Question 1

Which of the following quantities decrease in response to a tax on a good?

Accepted Answer

A)  the size of the market for the good, the effective price of the good paid by buyers, and consumer surplus
B)  the size of the market for the good, producer surplus, and the well-being of buyers of the good
C)  the effective price received by sellers of the good, the wedge between the effective price paid by buyers and the effective price received by sellers, and consumer surplus
D)  None of the above is necessarily correct unless we know whether the tax is levied on buyers or on sellers.

Question 2

Suppose a tax is levied on the sellers of a good;

Accepted Answer

A)  then the supply curve shifts upward by the amount of the tax.
B)  then the quantity demanded decreases for all conceivable prices of the good.
C)  this means that the sellers of the good will receive a lower price from buyers, not that the sellers are actually responsible for paying the tax to the government.
D)  All of the above are correct.

Question 3

Figure 8-5
 
-Refer to Figure 8-5.When a tax is placed on this good,the quantity sold

Accepted Answer

A)  is 600 and buyers effectively pay $10.
B)  is 300 and buyers effectively pay $10.
C)  is 600 and buyers effectively pay $16.
D)  is 300 and buyers effectively pay $16.

Question 4

Figure 8-5
 
-Refer to Figure 8-5.Without a tax,the equilibrium price and quantity are

Accepted Answer

A)  $16 and 300.
B)  $10 and 600.
C)  $10 and 300.
D)  $6 and 300.

Question 5

Figure 8-2
 
-Refer to Figure 8-2.The price that sellers effectively receive after the tax is imposed is

Accepted Answer

A)  P₁.
B)  P₂.
C)  P₃.
D)  impossible to determine from the figure.

Question 6

As the tax on a good increases from $1 per unit to $2 per unit to $3 per unit and so on,

Accepted Answer

A)  the tax revenue increases at first, but it eventually peaks and then decreases.
B)  the deadweight loss increases at first, but it eventually peaks and then decreases.
C)  the tax revenue always increases and the deadweight loss always increases.
D)  the tax revenue always decreases and the deadweight loss always increases.

Question 7

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.

Question 8

Figure 8-3
 
-Refer to Figure 8-3.The per-unit burden of the tax on buyers is

Accepted Answer

A)  $16.
B)  $14.
C)  $8.
D)  $6.

Question 9

Consider a good to which a per-unit tax applies.The greater the price elasticities of demand and supply for the good,the

Accepted Answer

A)  smaller the deadweight loss from the tax.
B)  greater the deadweight loss from the tax.
C)  more efficient is the tax.
D)  more equitable is the distribution of the tax burden between buyers and sellers.

Question 10

Figure 8-6
 
-Refer to Figure 8-6.Before the tax is imposed,

Accepted Answer

A)  the equilibrium price is $16 and the equilibrium quantity is 15.
B)  the equilibrium price is $12 and the equilibrium quantity is 25.
C)  the equilibrium price is $12 and the equilibrium quantity is 25
D)  the equilibrium price is $8 and the equilibrium quantity is 15.

Question 11

Figure 8-2
 
-Refer to Figure 8-2.The amount of tax revenue received by the government is equal to the area

Accepted Answer

A)  P₃ A C P₁.
B)  A B C.
C)  P₂ D A P₃.
D)  P₁ C D P₂.

Question 12

In 1776,the American Revolution was sparked by anger over

Accepted Answer

A)  the extravagant lifestyle of British royalty.
B)  the crimes of British soldiers stationed in the American colonies.
C)  British taxes imposed on the American colonies.
D)  the failure of the British to protect American colonists from attack by hostile Native Americans.

Question 13

During Ronald Reagan's presidency,the top tax rate on income fell from

Accepted Answer

A)  36 percent to 22 percent.
B)  50 percent to 22 percent.
C)  50 percent to 28 percent.
D)  70 percent to 28 percent.

Question 14

Figure 8-5
 
-Refer to Figure 8-5.When a tax is imposed in this market,producer surplus is

Accepted Answer

A)  $450.
B)  $600.
C)  $900.
D)  $1,500.

Question 15

Figure 8-5
 
-Refer to Figure 8-5.The tax results in a deadweight loss that amounts to

Accepted Answer

A)  $600.
B)  $900.
C)  $1,500.
D)  $1,800.

Question 16

Sellers of a product will bear the larger part of the tax burden,and buyers will bear a smaller part of the tax burden,when

Accepted Answer

A)  the tax is placed on the sellers of the product.
B)  the tax is placed on the buyers of the product.
C)  the supply of the product is more elastic than the demand for the product.
D)  the demand for the product is more elastic than the supply of the product.

Question 17

Figure 8-4
 
-Refer to Figure 8-4.The price that sellers effectively receive after the tax is imposed is

Accepted Answer

A)  P₁.
B)  P₂.
C)  P₃.
D)  impossible to determine from the figure.

Question 18

Economists generally agree that the most important tax in the U.S.economy is

Accepted Answer

A)  the income tax.
B)  the tax on labor.
C)  the inheritance or death tax.
D)  corporate profit taxes.

Question 19

Economists disagree on whether labor taxes have a small or large deadweight loss.

Accepted Answer

A) True 
 B)False

Question 20

Figure 8-4
 
-Refer to Figure 8-4.After the tax is levied,producer surplus is represented by area

Accepted Answer

A)  a.
B)  A + B + C.
C)  D + E + F.
D)  F.

Exam 8: Application: the Costs of Taxation

Suppose a tax is levied on the sellers of a good;

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Figure 8-4 -Refer to Figure 8-4.The price that sellers effectively receive after the tax is imposed is

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Which of the following ideas is the most plausible?

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During Ronald Reagan's presidency,the top tax rate on income fell from

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As the tax on a good increases from $1 per unit to $2 per unit to $3 per unit and so on,

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Figure 8-6 -Refer to Figure 8-6.Before the tax is imposed,

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Figure 8-3 -Refer to Figure 8-3.The per-unit burden of the tax on buyers is

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Consider a good to which a per-unit tax applies.The greater the price elasticities of demand and supply for the good,the

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Which of the following quantities decrease in response to a tax on a good?

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In 1776,the American Revolution was sparked by anger over

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Figure 8-5 -Refer to Figure 8-5.Without a tax,the equilibrium price and quantity are

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Figure 8-2 -Refer to Figure 8-2.The price that sellers effectively receive after the tax is imposed is

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Sellers of a product will bear the larger part of the tax burden,and buyers will bear a smaller part of the tax burden,when

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Figure 8-2 -Refer to Figure 8-2.The amount of tax revenue received by the government is equal to the area

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Figure 8-5 -Refer to Figure 8-5.When a tax is placed on this good,the quantity sold

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Figure 8-4 -Refer to Figure 8-4.After the tax is levied,producer surplus is represented by area

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Economists disagree on whether labor taxes have a small or large deadweight loss.

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Figure 8-5 -Refer to Figure 8-5.The tax results in a deadweight loss that amounts to

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Figure 8-5 -Refer to Figure 8-5.When a tax is imposed in this market,producer surplus is

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Economists generally agree that the most important tax in the U.S.economy is

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