Question 1

Figure 8-3
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-3.The loss in producer surplus caused by the tax is measured by the area

Accepted Answer

A)   ABC.
B)   P1P3ABC.
C)   P1P2BC.
D)   P1C0.

Question 2

Figure 8-11 
-Refer to Figure 8-11.Neither a shift of the demand curve nor a shift of the supply curve is shown on the figure.However,we know that,when the tax is imposed,

Accepted Answer

A)   the demand curve will shift.
B)   the supply curve will shift.
C)   either the demand curve or the supply curve will shift.
D)   None of the above are correct; the tax causes neither the demand curve nor the supply curve to shift.

Question 3

Sellers of a product will bear the larger part of the tax burden,and buyers will bear a smaller part of the tax burden,when the

Accepted Answer

A)   tax is placed on the sellers of the product.
B)   tax is placed on the buyers of the product.
C)   supply of the product is more elastic than the demand for the product.
D)   demand for the product is more elastic than the supply of the product.

Question 4

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 sellers is

Accepted Answer

A)   P3 - P1.
B)   P3 - P2.
C)   P2 - P1.
D)   P4 - P3.

Question 5

Consider a good to which a per-unit tax applies.The size of the deadweight that results from the tax is smaller,the

Accepted Answer

A)   larger is the price elasticity of demand.
B)   smaller is the price elasticity of supply.
C)   larger is the amount of the tax.
D)   All of the above are correct.

Question 6

Figure 8-4
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-4.The tax results in a loss of producer surplus that amounts to

Accepted Answer

A)   $45.
B)   $90.
C)   $210.
D)   $255.

Question 7

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 8

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.

Question 9

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

Accepted Answer

A)   first year after it is imposed than in the fifth year after it is imposed because demand and supply will be more elastic in the first year than in the fifth year.
B)   first year after it is imposed than in the fifth year after it is imposed because demand and supply will be less elastic in the first year than in the fifth year.
C)   fifth year after it is imposed than in the first year after it is imposed because demand and supply will be more elastic in the first year than in the fifth year.
D)   fifth year after it is imposed than in the first year after it is imposed because demand and supply will be less elastic in the first year than in the fifth year.

Question 10

Figure 8-11 3 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." class="answers-bank-image d-inline" rel="preload" >
-Refer to Figure 8-11.The price labeled as P3 on the vertical axis represents the price

Accepted Answer

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.

Question 11

Figure 8-8
Suppose the government imposes a $10 per unit tax on a good. 
-Refer to Figure 8-8.After the tax goes into effect,consumer surplus is the area

Accepted Answer

A)   A.
B)   B+C.
C)   A+B+C.
D)   A+B+D+J+K.

Question 12

Anger over British taxes played a significant role in bringing about the

Accepted Answer

A)   election of John Adams as the second American president.
B)   American Revolution.
C)   War of 1812.
D)   "no new taxes" clause in the U.S.Constitution.

Question 13

Figure 8-7
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-7.Which of the following statements summarizes the incidence of the tax?

Accepted Answer

A)   For each unit of the good that is sold,buyers bear one-half of the tax burden,and sellers bear one-half of the tax burden.
B)   For each unit of the good that is sold,buyers bear one-third of the tax burden,and sellers bear two-thirds of the tax burden.
C)   For each unit of the good that is sold,buyers bear one-fourth of the tax burden,and sellers bear three-fourths of the tax burden.
D)   For each unit of the good that is sold,buyers bear three-fourths of the tax burden,and sellers bear one-fourth of the tax burden.

Question 14

The more freedom young mothers have to work outside the home,the

Accepted Answer

A)   more elastic the supply of labor will be.
B)   less elastic the supply of labor will be.
C)   more vertical the labor supply curve will be.
D)   smaller is the decrease in employment that will result from a tax on labor.

Question 15

If the size of a tax triples,the deadweight loss increases by a factor of six.

Accepted Answer

A) True 
 B)False

Question 16

Figure 8-19.The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. 
-Refer to Figure 8-19.If the economy is at point A on the curve,then a decrease in the tax rate will

Accepted Answer

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

Question 17

Suppose a tax of $0.50 per unit on a good creates a deadweight loss of $100.If the tax is increased to $2.50 per unit,the deadweight loss from the new tax would be

Accepted Answer

A)   $200.
B)   $250.
C)   $500.
D)   $2,500.

Question 18

Figure 8-1 
-Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The area measured by J+K+I represents

Accepted Answer

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

Question 19

If the tax on a good is tripled,the deadweight loss of the tax

Accepted Answer

A)   remains constant.
B)   triples.
C)   increases by a factor of 9.
D)   increases by a factor of 12.

Question 20

Figure 8-10 
-Refer to Figure 8-10.Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2.The deadweight loss of the tax is

Accepted Answer

A)   [x (P0-P5) x Q5] + [x (P5-0) x Q5].
B)   [x (P0-P2) x Q2] +[(P2-P8) x Q2] + [x (P8-0) x Q2].
C)   (P2-P8) x Q2.
D)   x (P2-P8) x (Q5-Q2) .

Exam 8: Application: the Costs of Taxation

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 sellers is

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Consider a good to which a per-unit tax applies.The size of the deadweight that results from the tax is smaller,the

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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 tax results in a loss of producer surplus that amounts to

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If the size of a tax triples,the deadweight loss increases by a factor of six.

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Figure 8-11 -Refer to Figure 8-11.Neither a shift of the demand curve nor a shift of the supply curve is shown on the figure.However,we know that,when the tax is imposed,

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

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If the tax on a good is tripled,the deadweight loss of the tax

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Suppose a tax of $0.50 per unit on a good creates a deadweight loss of $100.If the tax is increased to $2.50 per unit,the deadweight loss from the new tax would be

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Figure 8-10 -Refer to Figure 8-10.Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2.The deadweight loss of the tax is

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Figure 8-19.The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-19.If the economy is at point A on the curve,then a decrease in the tax rate will

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Sellers of a product will bear the larger part of the tax burden,and buyers will bear a smaller part of the tax burden,when the

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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 J+K+I represents

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Figure 8-7 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-7.Which of the following statements summarizes the incidence of the tax?

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Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3.The loss in producer surplus caused by the tax is measured by the area

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

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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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The more freedom young mothers have to work outside the home,the

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Anger over British taxes played a significant role in bringing about the

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The benefit that government receives from a tax is measured by

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Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8.After the tax goes into effect,consumer surplus is the area

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

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