Question 1

A tax

Accepted Answer

A)  lowers the price buyers pay and raises the price sellers receive.
B)  raises the price buyers pay and lowers the price sellers receive.
C)  places a wedge between the price buyers pay and the price sellers receive.
D)  Both b)  and c)  are correct.

Question 2

Figure 8-8
Suppose the government imposes a $10 per unit tax on a good. 
-Refer to Figure 8-8. The tax causes consumer surplus to decrease by the area

Accepted Answer

A)  A.
B)  B+C.
C)  A+B+C.
D)  A+B+C+D+F.

Question 3

The benefit to buyers of participating in a market is measured by

Accepted Answer

A)  the price elasticity of demand.
B)  consumer surplus.
C)  the maximum amount that buyers are willing to pay for the good.
D)  the equilibrium price.

Question 4

The marginal tax rate on labor income for many workers in the United States is almost

Accepted Answer

A)  30 percent.
B)  40 percent.
C)  50 percent.
D)  65 percent.

Question 5

When a tax is levied on a good,

Accepted Answer

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.

Question 6

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

Accepted Answer

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

Question 7

Figure 8-11 1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then the deadweight loss of the tax is A) $6. B) $8. C) $9. D) $12." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then the deadweight loss of the tax is

Accepted Answer

A)  $6.
B)  $8.
C)  $9.
D)  $12.

Question 8

Figure 8-11 1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then, when the tax is imposed, A) the government collects $28 in tax revenue. B) producer surplus decreases by $13. C) consumer surplus decreases by $11. D) the deadweight loss amounts to $9." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then, when the tax is imposed,

Accepted Answer

A)  the government collects $28 in tax revenue.
B)  producer surplus decreases by $13.
C)  consumer surplus decreases by $11.
D)  the deadweight loss amounts to $9.

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.

Question 10

Figure 8-6
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-6. When the tax is imposed in this market, sellers effectively pay what amount of the $10 tax?

Accepted Answer

A)  $0
B)  $4
C)  $6
D)  $10

Question 11

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

Accepted Answer

A)  $3.
B)  $4.
C)  $5.
D)  $8.

Question 12

As the size of a tax increases, the government's tax revenue rises, then falls.

Accepted Answer

A) True 
 B)False

Question 13

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 14

Figure 8-9
The vertical distance between points A and C represent a tax in the market. 
-Refer to Figure 8-9. The per-unit burden of the tax on sellers is

Accepted Answer

A)  $20.
B)  $200.
C)  $300.
D)  $500.

Question 15

A $3.50 tax per gallon of paint placed on the sellers of paint will shift the supply curve

Accepted Answer

A)  downward by exactly $3.50.
B)  downward by less than $3.50.
C)  upward by exactly $3.50.
D)  upward by less than $3.50.

Question 16

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.

Accepted Answer

A) True 
 B)False

Question 17

When a tax on a good is enacted,

Accepted Answer

A)  buyers and sellers share the burden of the tax regardless of whether the tax is levied on buyers or on sellers.
B)  buyers always bear the full burden of the tax.
C)  sellers always bear the full burden of the tax.
D)  sellers bear the full burden of the tax if the tax is levied on them; buyers bear the full burden of the tax if the tax is levied on them.

Question 18

Figure 8-13 
-Refer to Figure 8-13. Panel (a)  and Panel (b)  each illustrate a $4 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.

Question 19

When a tax is levied on buyers of a good,

Accepted Answer

A)  government collects too little revenue to justify the tax if the equilibrium quantity of the good decreases as a result of the tax.
B)  there is an increase in the quantity of the good supplied.
C)  a wedge is placed between the price buyers pay and the price sellers effectively receive.
D)  the effective price to buyers decreases because the demand curve shifts leftward.

Question 20

Figure 8-8
Suppose the government imposes a $10 per unit tax on a good. 
-Refer to Figure 8-8. The government collects tax revenue that is the area

Accepted Answer

A)  L.
B)  B+D.
C)  C+F.
D)  F+G+L.

Exam 8: Application: The Costs of Taxation

A tax

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When a tax is levied on a good,

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Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. The government collects tax revenue that is the area

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The benefit to buyers of participating in a market is measured by

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Figure 8-11 -Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then the deadweight loss of the tax 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 8-1 -Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The consumer surplus before the tax is measured by the area

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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 per-unit burden of the tax on sellers is

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When a tax is levied on buyers of a good,

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Figure 8-13 -Refer to Figure 8-13. Panel (a) and Panel (b) each illustrate a $4 tax placed on a market. In comparison to Panel (a) , Panel (b) illustrates which of the following statements?

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Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. When the tax is imposed in this market, sellers effectively pay what amount of the $10 tax?

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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.

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Figure 8-11 -Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then, when the tax is imposed,

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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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When a tax on a good is enacted,

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Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. The tax causes consumer surplus to decrease by the area

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As the size of a tax increases, the government's tax revenue rises, then falls.

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The marginal tax rate on labor income for many workers in the United States is almost

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A $3.50 tax per gallon of paint placed on the sellers of paint will shift the supply curve

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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 per-unit burden of the tax on buyers is

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Figure 8-11 -Refer to Figure 8-11. Suppose Q₁ = 4; Q₂ = 7; P₁ = $6; P₂ = $8; and P₃= $10. Then the deadweight loss of the tax is

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Figure 8-11 -Refer to Figure 8-11. Suppose Q₁ = 4; Q₂ = 7; P₁ = $6; P₂ = $8; and P₃= $10. Then, when the tax is imposed,

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