Question 1

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

Question 2

Figure 8-4
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-4. The price that buyers effectively pay after the tax is imposed is

Accepted Answer

A)  $12.
B)  between $8 and $12.
C)  between $5 and $8.
D)  $5.E) A) and C)
F) B) and D)

Question 3

Anger over British taxes played a significant role in bringing about the

Accepted Answer

A)  election of John Adams as the second American president.
B)  American Revolution.
C)  War of 1812.
D)  "no new taxes" clause in the U.S. Constitution.E) All of the above
F) B) and C)

Question 4

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

Question 5

Which of the following ideas is the most plausible?

Accepted Answer

A)  Tax revenue is more likely to increase when a low tax rate is increased than when a high tax rate is increased.
B)  Tax revenue is less likely to increase when a low tax rate is increased than when a high tax rate is increased.
C)  Tax revenue is likely to increase by the same amount when a low tax rate is increased and when a high tax rate is increased.
D)  Decreasing a tax rate can never increase tax revenue.E) B) and D)
F) None of the above

Question 6

Figure 8-26 
-Refer to Figure 8-26. How much is producer surplus at the market equilibrium?

Accepted Answer

Producer surplus is ...

Question 7

Figure 8-25 
-Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is consumer surplus after the tax is imposed?

Accepted Answer

Consumer s...

Question 8

Which of the following statements is correct regarding the imposition of a tax on gasoline?

Accepted Answer

A)  The incidence of the tax depends upon whether the buyers or the sellers are required to remit tax payments to the government.
B)  The incidence of the tax depends upon the price elasticities of demand and supply.
C)  The amount of tax revenue raised by the tax depends upon whether the buyers or the sellers are required to remit tax payments to the government.
D)  The amount of tax revenue raised by the tax does not depend upon the amount of the tax per unit.E) None of the above
F) A) and B)

Question 9

Figure 8-25 
-Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. What price will sellers receive for the good after the tax is imposed?

Accepted Answer

Sellers will receive...

Question 10

Figure 8-1 
-Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The producer surplus before the tax is measured by the area

Accepted Answer

A)  I+J+K.
B)  I+Y.
C)  L+M+Y.
D)  M.E) None of the above
F) B) and C)

Question 11

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

Question 12

The elasticities of the supply and demand curves in the market for cigarettes affect how much a tax distorts that market.

Accepted Answer

A) True 
 B)False

Question 13

Figure 8-26 
-Refer to Figure 8-26. What are the equilibrium price and equilibrium quantity in this market?

Accepted Answer

The equilibrium pric...

Question 14

The deadweight loss from a tax of $2 per unit will be smallest in a market with

Accepted Answer

A)  inelastic supply and elastic demand.
B)  inelastic supply and inelastic demand.
C)  elastic supply and elastic demand.
D)  elastic supply and inelastic demand.E) B) and C)
F) C) and D)

Question 15

A deadweight loss is a consequence of a tax on a good because the tax

Accepted Answer

A)  induces the government to increase its expenditures.
B)  induces buyers to consume less, and sellers to produce less.
C)  increases the equilibrium price in the market.
D)  imposes a loss on buyers that is greater than the loss to sellers.E) A) and B)
F) A) and C)

Question 16

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.E) None of the above
F) A) and B)

Question 17

Figure 8-26 
-Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much is the deadweight loss from this tax?

Accepted Answer

The deadweight loss from this tax is 0.5...

Question 18

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

Accepted Answer

A)  $60
B)  $50
C)  $30
D)  $25E) None of the above
F) A) and B)

Question 19

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

Accepted Answer

A)  deadweight loss due to the tax.
B)  loss in consumer surplus due to the tax.
C)  loss in producer surplus due to the tax.
D)  total surplus before the tax.E) A) and D)
F) A) and C)

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 8: Applications: the Costs of Taxation

Figure 8-26 -Refer to Figure 8-26. What are the equilibrium price and equilibrium quantity in this market?

Correct AnswerverifiedThe equilibrium pric...View AnswerShow Answer

In 1776, the American Revolution was sparked by anger over

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The deadweight loss from a tax of $2 per unit will be smallest in a market with

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Which of the following ideas is the most plausible?

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

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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 price that buyers effectively pay after the tax is imposed is

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Figure 8-1 -Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The producer surplus before the tax is measured by the area

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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

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Which of the following statements is correct regarding the imposition of a tax on gasoline?

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The elasticities of the supply and demand curves in the market for cigarettes affect how much a tax distorts that market.

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

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

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Figure 8-26 -Refer to Figure 8-26. How much is producer surplus at the market equilibrium?

Correct AnswerverifiedProducer surplus is ...View AnswerShow Answer

Anger over British taxes played a significant role in bringing about the

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A deadweight loss is a consequence of a tax on a good because the tax

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Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. What price will sellers receive for the good after the tax is imposed?

Correct AnswerverifiedSellers will receive...View AnswerShow Answer

Figure 8-25 -Refer to Figure 8-25. Suppose the government places a $4 tax per unit on this good. How much is consumer surplus after the tax is imposed?

Correct AnswerverifiedConsumer s...View AnswerShow 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

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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 tax causes producer surplus to decrease by the area

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Figure 8-26 -Refer to Figure 8-26. Suppose the government places a $3 tax per unit on this good. How much is the deadweight loss from this tax?

Correct AnswerverifiedThe deadweight loss from this tax is 0.5...View AnswerShow Answer

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Producer surplus is ...
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Sellers will receive...
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Consumer s...
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The deadweight loss from this tax is 0.5...
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