Question 1

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The consumer surplus with the tax is

Accepted Answer

A)   $2,000.
B)   $4,000.
C)   $6,000.
D)   $8,000.

Question 2

A tax of $0.25 is imposed on each bag of potato chips that is sold. The tax decreases producer surplus by $600 per day, generates tax revenue of $1,220 per day, and decreases the equilibrium quantity of potato chips by 120 bags per day. The tax

Accepted Answer

A)   decreases consumer surplus by $645 per day.
B)   decreases the equilibrium quantity from 6,000 bags per day to 5,880 bags per day.
C)   decreases total surplus from $3,000 to $1,800 per day.
D)   creates a deadweight loss of $15 per day.

Question 3

Figure 8-4
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-4. The amount of the tax on each unit of the good is

Accepted Answer

A)   $5.
B)   $7.
C)   $8.
D)   $12.

Question 4

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The loss of producer surplus as a result of the tax is

Accepted Answer

A)   $3,000.
B)   $6,000.
C)   $9,000.
D)   $12,000.

Question 5

Figure 8-8
Suppose the government imposes a $10 per unit tax on a good. 
-Refer to Figure 8-8. After the tax goes into effect, producer surplus is the area

Accepted Answer

A)   D+F+G+H+J.
B)   D+F+G+H.
C)   D+F+J.
D)   J.

Question 6

Which of the following scenarios is not consistent with the Laffer curve?

Accepted Answer

A)   The tax rate is very low, and tax revenue is very low.
B)   The tax rate is very high, and tax revenue is very low.
C)   The tax rate is very high, and tax revenue is very high.
D)   The tax rate is moderate between very high and very low) , and tax revenue is relatively high.

Question 7

Suppose the government places a per-unit tax on a good. The smaller 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)   less efficient is the tax.
D)   more equitable is the distribution of the tax burden between buyers and sellers.

Question 8

Figure 8-19
The vertical distance between points A and B represents the original tax. 
-Refer to Figure 8-19. The original tax can be represented by the vertical distance AB. Suppose the government is deciding whether to lower the tax to CD or raise it to FG. Which of the following statements is correct?

Accepted Answer

A)   Compared to the original tax, the larger tax will decrease both tax revenue and deadweight loss.
B)   Compared to the original tax, the smaller tax will increase both tax revenue and deadweight loss.
C)   Compared to the original tax, the larger tax will decrease tax revenue and increase deadweight loss.
D)   Both a and b are correct.

Question 9

One result of a tax, regardless of whether the tax is placed on the buyers or the sellers, is that the

Accepted Answer

A)   equilibrium quantity of the good is unchanged.
B)   price the buyer effectively pays is lower.
C)   supply curve for the good shifts upward by the amount of the tax.
D)   tax reduces the welfare of both buyers and sellers.

Question 10

Figure 8-24. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. 
-Refer to Figure 8-24. For an economy that is currently at point D on the curve, a decrease in the tax rate would

Accepted Answer

A)   decrease consumer surplus.
B)   decrease producer surplus.
C)   increase tax revenue.
D)   increase the deadweight loss of the tax.

Question 11

Total surplus is always equal to the sum of consumer surplus and producer surplus.

Accepted Answer

A) True 
 B)False

Question 12

A tax

Accepted Answer

A)   lowers the price buyers pay and raises the price sellers receive.
B)   raises the price buyers pay and lowers the price sellers receive.
C)   places a wedge between the price buyers pay and the price sellers receive.
D)   Both b)  and c)  are correct.

Question 13

The size of the deadweight loss generated from a tax is affected by the

Accepted Answer

A)   elasticities of both supply and demand.
B)   elasticity of demand only.
C)   elasticity of supply only.
D)   total revenue collected by the government.

Question 14

Figure 8-26 
-Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. What price will consumers pay for the good after the tax is imposed?

Accepted Answer

Consumers will pay $...

Question 15

In 2012, in The Wall Street Journal, economists Peter Diamond and Emmanuel Saez wrote that, according to their analysis, the federal government's tax revenue would be maximized if the marginal income tax rate on individuals with the highest earnings were in or near the range of

Accepted Answer

A)   10 percent to 30 percent.
B)   30 percent to 50 percent.
C)   50 percent to 70 percent.
D)   70 percent to 90 percent.

Question 16

Which of the following statements is correct?

Accepted Answer

A)   A decrease in the size of a tax always decreases the tax revenue raised by that tax.
B)   A decrease in the size of a tax always decreases the deadweight loss of that tax.
C)   Tax revenue decreases when there is a small decrease in the tax rate and the economy is on the downward- sloping part of the Laffer curve.
D)   An increase in the size of a tax leads to an increase in the deadweight loss of the tax only if the economy is on the upward-sloping part of the Laffer curve.

Question 17

Figure 8-4
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-4. The tax results in a loss of consumer surplus that amounts to

Accepted Answer

A)   $105.
B)   $140.
C)   $170.
D)   $210.

Question 18

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

Accepted Answer

A)   D+F.
B)   D+F+G.
C)   D+F+J.
D)   D+F+G+H.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements correctly describes the relationship between the size of the deadweight loss and the amount of tax revenue as the size of a tax increases from a small tax to a medium tax and finally to a large tax?

Accepted Answer

A)   Both the size of the deadweight loss and tax revenue increase.
B)   The size of the deadweight loss increases, but the tax revenue decreases.
C)   The size of the deadweight loss increases, but the tax revenue first increases, then decreases.
D)   Both the size of the deadweight loss and tax revenue decrease.

Exam 8: Application: The Costs of Taxation

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. After the tax goes into effect, producer surplus is the area

Correct Answer
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Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4. The amount of the tax on each unit of the good is

Correct Answer
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The size of the deadweight loss generated from a tax is affected by the

Correct Answer
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Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. What price will consumers pay for the good after the tax is imposed?

Correct Answer
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Consumers will pay $...
View Answer

One result of a tax, regardless of whether the tax is placed on the buyers or the sellers, is that the

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 loss of producer surplus as a result of the tax is

Correct Answer
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Figure 8-24. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-24. For an economy that is currently at point D on the curve, a decrease in the tax rate would

Correct Answer
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In 2012, in The Wall Street Journal, economists Peter Diamond and Emmanuel Saez wrote that, according to their analysis, the federal government's tax revenue would be maximized if the marginal income tax rate on individuals with the highest earnings were in or near the range of

Correct Answer
verified

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

Correct Answer
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Which of the following statements correctly describes the relationship between the size of the deadweight loss and the amount of tax revenue as the size of a tax increases from a small tax to a medium tax and finally to a large tax?

Correct Answer
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Which of the following statements is correct?

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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A tax

Correct Answer
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Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4. The tax results in a loss of consumer surplus that amounts to

Correct Answer
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A tax of $0.25 is imposed on each bag of potato chips that is sold. The tax decreases producer surplus by $600 per day, generates tax revenue of $1,220 per day, and decreases the equilibrium quantity of potato chips by 120 bags per day. The tax

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 consumer surplus with the tax is

Correct Answer
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Suppose the government places a per-unit tax on a good. The smaller the price elasticities of demand and supply for the good, the

Correct Answer
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Which of the following scenarios is not consistent with the Laffer curve?

Correct Answer
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Total surplus is always equal to the sum of consumer surplus and producer surplus.

Correct Answer
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Exam 8: Application: The Costs of Taxation

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. After the tax goes into effect, producer surplus is the area

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4. The amount of the tax on each unit of the good is

Correct AnswerverifiedShow Answer

The size of the deadweight loss generated from a tax is affected by the

Correct AnswerverifiedShow Answer

Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. What price will consumers pay for the good after the tax is imposed?

Correct AnswerverifiedConsumers will pay $...View AnswerShow Answer

One result of a tax, regardless of whether the tax is placed on the buyers or the sellers, is that the

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 loss of producer surplus as a result of the tax is

Correct AnswerverifiedShow Answer

Figure 8-24. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. -Refer to Figure 8-24. For an economy that is currently at point D on the curve, a decrease in the tax rate would

Correct AnswerverifiedShow Answer

In 2012, in The Wall Street Journal, economists Peter Diamond and Emmanuel Saez wrote that, according to their analysis, the federal government's tax revenue would be maximized if the marginal income tax rate on individuals with the highest earnings were in or near the range of

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements correctly describes the relationship between the size of the deadweight loss and the amount of tax revenue as the size of a tax increases from a small tax to a medium tax and finally to a large tax?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A tax

Correct AnswerverifiedShow Answer

Figure 8-4 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-4. The tax results in a loss of consumer surplus that amounts to

Correct AnswerverifiedShow Answer

A tax of $0.25 is imposed on each bag of potato chips that is sold. The tax decreases producer surplus by $600 per day, generates tax revenue of $1,220 per day, and decreases the equilibrium quantity of potato chips by 120 bags per day. The tax

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 consumer surplus with the tax is

Correct AnswerverifiedShow Answer

Suppose the government places a per-unit tax on a good. The smaller the price elasticities of demand and supply for the good, the

Correct AnswerverifiedShow Answer

Which of the following scenarios is not consistent with the Laffer curve?

Correct AnswerverifiedShow Answer

Total surplus is always equal to the sum of consumer surplus and producer surplus.

Correct AnswerverifiedShow Answer

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Consumers will pay $...
View Answer

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