Exam 8: Application: The Costs of Taxation

Taxes cause deadweight losses because they

Correct AnswerverifiedShow Answer

The Social Security tax is a tax on

Correct AnswerverifiedShow Answer

When a tax is levied on the buyers of a good, the

Correct AnswerverifiedShow Answer

When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic,

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

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Figure 8-9 The vertical distance between points A and C represent a tax in the market. -Refer to Figure 8-9. The loss of consumer surplus as a result of the tax is

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The more elastic the supply, the larger the deadweight loss from a tax, all else equal.

Correct AnswerverifiedShow Answer

For a good that is taxed, the area on the relevant supply-and-demand graph that represents government's tax revenue is a

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The Social Security tax is a labor tax.

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Suppose the government increases the size of a tax by 40 percent. The deadweight loss from that tax

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If the labor supply curve is nearly vertical, a tax on labor

Correct AnswerverifiedShow Answer

Figure 8-9 The vertical distance between points A and C represent a tax in the market. -Refer to Figure 8-9. The loss of producer surplus as a result of the tax is

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. Before the tax, what is the total surplus?

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Suppose a tax of $1 per unit is imposed on a good. The more elastic the supply of the good, other things equal, the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If T represents the size of the tax on a good and Q represents the quantity of the good that is sold, total tax revenue received by government can be expressed as

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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 loss of producer surplus for those sellers of the good who continue to sell it after the tax is imposed is

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Which of the following statements is correct?

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The elasticities of the supply and demand curves in the market for cigarettes affect how much a tax distorts that market.

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