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Exam 8: Application: The Costs of Taxation

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Question 81

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Figure 8-12 -Refer to Figure 8-12. Suppose a $3 per-unit tax is placed on this good. The amount of deadweight loss resulting from this tax is

A) $7.50.
B) $15.00.
C) $22.50.
D) $45.00.

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Question 82

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If a tax shifts the demand curve upward (or to the right) , we can infer that the tax was levied on

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.

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Question 83

Multiple Choice

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When the government places a tax on a product, the cost of the tax to buyers and sellers

Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much tax revenue is collected after the tax is imposed?

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,

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

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. Total surplus with the tax in place is

If the tax on a good is increased from $1 per unit to $4 per unit, the deadweight loss from the tax increases by a factor of

Suppose a tax of $4 per unit is imposed on a good, and the tax causes the equilibrium quantity of the good to decrease from 2,000 units to 1,700 units. The tax decreases consumer surplus by $3,000 and decreases producer surplus by $4,400. The deadweight loss of the tax is

Figure 8-3 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-3. The price that sellers effectively receive after the tax is imposed is

Which of the following would likely have the smallest deadweight loss relative to the tax revenue?

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

Figure 8-25 -Refer to Figure 8-25. Suppose the government increases the size of the tax on this good from $4 per unit to $6 per unit. Will the tax revenue collected from the tax increase, decrease, or stay the same?

Tom walks Bethany's dog once a day for $50 per week. Bethany values this service at $60 per week, while the opportunity cost of Tom's time is $30 per week. The government places a tax of $35 per week on dog walkers. Before the tax, what is the total surplus?

When a good is taxed, the deadweight loss is larger the more elastic are demand and supply.

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 price that sellers receive is

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

Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much is the deadweight loss from this tax?

Figure 8-13 -Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The consumer surplus after this tax is

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