Question 1

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) B) and D)
F) A) and B)

Question 2

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

Question 3

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

Question 4

The benefit that government receives from a tax is measured by

Accepted Answer

A)   deadweight loss.
B)   consumer surplus.
C)   tax incidence.
D)   tax revenue.E) None of the above
F) All of the above

Question 5

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.E) All of the above
F) C) and D)

Question 6

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

Accepted Answer

A)   $600.
B)   $900.
C)   $1,500.
D)   $3,000.E) None of the above
F) A) and B)

Question 7

Which of the following statements is true for markets in which the demand curve slopes downward and the supply curve slopes upward?

Accepted Answer

A)   As the size of the tax increases, tax revenue continually rises and deadweight loss continually falls.
B)   As the size of the tax increases, tax revenue and deadweight loss rise initially, but both eventually begin to fall.
C)   As the size of the tax increases, tax revenue rises initially, but it eventually begins to fall; deadweight loss continually rises.
D)   As the size of the tax increases, tax revenue rises initially, but it eventually begins to fall; deadweight loss falls initially, but eventually it begins to rise.E) A) and B)
F) A) and C)

Question 8

As more people become self-employed,which allows them to determine how many hours they work per week,we would expect the deadweight loss from the Social Security tax to

Accepted Answer

A)   increase, and the revenue generated from the tax to increase.
B)   increase, and the revenue generated from the tax to decrease.
C)   decrease, and the revenue generated from the tax to increase.
D)   decrease, and the revenue generated from the tax to decrease.E) B) and C)
F) A) and D)

Question 9

Who once said that taxes are the price we pay for a civilized society?

Accepted Answer

A)   Milton Friedman
B)   Theodore Roosevelt
C)   Arthur Laffer
D)   Oliver Wendell Holmes, Jr.E) C) and D)
F) B) and C)

Question 10

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

Accepted Answer

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

Question 11

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

Accepted Answer

A)   $1,500.
B)   $3,600.
C)   $4,500.
D)   $6,000.E) C) and D)
F) A) and D)

Question 12

When a good is taxed,

Accepted Answer

A)   both buyers and sellers of the good are made worse off.
B)   only buyers are made worse off, because they ultimately bear the burden of the tax.
C)   only sellers are made worse off, because they ultimately bear the burden of the tax.
D)   neither buyers nor sellers are made worse off, since tax revenue is used to provide goods and services that would otherwise not be provided in a market economy.E) A) and C)
F) None of the above

Question 13

Figure 8-9
The vertical distance between points A and C represent a tax in the market.
 
-Refer to Figure 8-9.The per-unit burden of the tax on sellers is

Accepted Answer

A)   $20.
B)   $200.
C)   $300.
D)   $500.E) B) and C)
F) A) and B)

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Figure 8-17
The vertical distance between points A and B represents the original tax.
 
-Refer to Figure 8-17.If the government changed the per-unit tax from $5.00 to $2.50,then the price paid by buyers would be $7.50,the price received by sellers would be $5,and the quantity sold in the market would be 1.5 units.Compared to the original tax rate,this lower tax rate would

Accepted Answer

A)   increase government revenue and increase the deadweight loss from the tax.
B)   increase government revenue and decrease the deadweight loss from the tax.
C)   decrease government revenue and increase the deadweight loss from the tax.
D)   decrease government revenue and decrease the deadweight loss from the tax.E) None of the above
F) All of the above

Question 16

To fully understand how taxes affect economic well-being,we must

Accepted Answer

A)   assume that economic well-being is not affected if all tax revenue is spent on goods and services for the people who are being taxed.
B)   compare the taxes raised in the United States with those raised in other countries, especially France.
C)   compare the reduced welfare of buyers and sellers to the amount of revenue the government raises.
D)   take into account the fact that almost all taxes reduce the welfare of buyers, increase the welfare of sellers, and raise revenue for the government.E) C) and D)
F) None of the above

Question 17

Suppose that instead of a supply-demand diagram,you are given the following information:
Qs = 100 + 3P
Qd = 400 - 2P
From this information compute equilibrium price and quantity.Now suppose that a tax is placed on buyers so that
Qd = 400 - 2(P + T).
If T = 15,solve for the new equilibrium price and quantity.(Note: P is the price received by sellers and P + T is the price paid by buyers.)Compare these answers for equilibrium price and quantity with your first answers.What does this show you?

Accepted Answer

Prior to the tax,the equilibrium price w...

Question 18

The supply curve for liquor is the typical upward-sloping straight line,and the demand curve for liquor is the typical downward-sloping straight line.When liquor is taxed,the area on the relevant supply-and-demand graph that represents the deadweight loss is

Accepted Answer

A)   larger than the area that represents consumer surplus in the absence of the tax.
B)   larger than the area that represents government's tax revenue.
C)   a triangle.
D)   All of the above are correct.E) A) and B)
F) All of the above

Question 19

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 20

Figure 8-20. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax.
 
-Refer to Figure 8-20.Suppose the figure pertains to the labor tax,and suppose also that point B represents the position on the curve of the typical European country.Then,according to a recent research paper published by the European Central Bank,the position on the curve of the U.S.would most likely be point

Accepted Answer

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

Exam 8: Application: The Costs of Taxation.

Correct Answer
verified
Prior to the tax,the equilibrium price w...
View Answer

Which of the following statements is true for markets in which the demand curve slopes downward and the supply curve slopes upward?

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

The benefit that government receives from a tax is measured by

Correct Answer
verified

To fully understand how taxes affect economic well-being,we must

Correct Answer
verified

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
verified

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

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.When the government imposes the tax in this market,tax revenue is

Correct Answer
verified

Figure 8-9 The vertical distance between points A and C represent a tax in the market. -Refer to Figure 8-9.The per-unit burden of the tax on sellers 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.Total surplus with the tax in place is

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

As more people become self-employed,which allows them to determine how many hours they work per week,we would expect the deadweight loss from the Social Security tax to

Correct Answer
verified

When a good is taxed,

Correct Answer
verified

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 Answer
verified

The supply curve for liquor is the typical upward-sloping straight line,and the demand curve for liquor is the typical downward-sloping straight line.When liquor is taxed,the area on the relevant supply-and-demand graph that represents the deadweight loss is

Correct Answer
verified

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 an increase in the tax rate will

Correct Answer
verified

Who once said that taxes are the price we pay for a civilized society?

Correct Answer
verified

Exam 8: Application: The Costs of Taxation.

Correct AnswerverifiedPrior to the tax,the equilibrium price w...View AnswerShow Answer

Which of the following statements is true for markets in which the demand curve slopes downward and the supply curve slopes upward?

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The benefit that government receives from a tax is measured by

Correct AnswerverifiedShow Answer

To fully understand how taxes affect economic well-being,we must

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

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

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 government imposes the tax in this market,tax revenue is

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 per-unit burden of the tax on sellers 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.Total surplus with the tax in place is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

As more people become self-employed,which allows them to determine how many hours they work per week,we would expect the deadweight loss from the Social Security tax to

Correct AnswerverifiedShow Answer

When a good is taxed,

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

The supply curve for liquor is the typical upward-sloping straight line,and the demand curve for liquor is the typical downward-sloping straight line.When liquor is taxed,the area on the relevant supply-and-demand graph that represents the deadweight loss is

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 an increase in the tax rate will

Correct AnswerverifiedShow Answer

Who once said that taxes are the price we pay for a civilized society?

Correct AnswerverifiedShow Answer

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verified
Prior to the tax,the equilibrium price w...
View Answer

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