Question 1

Figure 8-11 
-Refer to Figure 8-11. The price labeled as P2 on the vertical axis represents the

Accepted Answer

A)   difference between the price paid by buyers after the tax is imposed and the price paid by buyers before the tax is imposed.
B)   difference between the price received by sellers before the tax is imposed and the price received by sellers after the tax is imposed.
C)   price of the good before the tax is imposed.
D)   price of the good after the tax is imposed.E) A) and B)
F) None of the above

Question 2

Which of the following statements is correct regarding a tax on a good and the resulting deadweight loss?

Accepted Answer

A)   The greater are the price elasticities of supply and demand, the greater is the deadweight loss.
B)   The greater is the price elasticity of supply and the smaller is the price elasticity of demand, the greater is the deadweight loss.
C)   The smaller are the decreases in quantity demanded and quantity supplied, the greater the deadweight loss.
D)   The smaller is the wedge between the effective price to sellers and the effective price to buyers, the greater is the deadweight loss.E) A) and B)
F) C) and D)

Question 3

As the size of a tax increases, the government's tax revenue rises, then falls.

Accepted Answer

A) True 
 B)False

Question 4

The larger the deadweight loss from taxation, the larger the cost of government programs.

Accepted Answer

A) True 
 B)False

Question 5

When a tax is imposed on buyers, consumer surplus decreases but producer surplus increases.

Accepted Answer

A) True 
 B)False

Question 6

When a good is taxed, the tax revenue collected by the government equals the decrease in the welfare of buyers and sellers caused by the tax.

Accepted Answer

A) True 
 B)False

Question 7

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.E) B) and C)
F) A) and D)

Question 8

Scenario 8-1
Erin would be willing to pay as much as $100 per week to have her house cleaned. Ernesto's opportunity cost of cleaning Erin's house is $70 per week.
-Refer to Scenario 8-1. If Erin pays Ernesto $90 to clean her house, Erin's consumer surplus is

Accepted Answer

A)   $80.
B)   $30.
C)   $20.
D)   $10.E) A) and B)
F) All of the above

Question 9

In which of the following instances would the deadweight loss of the tax on airline tickets increase by a factor of 9?

Accepted Answer

A)   The tax on airline tickets increases from $20 per ticket to $60 per ticket.
B)   The tax on airline tickets increases from $20 per ticket to $90 per ticket.
C)   The tax on airline tickets increases from $15 per ticket to $60 per ticket.
D)   The tax on airline tickets increases from $15 per ticket to $135 per ticket.E) C) and D)
F) All of the above

Question 10

Taxes on labor tend to encourage second earners to stay at home rather than work in the labor force.

Accepted Answer

A) True 
 B)False

Question 11

Figure 8-13 
-Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The per-unit burden of the tax on sellers is

Accepted Answer

A)   $1.
B)   $2.
C)   $3.
D)   $5.E) A) and B)
F) C) and D)

Question 12

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The imposition of the tax causes the price paid by buyers to increase by

Accepted Answer

A)   $20.
B)   $200.
C)   $300.
D)   $500.E) None of the above
F) A) and B)

Question 13

Figure 8-28 
-Refer to Figure 8-28. Suppose that Market A is characterized by Demand 1 and Supply 1, and Market B is characterized by Demand 1 and Supply 2. If an identical tax is imposed on each market, the tax will create a larger deadweight loss in which market? Explain.

Accepted Answer

The deadweight loss will be larger in Ma...

Question 14

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 15

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.E) B) and C)
F) A) and B)

Question 16

Figure 8-8
Suppose the government imposes a $10 per unit tax on a good. 
-Refer to Figure 8-8. The government collects tax revenue that is the area

Accepted Answer

A)   L.
B)   B+D.
C)   C+F.
D)   F+G+L.E) All of the above
F) A) and B)

Question 17

Figure 8-2
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-2. The imposition of the tax causes the price received by sellers to

Accepted Answer

A)   decrease by $2.
B)   increase by $3.
C)   decrease by $4.
D)   increase by $5.E) A) and B)
F) C) and D)

Question 18

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The imposition of the tax causes the price paid by buyers to

Accepted Answer

A)   increase from $600 to $800.
B)   increase from $300 to $800.
C)   decrease from $600 to $300.
D)   remain unchanged at $600.E) A) and D)
F) A) and B)

Question 19

The benefit to sellers of participating in a market is measured by the

Accepted Answer

A)   amount of taxes collected on sales of the good.
B)   producer surplus.
C)   amount sellers receive for their product.
D)   sellers' willingness to sell.E) A) and D)
F) None of the above

Question 20

Suppose that policymakers are considering placing a tax on either of two markets. In Market A, the tax will have a significant effect on the price consumers pay, but it will not affect equilibrium quantity very much. In Market B, the same tax will have only a small effect on the price consumers pay, but it will have a large effect on the equilibrium quantity. Other factors are held constant. In which market will the tax have a larger deadweight loss?

Accepted Answer

A)   Market A
B)   Market B
C)   The deadweight loss will be the same in both markets.
D)   There is not enough information to answer the question.E) B) and C)
F) C) and D)

Exam 8: Application: the Costs of Taxation

In which of the following instances would the deadweight loss of the tax on airline tickets increase by a factor of 9?

Correct Answer
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Figure 8-28 -Refer to Figure 8-28. Suppose that Market A is characterized by Demand 1 and Supply 1, and Market B is characterized by Demand 1 and Supply 2. If an identical tax is imposed on each market, the tax will create a larger deadweight loss in which market? Explain.

Correct Answer
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The deadweight loss will be larger in Ma...
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Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. The government collects tax revenue that is the area

Correct Answer
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Figure 8-13 -Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The per-unit burden of the tax on sellers is

Correct Answer
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When a tax is imposed on buyers, consumer surplus decreases but producer surplus increases.

Correct Answer
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Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The imposition of the tax causes the price paid by buyers to increase by

Correct Answer
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The larger the deadweight loss from taxation, the larger the cost of government programs.

Correct Answer
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Correct Answer
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When a good is taxed, the tax revenue collected by the government equals the decrease in the welfare of buyers and sellers caused by the tax.

Correct Answer
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Scenario 8-1 Erin would be willing to pay as much as $100 per week to have her house cleaned. Ernesto's opportunity cost of cleaning Erin's house is $70 per week. -Refer to Scenario 8-1. If Erin pays Ernesto $90 to clean her house, Erin's consumer surplus is

Correct Answer
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Figure 8-11 -Refer to Figure 8-11. The price labeled as P2 on the vertical axis represents the

Correct Answer
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Which of the following statements is correct regarding a tax on a good and the resulting deadweight loss?

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

Correct Answer
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As the size of a tax increases, the government's tax revenue rises, then falls.

Correct Answer
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Deadweight loss is the

Correct Answer
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Taxes on labor tend to encourage second earners to stay at home rather than work in the labor force.

Correct Answer
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The benefit to sellers of participating in a market is measured by the

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 amount of deadweight loss associated with the tax is equal to

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 imposition of the tax causes the price received by sellers to

Correct Answer
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Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The imposition of the tax causes the price paid by buyers to

Correct Answer
verified

Exam 8: Application: the Costs of Taxation

In which of the following instances would the deadweight loss of the tax on airline tickets increase by a factor of 9?

Correct AnswerverifiedShow Answer

Figure 8-28 -Refer to Figure 8-28. Suppose that Market A is characterized by Demand 1 and Supply 1, and Market B is characterized by Demand 1 and Supply 2. If an identical tax is imposed on each market, the tax will create a larger deadweight loss in which market? Explain.

Correct AnswerverifiedThe deadweight loss will be larger in Ma...View AnswerShow Answer

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. The government collects tax revenue that is the area

Correct AnswerverifiedShow Answer

Figure 8-13 -Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The per-unit burden of the tax on sellers is

Correct AnswerverifiedShow Answer

When a tax is imposed on buyers, consumer surplus decreases but producer surplus increases.

Correct AnswerverifiedShow Answer

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The imposition of the tax causes the price paid by buyers to increase by

Correct AnswerverifiedShow Answer

The larger the deadweight loss from taxation, the larger the cost of government programs.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When a good is taxed, the tax revenue collected by the government equals the decrease in the welfare of buyers and sellers caused by the tax.

Correct AnswerverifiedShow Answer

Scenario 8-1 Erin would be willing to pay as much as $100 per week to have her house cleaned. Ernesto's opportunity cost of cleaning Erin's house is $70 per week. -Refer to Scenario 8-1. If Erin pays Ernesto $90 to clean her house, Erin's consumer surplus is

Correct AnswerverifiedShow Answer

Figure 8-11 -Refer to Figure 8-11. The price labeled as P2 on the vertical axis represents the

Correct AnswerverifiedShow Answer

Which of the following statements is correct regarding a tax on a good and the resulting deadweight loss?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

As the size of a tax increases, the government's tax revenue rises, then falls.

Correct AnswerverifiedShow Answer

Deadweight loss is the

Correct AnswerverifiedShow Answer

Taxes on labor tend to encourage second earners to stay at home rather than work in the labor force.

Correct AnswerverifiedShow Answer

The benefit to sellers of participating in a market is measured by the

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. The amount of deadweight loss associated with the tax is equal to

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 imposition of the tax causes the price received by sellers to

Correct AnswerverifiedShow Answer

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The imposition of the tax causes the price paid by buyers to

Correct AnswerverifiedShow Answer

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The deadweight loss will be larger in Ma...
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