Question 1

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

Question 2

When the government places a tax on a product, the cost of the tax to buyers and sellers

Accepted Answer

A)   is less than the revenue raised from the tax by the government.
B)   is equal to the revenue raised from the tax by the government.
C)   exceeds the revenue raised from the tax by the government.
D)   Without additional information, such as the elasticity of demand for this product, it is impossible to compare the cost of a tax to buyers and sellers with tax revenue.E) A) and B)
F) None of the above

Question 3

Figure 8-5
Suppose that the government imposes a tax of P3 - P1. 
-Refer to Figure 8-5. The price that buyers effectively pay after the tax is imposed is

Accepted Answer

A)   P1.
B)   P2.
C)   P3.
D)   P4.E) A) and D)
F) All of the above

Question 4

Suppose a tax is imposed on baseball bats. In which of the following cases will the tax cause the equilibrium quantity of baseball bats to shrink by the smallest amount?

Accepted Answer

A)   The response of buyers to a change in the price of baseball bats is strong, and the response of sellers to a change in the price of baseball bats is weak.
B)   The response of sellers to a change in the price of baseball bats is strong, and the response of buyers to a change in the price of baseball bats is weak.
C)   The response of buyers and sellers to a change in the price of baseball bats is strong.
D)   The response of buyers and sellers to a change in the price of baseball bats is weak.E) B) and C)
F) C) and D)

Question 5

Suppose Rebecca needs a dog sitter so that she can travel to her sister's wedding. Rebecca values dog sitting for the weekend at $200. Susan is willing to dog sit for Rebecca so long as she receives at least $150. Rebecca and Susan agree on a price of $175. Suppose the government imposes a tax of $10 on dog sitting. The tax has made Rebecca and Susan worse off by a total of

Accepted Answer

A)   $50.
B)   $40.
C)   $20.
D)   $10.E) C) and D)
F) A) and C)

Question 6

Figure 8-1 
-Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. Total surplus before the tax is measured by the area

Accepted Answer

A)   I+Y.
B)   J+K+L+M.
C)   L+M+Y.
D)   I+J+K+L+M+Y.E) C) and D)
F) A) and B)

Question 7

Figure 8-7
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-7. The deadweight loss associated with this tax amounts to

Accepted Answer

A)   $80, and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses.
B)   $80, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers.
C)   $60, and this figure represents the amount by which tax revenue to the government exceeds the combined loss of producer and consumer surpluses.
D)   $60, and this figure represents the surplus that is lost because the tax discourages mutually advantageous trades between buyers and sellers.E) None of the above
F) C) and D)

Question 8

Which of the following ideas is the most plausible?

Accepted Answer

A)   Reducing a high tax rate is less likely to increase tax revenue than is reducing a low tax rate.
B)   Reducing a high tax rate is more likely to increase tax revenue than is reducing a low tax rate.
C)   Reducing a high tax rate will have the same effect on tax revenue as reducing a low tax rate.
D)   Reducing a tax rate can never increase tax revenue.E) B) and C)
F) A) and D)

Question 9

Figure 8-21 
-Refer to Figure 8-21. Suppose the market is represented by Demand 1 and Supply 1. At first the government places a $3 per-unit tax on this good. Then the government decides to raise the tax to $6 per unit. How would you characterize the decision to raise the tax rate from $3 to $6 per unit? The decision is

Accepted Answer

A)   a good one because it increases tax revenue while decreasing the deadweight loss from the tax.
B)   a bad one because it does not increase tax revenue yet increases the deadweight loss from the tax.
C)   a bad one because it decreases tax revenue while increasing the deadweight loss from the tax.
D)   unclear because it increases tax revenue yet also increases the deadweight loss from the tax.E) None of the above
F) A) and B)

Question 10

Suppose Rebecca needs a dog sitter so that she can travel to her sister's wedding. Rebecca values dog sitting for the weekend at $200. Susan is willing to dog sit for Rebecca so long as she receives at least $175. Rebecca and Susan agree on a price of $185. Suppose the government imposes a tax of $30 on dog sitting. The tax has made Rebecca and Susan worse off by a total of

Accepted Answer

A)   $30.
B)   $25.
C)   $10.
D)   $5.E) A) and B)
F) All of the above

Question 11

The benefit that government receives from a tax is measured by

Accepted Answer

A)   deadweight loss.
B)   consumer surplus.
C)   tax incidence.
D)   tax revenue.E) None of the above
F) B) and C)

Question 12

When a country is on the downward-sloping side of the Laffer curves, a cut in the tax rate will

Accepted Answer

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

Question 13

An increase 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) B) and C)
F) A) and B)

Question 14

If the government imposes a $3 tax in a market, the buyers and sellers will share an equal burden of the tax.

Accepted Answer

A) True 
 B)False

Question 15

Scenario 8-2
Roland mows Karla's lawn for $25. Roland's opportunity cost of mowing Karla's lawn is $20, and Karla's willingness to pay Roland to mow her lawn is $28.
-Refer to Scenario 8-2. If Karla hires Roland to mow her lawn, Roland's producer surplus is

Accepted Answer

A)   $2.
B)   $3.
C)   $5.
D)   $25.E) C) and D)
F) None of the above

Question 16

Figure 8-5
Suppose that the government imposes a tax of P3 - P1. 
-Refer to Figure 8-5. Consumer surplus before the tax was levied is represented by area

Accepted Answer

A)   A.
B)   A+B+C.
C)   D+H+F.
D)   F.E) A) and B)
F) C) and D)

Question 17

The deadweight loss from a tax of $2 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) A) and D)

Question 18

Figure 8-25 
-Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is the deadweight loss from this tax?

Accepted Answer

The deadwe...

Question 19

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) B) and D)
F) B) and C)

Question 20

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The imposition of the tax causes the quantity sold to

Accepted Answer

A)   increase by 20 units.
B)   increase by 500 units.
C)   decrease by 20 units.
D)   decrease by 500 units.E) A) and B)
F) None of the above

Exam 8: Application: The Costs of Taxation

Suppose a tax is imposed on baseball bats. In which of the following cases will the tax cause the equilibrium quantity of baseball bats to shrink by the smallest amount?

Correct Answer
verified

Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is the deadweight loss from this tax?

Correct Answer
verified
The deadwe...
View Answer

Figure 8-1 -Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. Total surplus before the tax is measured by the area

Correct Answer
verified

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. Consumer surplus before the tax was levied is represented by area

Correct Answer
verified

When the government places a tax on a product, the cost of the tax to buyers and sellers

Correct Answer
verified

If the government imposes a $3 tax in a market, the buyers and sellers will share an equal burden of the tax.

Correct Answer
verified

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The imposition of the tax causes the quantity sold to

Correct Answer
verified

When a country is on the downward-sloping side of the Laffer curves, a cut in the tax rate will

Correct Answer
verified

Correct Answer
verified

The benefit that government receives from a tax is measured by

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Scenario 8-2 Roland mows Karla's lawn for $25. Roland's opportunity cost of mowing Karla's lawn is $20, and Karla's willingness to pay Roland to mow her lawn is $28. -Refer to Scenario 8-2. If Karla hires Roland to mow her lawn, Roland's producer surplus is

Correct Answer
verified

Which of the following ideas is the most plausible?

Correct Answer
verified

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. The price that buyers effectively pay after the tax is imposed is

Correct Answer
verified

Correct Answer
verified

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7. The deadweight loss associated with this tax amounts to

Correct Answer
verified

The deadweight loss from a tax of $2 per unit will be smallest in a market with

Correct Answer
verified

Exam 8: Application: The Costs of Taxation

Suppose a tax is imposed on baseball bats. In which of the following cases will the tax cause the equilibrium quantity of baseball bats to shrink by the smallest amount?

Correct AnswerverifiedShow Answer

Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is the deadweight loss from this tax?

Correct AnswerverifiedThe deadwe...View AnswerShow Answer

Figure 8-1 -Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. Total surplus before the tax is measured by the area

Correct AnswerverifiedShow Answer

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. Consumer surplus before the tax was levied is represented by area

Correct AnswerverifiedShow Answer

When the government places a tax on a product, the cost of the tax to buyers and sellers

Correct AnswerverifiedShow Answer

If the government imposes a $3 tax in a market, the buyers and sellers will share an equal burden of the tax.

Correct AnswerverifiedShow Answer

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The imposition of the tax causes the quantity sold to

Correct AnswerverifiedShow Answer

When a country is on the downward-sloping side of the Laffer curves, a cut in the tax rate will

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The benefit that government receives from a tax is measured by

Correct AnswerverifiedShow Answer

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

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

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Scenario 8-2 Roland mows Karla's lawn for $25. Roland's opportunity cost of mowing Karla's lawn is $20, and Karla's willingness to pay Roland to mow her lawn is $28. -Refer to Scenario 8-2. If Karla hires Roland to mow her lawn, Roland's producer surplus is

Correct AnswerverifiedShow Answer

Which of the following ideas is the most plausible?

Correct AnswerverifiedShow Answer

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. The price that buyers effectively pay after the tax is imposed is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7. The deadweight loss associated with this tax amounts to

Correct AnswerverifiedShow Answer

The deadweight loss from a tax of $2 per unit will be smallest in a market with

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
The deadwe...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified