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Exam 8: Application: the Costs of Taxation

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Question 41

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When a tax is levied on a good,

A) government revenues exceed the loss in total welfare.
B) there is a decrease in the quantity of the good bought and sold in the market.
C) the price that sellers receive exceeds the price that buyers pay.
D) All of the above are correct.

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

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Question 42

Multiple Choice

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Figure 8-11 -Refer to Figure 8-11. The price labeled as P3 on the vertical axis represents the price

A) received by sellers before the tax is imposed.
B) received by sellers after the tax is imposed.
C) paid by buyers before the tax is imposed.
D) paid by buyers after the tax is imposed.

E) All of the above
F) None of the above

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Question 43

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Figure 8-23. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-23. If the economy is at point A on the curve, then a small increase in the tax rate will

The demand for beer is more elastic than the demand for milk, so a tax on beer would have a smaller deadweight loss than an equivalent tax on milk, all else equal.

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

The more elastic are supply and demand in a market, the greater are the distortions caused by a tax on that market, and the more likely it is that a tax cut in that market will raise tax revenue.

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

Taxes on labor tend to increase the number of hours that people choose to work.

Economists generally agree that the most important tax in the U.S. economy is the

Figure 8-11 -Refer to Figure 8-11. The price labeled as P2 on the vertical axis represents the

Figure 8-19 The vertical distance between points A and B represents the original tax. -Refer to Figure 8-19. The original tax can be represented by the vertical distance AB. Suppose the government is deciding whether to lower the tax to CD or raise it to FG. Which of the following statements is correct?

A tax is imposed on a certain good. The tax produces revenue of $5,000 for the government. The tax reduces consumer surplus by $3,000 and it reduces producer surplus by $4,000. What is the amount of the deadweight loss of the tax?

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 tax revenue received by the government is equal to

Supply-side economics is a term associated with the views of

As more people become self-employed, which allows them to determine how many hours they work per week, we would expect the deadweight loss from the Social Security tax to

Deadweight loss is the

Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is consumer surplus after the tax is imposed?

Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much is total surplus after the tax is imposed?

If the tax on a good is increased from $1 per unit to $4 per unit, the deadweight loss from the tax increases by a factor of

Figure 8-17 -Refer to Figure 8-17. Suppose the government imposes a $1 tax in each of the four markets represented by demand curves D1, D2, D3, and D4. The deadweight will be the largest in the market represented by