Question 1

Because taxes distort incentives,they cause markets to allocate resources inefficiently.

Accepted Answer

A) True 
 B)False

Question 2

Figure 8-3
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-3.The equilibrium price before the tax is imposed is

Accepted Answer

A)   P1.
B)   P2.
C)   P3.
D)   P4.E) A) and D)
F) A) and C)

Question 3

The deadweight loss from a tax

Accepted Answer

A)   does not vary in amount when the price elasticity of demand changes.
B)   does not vary in amount when the amount of the tax per unit changes.
C)   is larger,the larger is the amount of the tax per unit.
D)   is smaller,the larger is the amount of the tax per unit.E) A) and B)
F) None of the above

Question 4

When the price of a good is measured in dollars,then the size of the deadweight loss that results from taxing that good is measured in

Accepted Answer

A)   units of the good that is being taxed.
B)   units of a related good that is not being taxed.
C)   dollars.
D)   percentage change.E) A) and B)
F) None of the above

Question 5

Which of the following ideas is the most plausible?

Accepted Answer

A)   Reducing a high tax rate is less likely to increase tax revenue than is reducing a low tax rate.
B)   Reducing a high tax rate is more likely to increase tax revenue than is reducing a low tax rate.
C)   Reducing a high tax rate will have the same effect on tax revenue as reducing a low tax rate.
D)   Reducing a tax rate can never increase tax revenue.E) B) and C)
F) A) and C)

Question 6

When a tax is imposed on sellers,consumer surplus and producer surplus both decrease.

Accepted Answer

A) True 
 B)False

Question 7

Figure 8-9 
-Refer to Figure 8-9.Which of the following combinations will minimize the deadweight loss from a tax?

Accepted Answer

A)   supply 1 and demand 1
B)   supply 2 and demand 2
C)   supply 1 and demand 2
D)   supply 2 and demand 1E) None of the above
F) A) and C)

Question 8

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.E) C) and D)
F) None of the above

Question 9

When a tax is levied on a good,the buyers and sellers of the good share the burden,

Accepted Answer

A)   provided the tax is levied on the sellers.
B)   provided the tax is levied on the buyers.
C)   provided a portion of the tax is levied on the buyers,with the remaining portion levied on the sellers.
D)   regardless of how the tax is levied.E) A) and B)
F) B) and D)

Question 10

Deadweight loss is the

Accepted Answer

A)   decline in total surplus that results from a tax.
B)   decline in government revenue when taxes are reduced in a market.
C)   decline in consumer surplus when a tax is placed on buyers.
D)   loss of profits to business firms when a tax is imposed.E) B) and D)
F) None of the above

Question 11

The elasticities of the supply and demand curves in the market for cigarettes affect how much a tax distorts that market.

Accepted Answer

A) True 
 B)False

Question 12

Use the following graph shown to fill in the table that follows.

Accepted Answer

The answer of Use the following graph shown to fill...

Question 13

A decrease in the size of a tax is most likely to increase tax revenue in a market with

Accepted Answer

A)   elastic demand and elastic supply.
B)   elastic demand and inelastic supply.
C)   inelastic demand and elastic supply.
D)   inelastic demand and inelastic supply.E) B) and D)
F) C) and D)

Question 14

A tax on a good

Accepted Answer

A)   raises the price that buyers effectively pay and raises the price that sellers effectively receive.
B)   raises the price that buyers effectively pay and lowers the price that sellers effectively receive.
C)   lowers the price that buyers effectively pay and raises the price that sellers effectively receive.
D)   lowers the price that buyers effectively pay and lowers the price that sellers effectively receive.E) A) and C)
F) B) and C)

Question 15

A tax on insulin is likely to cause a very large deadweight loss to society.

Accepted Answer

A) True 
 B)False

Question 16

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 is correct?

Accepted Answer

A)   Total surplus before the tax is imposed is $250.
B)   After the tax is imposed,consumer surplus is 45 percent of its pre-tax value.
C)   After the tax is imposed,producer surplus is 45 percent of its pre-tax value.
D)   All of the above are correct.E) A) and B)
F) B) and C)

Question 17

Diana is a personal trainer whose client Charles pays $80 per hour-long session.Charles values this service at $100 per hour,while the opportunity cost of Diana's time is $75 per hour.The government places a tax of $10 per hour on personal trainers.After the tax,what is likely to happen in the market for personal training?

Accepted Answer

A)   Diana and Charles will agree to a new price somewhere between $85 and $100.
B)   Diana and Charles will agree to a new price somewhere between $70 and $110.
C)   Diana will no longer offer personal training services to Charles because she must charge more than $100 in order to cover her opportunity costs and pay the tax.
D)   The price will remain at $80,and Diana will pay the $10 tax.E) A) and B)
F) All of the above

Question 18

Figure 8-9 
-Refer to Figure 8-9.Which of the following statements is correct?

Accepted Answer

A)   Supply 1 is more elastic than supply 2.
B)   Demand 2 is more elastic than demand 1.
C)   Demand 1 is more elastic than supply 1.
D)   All of the above are correct.E) A) and B)
F) B) and C)

Question 19

In countries with higher tax rates,people tend to

Accepted Answer

A)   have higher standards of living.
B)   take fewer vacations.
C)   work less.
D)   pay less into Social Security.E) None of the above
F) A) and B)

Question 20

Suppose a tax of $3 per unit is imposed on a good.The supply curve is a typical upward-sloping straight line,and the demand curve is a typical downward-sloping straight line.The tax decreases consumer surplus by $3,900 and decreases producer surplus by $3,000.The tax generates tax revenue of $6,000.The tax decreased the equilibrium quantity of the good from

Accepted Answer

A)   2,000 to 1,500.
B)   2,400 to 2,000.
C)   2,600 to 2,000.
D)   3,000 to 2,400.E) B) and D)
F) All of the above

Exam 8: Application: The Costs of Taxation

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 is correct?

Correct Answer
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When a tax is imposed on sellers,consumer surplus and producer surplus both decrease.

Correct Answer
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Correct Answer
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Figure 8-9 -Refer to Figure 8-9.Which of the following statements is correct?

Correct Answer
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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 equilibrium price before the tax is imposed is

Correct Answer
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Deadweight loss is the

Correct Answer
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Figure 8-9 -Refer to Figure 8-9.Which of the following combinations will minimize the deadweight loss from a tax?

Correct Answer
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Which of the following ideas is the most plausible?

Correct Answer
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A tax on a good

Correct Answer
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The deadweight loss from a tax

Correct Answer
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A decrease in the size of a tax is most likely to increase tax revenue in a market with

Correct Answer
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When the price of a good is measured in dollars,then the size of the deadweight loss that results from taxing that good is measured in

Correct Answer
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A tax on insulin is likely to cause a very large deadweight loss to society.

Correct Answer
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When a tax is levied on a good,the buyers and sellers of the good share the burden,

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

Correct Answer
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Use the following graph shown to fill in the table that follows.

Correct Answer
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In countries with higher tax rates,people tend to

Correct Answer
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Because taxes distort incentives,they cause markets to allocate resources inefficiently.

Correct Answer
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The elasticities of the supply and demand curves in the market for cigarettes affect how much a tax distorts that market.

Correct Answer
verified

Exam 8: Application: The Costs of Taxation

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 is correct?

Correct AnswerverifiedShow Answer

When a tax is imposed on sellers,consumer surplus and producer surplus both decrease.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 8-9 -Refer to Figure 8-9.Which of the following statements is correct?

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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 equilibrium price before the tax is imposed is

Correct AnswerverifiedShow Answer

Deadweight loss is the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 8-9 -Refer to Figure 8-9.Which of the following combinations will minimize the deadweight loss from a tax?

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Which of the following ideas is the most plausible?

Correct AnswerverifiedShow Answer

A tax on a good

Correct AnswerverifiedShow Answer

The deadweight loss from a tax

Correct AnswerverifiedShow Answer

A decrease in the size of a tax is most likely to increase tax revenue in a market with

Correct AnswerverifiedShow Answer

When the price of a good is measured in dollars,then the size of the deadweight loss that results from taxing that good is measured in

Correct AnswerverifiedShow Answer

A tax on insulin is likely to cause a very large deadweight loss to society.

Correct AnswerverifiedShow Answer

When a tax is levied on a good,the buyers and sellers of the good share the burden,

Correct AnswerverifiedShow Answer

When a good is taxed,the burden of the tax

Correct AnswerverifiedShow Answer

Use the following graph shown to fill in the table that follows.

Correct AnswerverifiedShow Answer

In countries with higher tax rates,people tend to

Correct AnswerverifiedShow Answer

Because taxes distort incentives,they cause markets to allocate resources inefficiently.

Correct AnswerverifiedShow Answer

The elasticities of the supply and demand curves in the market for cigarettes affect how much a tax distorts that market.

Correct AnswerverifiedShow Answer

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