Question 1

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

Accepted Answer

A)   $50
B)   $30
C)   $25
D)   $0

Question 2

Assume that for good X the supply curve for a good is a typical,upward-sloping straight line,and the demand curve is a typical downward-sloping straight line.If the good is taxed,and the tax is tripled,the

Accepted Answer

A)   base of the triangle that represents the deadweight loss triples.
B)   height of the triangle that represents the deadweight loss triples.
C)   deadweight loss of the tax increases by a factor of nine.
D)   All of the above are correct.

Question 3

Table 8-1
 
-Refer to Table 8-1.Suppose the government is considering levying a tax in one or more of the markets described in the table.Which of the markets will maximize the deadweight loss(es) from the tax?

Accepted Answer

A)   market B only
B)   markets A and C only
C)   markets B and D only
D)   market D only

Question 4

Tax revenue equals the size of the tax multiplied by the quantity sold in the market after the tax is levied.

Accepted Answer

A) True 
 B)False

Question 5

Figure 8-1 
-Refer to Figure 8-1.Suppose the government imposes a tax of P' - P'''.The area measured by J 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 6

According to Arthur Laffer,the graph that represents the amount of tax revenue (measured on the vertical axis) as a function of the size of the tax (measured on the horizontal axis) looks like

Accepted Answer

A)   a U.
B)   an upside-down U.
C)   a horizontal straight line.
D)   an upward-sloping line or curve.

Question 7

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 B on the curve,then a small 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 8

Figure 8-3
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-3.The amount of deadweight loss associated with the tax is equal to

Accepted Answer

A)   P3ACP1.
B)   ABC.
C)   P2ADP3.
D)   P1DCP2.

Question 9

Taxes are of interest to

Accepted Answer

A)   microeconomists because they consider how to balance equality and efficiency.
B)   microeconomists because they consider how best to design a tax system.
C)   macroeconomists because they consider how policymakers can use the tax system to stabilize economic activity.
D)   All of the above are correct.

Question 10

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 buyers pay is

Accepted Answer

A)   P0.
B)   P2.
C)   P5.
D)   P8.

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

When a tax is imposed on a good,the

Accepted Answer

A)   supply curve for the good always shifts.
B)   demand curve for the good always shifts.
C)   amount of the good that buyers are willing to buy at each price always remains unchanged.
D)   equilibrium quantity of the good always decreases.

Question 13

The size of a tax and the deadweight loss that results from the tax are

Accepted Answer

A)   positively related.
B)   negatively related.
C)   independent of each other.
D)   equal to each other.

Question 14

What happens to the total surplus in a market when the government imposes a tax?

Accepted Answer

A)   Total surplus increases by the amount of the tax.
B)   Total surplus increases but by less than the amount of the tax.
C)   Total surplus decreases.
D)   Total surplus is unaffected by the tax.

Question 15

When a tax is levied on buyers,the

Accepted Answer

A)   supply curves shifts upward by the amount of the tax.
B)   tax creates a wedge between the price buyers effectively pay and the price sellers receive.
C)   tax has no effect on the well-being of sellers.
D)   All of the above are correct.

Question 16

Figure 8-8
Suppose the government imposes a $10 per unit tax on a good. 
-Refer to Figure 8-8.One effect of the tax is to

Accepted Answer

A)   reduce consumer surplus by $108.
B)   reduce producer surplus by $72.
C)   create a deadweight loss of $60.
D)   All of the above are correct.

Question 17

Figure 8-6
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-6.When the tax is imposed in this market,consumer surplus is

Accepted Answer

A)   $600.
B)   $900.
C)   $1,500.
D)   $3,000.

Question 18

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 tax revenue that the tax provides to the government?

Accepted Answer

A)   Tax revenue = (P2 - P1) xQ1
B)   Tax revenue = (P3 - P1) xQ1
C)   Tax revenue = (P3 - P2) xQ1
D)   Tax revenue = (P3 - P1) x(Q2 - Q1)

Question 19

In a recent research paper published by the European Central Bank,two economists concluded that

Accepted Answer

A)   tax revenue would increase in Denmark and Sweden if tax rates on capital income were reduced in those countries.
B)   tax revenue would increase in Denmark and Sweden if tax rates on labor income were reduced in those countries.
C)   tax revenue would increase in the U.S.if tax rates on capital income were reduced in the U.S.
D)   tax revenue would increase in the U.S.if tax rates on labor income were reduced in the U.S.

Question 20

Figure 8-9
The vertical distance between points A and C represent a tax in the market. 
-Refer to Figure 8-9.The imposition of the tax causes the price received by sellers to decrease by

Accepted Answer

A)   $20.
B)   $200.
C)   $300.
D)   $500.

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 amount of deadweight loss associated with the tax is equal to

Correct AnswerverifiedShow Answer

According to Arthur Laffer,the graph that represents the amount of tax revenue (measured on the vertical axis) as a function of the size of the tax (measured on the horizontal axis) looks like

Correct AnswerverifiedShow Answer

Tax revenue equals the size of the tax multiplied by the quantity sold in the market after the tax is levied.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What happens to the total surplus in a market when the government imposes a tax?

Correct AnswerverifiedShow Answer

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 tax revenue that the tax provides to the government?

Correct AnswerverifiedShow Answer

Assume that for good X the supply curve for a good is a typical,upward-sloping straight line,and the demand curve is a typical downward-sloping straight line.If the good is taxed,and the tax is tripled,the

Correct AnswerverifiedShow Answer

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 buyers pay is

Correct AnswerverifiedShow Answer

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8.One effect of the tax is to

Correct AnswerverifiedShow Answer

Taxes are of interest to

Correct AnswerverifiedShow Answer

In a recent research paper published by the European Central Bank,two economists concluded that

Correct AnswerverifiedShow Answer

The size of a tax and the deadweight loss that results from the tax are

Correct AnswerverifiedShow Answer

When a tax is levied on buyers,the

Correct AnswerverifiedShow Answer

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 B on the curve,then a small decrease in the tax rate will

Correct AnswerverifiedShow Answer

Figure 8-9 The vertical distance between points A and C represent a tax in the market. -Refer to Figure 8-9.The imposition of the tax causes the price received by sellers to decrease by

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

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.When the tax is imposed in this market,consumer surplus is

Correct AnswerverifiedShow Answer

Table 8-1 -Refer to Table 8-1.Suppose the government is considering levying a tax in one or more of the markets described in the table.Which of the markets will maximize the deadweight loss(es) from the tax?

Correct AnswerverifiedShow Answer

When a tax is imposed on a good,the

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified