Question 1

Figure 8-12 
-Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The amount of tax revenue collected by the government is

Accepted Answer

A)   $7.50.
B)   $15.00.
C)   $22.50.
D)   $45.00.E) A) and C)
F) All of the above

Question 2

A tax places a wedge between the price buyers pay and the price sellers receive.

Accepted Answer

A) True 
 B)False

Question 3

A tax on insulin is likely to cause a very large deadweight loss to society.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A)   benefit to buyers with the loss to sellers.
B)   price paid by buyers to the price received by sellers.
C)   profits earned by firms to the losses incurred by consumers.
D)   decrease in total surplus to the increase in revenue raised by the government.E) B) and C)
F) A) and D)

Question 5

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

Accepted Answer

Consumer s...

Question 6

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 loss in total surplus?

Accepted Answer

A)   $50
B)   $30
C)   $25
D)   $0E) None of the above
F) A) and C)

Question 7

Figure 8-12 
-Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The loss of producer surplus resulting from this tax is

Accepted Answer

A)   $5.50.
B)   $17.50.
C)   $22.50.
D)   $45.00E) C) and D)
F) A) and B)

Question 8

Figure 8-2
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-2. The amount of the tax on each unit of the good is

Accepted Answer

A)   $1.
B)   $4.
C)   $5.
D)   $9.E) None of the above
F) B) and D)

Question 9

Figure 8-2
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-2. Producer surplus without the tax is

Accepted Answer

A)   $4, and producer surplus with the tax is $1.
B)   $4, and producer surplus with the tax is $3.
C)   $10, and producer surplus with the tax is $1.
D)   $10, and producer surplus with the tax is $3.E) A) and B)
F) None of the above

Question 10

Provide several examples of important taxes on labor in the United States. For a typical worker, what is the marginal tax rate on labor income once all the labor taxes are summed?

Accepted Answer

*the Social Security tax
*the ...

Question 11

If the tax on gasoline increases from $2 to $4 per gallon, the deadweight loss from the tax increases by a factor of

Accepted Answer

A)   one-half.
B)   two.
C)   four.
D)   six.E) A) and C)
F) C) and D)

Question 12

Scenario 8-3
Suppose the market demand and market supply curves are given by the equations: 
-Refer to Scenario 8-3. What are the equilibrium price and equilibrium quantity in this market?

Accepted Answer

The equilibrium pric...

Question 13

Figure 8-11 
-Refer to Figure 8-11. The size of the tax is represented by the

Accepted Answer

A)   length of the line segment connecting points A and B.
B)   length of the line segment connecting points A and C.
C)   length of the line segment connecting points B and C.
D)   area of the triangle bounded by the points A, B, and d.E) C) and D)
F) All of the above

Question 14

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 15

Figure 8-4
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-4. The amount of the tax on each unit of the good is

Accepted Answer

A)   $5.
B)   $7.
C)   $8.
D)   $12.E) A) and C)
F) B) and C)

Question 16

In 1776, the American Revolution was sparked by anger over

Accepted Answer

A)   the extravagant lifestyle of British royalty.
B)   the crimes of British soldiers stationed in the American colonies.
C)   British taxes imposed on the American colonies.
D)   the failure of the British to protect American colonists from attack by hostile Native Americans.E) B) and C)
F) All of the above

Question 17

Figure 8-3
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-3. The per unit burden of the tax on buyers is

Accepted Answer

A)   P3 - P1.
B)   P3 - P2.
C)   P2 - P1.
D)   P4 - P3.E) C) and D)
F) A) and D)

Question 18

Because taxes distort incentives, they cause markets to allocate resources inefficiently.

Accepted Answer

A) True 
 B)False

Question 19

Using demand and supply diagrams, show the difference in deadweight loss between (a) a market with inelastic demand and supply and (b) a market with elastic demand and supply.

Accepted Answer

The answer of Using demand and supply diagrams, show the...

Question 20

Figure 8-22 
-Refer to Figure 8-22. Suppose the government initially imposes a $3 per-unit tax on this good. Now suppose the government is deciding whether to lower the tax to $1.50 or raise it to $4.50. Which of the following statements is not correct?

Accepted Answer

A)   Compared to the original tax, the larger tax will decrease tax revenue.
B)   Compared to the original tax, the smaller tax will decrease deadweight loss.
C)   Compared to the original tax, the smaller tax will decrease tax revenue.
D)   Compared to the original tax, the larger tax will increase deadweight loss.E) A) and C)
F) All of the above

Exam 8: Application: The Costs of Taxation

Figure 8-11 -Refer to Figure 8-11. The size of the tax is represented by the

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In 1776, the American Revolution was sparked by anger over

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Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4. The amount of the tax on each unit of the good is

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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 loss in total surplus?

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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.

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Provide several examples of important taxes on labor in the United States. For a typical worker, what is the marginal tax rate on labor income once all the labor taxes are summed?

Correct Answerverified*the Social Security tax*the ...View AnswerShow Answer

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. The per unit burden of the tax on buyers is

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Using demand and supply diagrams, show the difference in deadweight loss between (a) a market with inelastic demand and supply and (b) a market with elastic demand and supply.

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Figure 8-22 -Refer to Figure 8-22. Suppose the government initially imposes a $3 per-unit tax on this good. Now suppose the government is deciding whether to lower the tax to $1.50 or raise it to $4.50. Which of the following statements is not correct?

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Scenario 8-3 Suppose the market demand and market supply curves are given by the equations: -Refer to Scenario 8-3. What are the equilibrium price and equilibrium quantity in this market?

Correct AnswerverifiedThe equilibrium pric...View AnswerShow Answer

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

Correct AnswerverifiedConsumer s...View AnswerShow Answer

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

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A tax on insulin is likely to cause a very large deadweight loss to society.

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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. Producer surplus without the tax is

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A tax places a wedge between the price buyers pay and the price sellers receive.

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If the tax on gasoline increases from $2 to $4 per gallon, the deadweight loss from the tax increases by a factor of

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Figure 8-12 -Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The loss of producer surplus resulting from this tax is

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Because taxes distort incentives, they cause markets to allocate resources inefficiently.

Correct AnswerverifiedShow Answer

Figure 8-12 -Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The amount of tax revenue collected by the government is

Correct AnswerverifiedShow Answer

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2. The amount of the tax on each unit of the good is

Correct AnswerverifiedShow Answer

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the Social Security tax
the ...
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The equilibrium pric...
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Consumer s...
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