Question 1

Taxes on labor encourage which of the following?

Accepted Answer

A)   labor demand to be more inelastic
B)   mothers to stay at home rather than work in the labor force
C)   workers to work overtime
D)   fathers to take on second jobs

Question 2

When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic,

Accepted Answer

A)   buyers of the good will bear most of the burden of the tax.
B)   sellers of the good will bear most of the burden of the tax.
C)   buyers and sellers will each bear 50 percent of the burden of the tax.
D)   both equilibrium price and quantity will increase.

Question 3

If a tax shifts the supply curve downward or to the right) , we can infer that the tax was levied on

Accepted Answer

A)   buyers of the good.
B)   sellers of the good.
C)   both buyers and sellers of the good.
D)   We cannot infer anything because the shift described is not consistent with a tax.

Question 4

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, buyers effectively pay

Accepted Answer

A)   $32 for each unit of the good, and sellers effectively receive $24 for each unit of the good.
B)   $32 for each unit of the good, and sellers effectively receive $16 for each unit of the good.
C)   $24 for each unit of the good, and sellers effectively receive $16 for each unit of the good.
D)   $28 for each unit of the good, and sellers effectively receive $20 for each unit of the good.

Question 5

It does not matter whether a tax is levied on the buyers or the sellers of a good because

Accepted Answer

A)   sellers always bear the full burden of the tax.
B)   buyers always bear the full burden of the tax.
C)   buyers and sellers will share the burden of the tax.
D)   None of the above is correct; the incidence of the tax does depend on whether the buyers or the sellers are required to pay the tax.

Question 6

Figure 8-6
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-6. The amount of the tax on each unit of the good is

Accepted Answer

A)   $6.
B)   $8.
C)   $10.
D)   $12.

Question 7

Figure 8-2
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-2. The loss of consumer surplus associated with some buyers dropping out of the market as a result of the tax is

Accepted Answer

A)   $0.
B)   $1.50.
C)   $3.
D)   $4.50.

Question 8

Figure 8-26 
-Refer to Figure 8-26. What are the equilibrium price and equilibrium quantity in this market?

Accepted Answer

The equilibrium pric...

Question 9

Suppose that the market for product X is characterized by a typical, downward-sloping, linear demand curve and a typical, upward-sloping, linear supply curve. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $4 tax per unit?

Accepted Answer

The deadweight loss will be $8...

Question 10

Labor taxes may distort labor markets greatly if

Accepted Answer

A)   labor supply is highly inelastic.
B)   many workers choose to work 40 hours per week regardless of their earnings.
C)   the number of hours many part-time workers want to work is very sensitive to the wage rate.
D)   "underground" workers do not respond to changes in the wages of legal jobs because they prefer not to pay taxes.

Question 11

A tax on a good causes the size of the market to increase.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

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

Question 13

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

Accepted Answer

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

Question 14

In the early 1980s, which of the following countries had a marginal tax rate of about 80 percent?

Accepted Answer

A)   United States
B)   Canada
C)   Japan
D)   Sweden

Question 15

Figure 8-12 
-Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The per-unit burden of the tax on buyers is

Accepted Answer

A)   $1.
B)   $2.
C)   $3.
D)   $4.

Question 16

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

Accepted Answer

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

Question 17

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. Assume Roland is required to pay a tax of $10 each time he mows a lawn. Which of the following results is most likely?

Accepted Answer

A)   Karla now will decide to mow her own lawn, and Roland will decide it is no longer in his interest to mow Karla's lawn.
B)   Karla still is willing to pay Roland to mow her lawn, but Roland will decline her offer.
C)   Roland still is willing to mow Karla's lawn, but Karla will decide to mow her own lawn.
D)   Roland and Karla still can engage in a mutually-agreeable trade.

Question 18

When a good is taxed, the burden of the tax

Accepted Answer

A)   falls more heavily on the side of the market that is more elastic.
B)   falls more heavily on the side of the market that is more inelastic.
C)   falls more heavily on the side of the market that is closer to unit elastic.
D)   is distributed independently of relative elasticities of supply and demand.

Question 19

Figure 8-22 
-Refer to Figure 8-22. Suppose the government initially imposes a $3 per-unit tax on this good. Now suppose the government is deciding whether to lower the tax to $1.50 or raise it to $4.50. Which of the following statements is correct?

Accepted Answer

A)   Compared to the original tax, the smaller tax will decrease both tax revenue and deadweight loss.
B)   Compared to the original tax, the larger tax will increase both tax revenue and deadweight loss.
C)   Compared to the original tax, the larger tax will decrease tax revenue and increase deadweight loss.
D)   Both a and b are correct.

Question 20

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.

Accepted Answer

A) True 
 B)False

Exam 8: Application: the Costs of Taxation

Correct Answer
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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. The loss of consumer surplus associated with some buyers dropping out of the market as a result of the tax is

Correct Answer
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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. As a result of the tax, buyers effectively pay

Correct Answer
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When a good is taxed, the burden of the tax

Correct Answer
verified

It does not matter whether a tax is levied on the buyers or the sellers of a good because

Correct Answer
verified

If a tax shifts the supply curve downward or to the right) , we can infer that the tax was levied on

Correct Answer
verified

When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic,

Correct Answer
verified

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.

Correct Answer
verified

Figure 8-22 -Refer to Figure 8-22. Suppose the government initially imposes a $3 per-unit tax on this good. Now suppose the government is deciding whether to lower the tax to $1.50 or raise it to $4.50. Which of the following statements is correct?

Correct Answer
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In the early 1980s, which of the following countries had a marginal tax rate of about 80 percent?

Correct Answer
verified

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

Correct Answer
verified

Taxes on labor encourage which of the following?

Correct Answer
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A tax on a good causes the size of the market to increase.

Correct Answer
verified

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

Correct Answer
verified

Figure 8-12 -Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The per-unit burden of the tax on buyers is

Correct Answer
verified

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. The amount of the tax on each unit of the good is

Correct Answer
verified

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

Correct Answer
verified

Figure 8-26 -Refer to Figure 8-26. What are the equilibrium price and equilibrium quantity in this market?

Correct Answer
verified
The equilibrium pric...
View Answer

Labor taxes may distort labor markets greatly if

Correct Answer
verified

Suppose that the market for product X is characterized by a typical, downward-sloping, linear demand curve and a typical, upward-sloping, linear supply curve. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $4 tax per unit?

Correct Answer
verified
The deadweight loss will be $8...
View Answer

Exam 8: Application: the Costs of Taxation

Correct AnswerverifiedShow Answer

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2. The loss of consumer surplus associated with some buyers dropping out of the market as a result of the tax is

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. As a result of the tax, buyers effectively pay

Correct AnswerverifiedShow Answer

When a good is taxed, the burden of the tax

Correct AnswerverifiedShow Answer

It does not matter whether a tax is levied on the buyers or the sellers of a good because

Correct AnswerverifiedShow Answer

If a tax shifts the supply curve downward or to the right) , we can infer that the tax was levied on

Correct AnswerverifiedShow Answer

When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic,

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Figure 8-22 -Refer to Figure 8-22. Suppose the government initially imposes a $3 per-unit tax on this good. Now suppose the government is deciding whether to lower the tax to $1.50 or raise it to $4.50. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

In the early 1980s, which of the following countries had a marginal tax rate of about 80 percent?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Taxes on labor encourage which of the following?

Correct AnswerverifiedShow Answer

A tax on a good causes the size of the market to increase.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 8-12 -Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The per-unit burden of the tax on buyers is

Correct AnswerverifiedShow Answer

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. The amount of the tax on each unit of the good is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 8-26 -Refer to Figure 8-26. What are the equilibrium price and equilibrium quantity in this market?

Correct AnswerverifiedThe equilibrium pric...View AnswerShow Answer

Labor taxes may distort labor markets greatly if

Correct AnswerverifiedShow Answer

Suppose that the market for product X is characterized by a typical, downward-sloping, linear demand curve and a typical, upward-sloping, linear supply curve. If a $2 tax per unit results in a deadweight loss of $200, how large would be the deadweight loss from a $4 tax per unit?

Correct AnswerverifiedThe deadweight loss will be $8...View AnswerShow Answer

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The equilibrium pric...
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The deadweight loss will be $8...
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