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Exam 8: Application: The Costs of Taxation

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Question 131

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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 M represents

A) consumer surplus after the tax.
B) consumer surplus before the tax.
C) producer surplus after the tax.
D) producer surplus before the tax.

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Question 132

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The amount of deadweight loss that results from a tax of a given size is determined by

A) whether the tax is levied on buyers or sellers.
B) the number of buyers in the market relative to the number of sellers.
C) the price elasticities of demand and supply.
D) the ratio of the tax per unit to the effective price received by sellers.

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Question 133

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Taxes affect market participants by increasing the price paid by the buyer and received by the seller.

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.The price paid by buyers increases by $2 and the after-tax price received by sellers falls by $3.The government is able to raise $750 per month in revenue from the tax.The deadweight loss from the tax is

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

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3.Which of the following equations is valid for the deadweight loss of the tax?

The demand for bread is less elastic than the demand for donuts;hence,a tax on bread will create a larger deadweight loss than will the same tax on donuts,other things equal.

Taxes on labor have the effect of encouraging

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

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

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The total surplus with the tax is represented by area

Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7.As a result of the tax,

When a tax is levied on a good,

The loss in total surplus resulting from a tax is called

Suppose that policymakers are considering placing a tax on either of two markets.In Market A,the tax will have a significant effect on the price consumers pay,but it will not affect equilibrium quantity very much.In Market B,the same tax will have only a small effect on the price consumers pay,but it will have a large effect on the equilibrium quantity.Other factors are held constant.In which market will the tax have a larger deadweight loss?

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6.Without a tax,producer surplus in this market is

Suppose that the government imposes a tax on dairy products.The deadweight loss from this tax will likely be greater in the

If the tax on a good is increased from $1 per unit to $3 per unit,the deadweight loss from the tax increases by a factor of

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5.The tax causes a reduction in producer surplus that is represented by area

Figure 8-10 The vertical distance between points A and B represents the original tax. -Refer to Figure 8-10.If the government changed the per-unit tax from $5.00 to $7.50,then the price paid by buyers would be $10.50,the price received by sellers would be $3,and the quantity sold in the market would be 0.5 units.Compared to the original tax rate,this higher tax rate would