Question 1

Figure 8-6
The vertical distance between points A and B represents a tax in the market. 
-Refer to Figure 8-6. When the tax is imposed in this market, the price buyers effectively pay is

Accepted Answer

A)   $4.
B)   $6.
C)   $10.
D)   $16.E) B) and D)
F) None of the above

Question 2

Figure 8-15
 
-Refer to Figure 8-15. Panel a)  and Panel b)  each illustrate a $4 tax placed on a market. In comparison to Panel b) , Panel a)  illustrates which of the following statements?

Accepted Answer

A)   When demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic.
B)   When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic.
C)   When supply is relatively inelastic, the deadweight loss of a tax is smaller than when supply is relatively elastic.
D)   When supply is relatively elastic, the deadweight loss of a tax is larger than when supply is relatively inelastic.E) None of the above
F) B) and C)

Question 3

Figure 8-11 
-Refer to Figure 8-11. The tax revenue that the government collects equals

Accepted Answer

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

Question 4

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) B) and C)
F) None of the above

Question 5

A tax levied on the buyers of a good shifts the

Accepted Answer

A)   supply curve upward or to the left) .
B)   supply curve downward or to the right) .
C)   demand curve downward or to the left) .
D)   demand curve upward or to the right) .E) C) and D)
F) A) and D)

Question 6

It does not matter whether a tax is levied on the buyers or the sellers of a good because

Accepted Answer

A)   sellers always bear the full burden of the tax.
B)   buyers always bear the full burden of the tax.
C)   buyers and sellers will share the burden of the tax.
D)   None of the above is correct; the incidence of the tax does depend on whether the buyers or the sellers are required to pay the tax.E) A) and D)
F) A) and C)

Question 7

Taxes cause deadweight losses because taxes

Accepted Answer

A)   reduce the sum of producer and consumer surpluses by more than the amount of tax revenue.
B)   prevent buyers and sellers from realizing some of the gains from trade.
C)   cause marginal buyers and marginal sellers to leave the market, causing the quantity sold to fall.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 8

The benefit that government receives from a tax is measured by

Accepted Answer

A)   the change in the equilibrium quantity of the good.
B)   the change in the equilibrium price of the good.
C)   tax revenue.
D)   total surplus.E) A) and D)
F) None of the above

Question 9

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

Accepted Answer

A)   Aristotle
B)   George Washington
C)   Oliver Wendell Holmes, Jr.
D)   Ronald ReaganE) A) and B)
F) A) and C)

Question 10

The greater the elasticity of demand, the smaller the deadweight loss of a tax.

Accepted Answer

A) True 
 B)False

Question 11

When motorcycles are taxed and sellers of motorcycles are required to pay the tax to the government,

Accepted Answer

A)   the quantity of motorcycles bought and sold in the market is reduced.
B)   the price paid by buyers of motorcycles decreases.
C)   the demand for motorcycles decreases.
D)   there is a movement downward and to the right along the demand curve for motorcycles.E) All of the above
F) B) and C)

Question 12

When a tax is imposed on the buyers of a good, the demand curve shifts

Accepted Answer

A)   downward by the amount of the tax.
B)   upward by the amount of the tax.
C)   downward by less than the amount of the tax.
D)   upward by more than the amount of the tax.E) A) and B)
F) B) and D)

Question 13

Figure 8-16

-Refer to Figure 8-16. Panel a)  and Panel b)  each illustrate a $2 tax placed on a market. In comparison to Panel b) , Panel a)  illustrates which of the following statements?

Accepted Answer

A)   When demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic.
B)   When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic.
C)   When supply is relatively inelastic, the deadweight loss of a tax is smaller than when supply is relatively elastic.
D)   When supply is relatively elastic, the deadweight loss of a tax is larger than when supply is relatively inelastic.E) B) and C)
F) A) and B)

Question 14

Figure 8-13 
-Refer to Figure 8-13. Suppose the government places a $5 per-unit tax on this good. The consumer surplus after this tax is

Accepted Answer

A)   $80.
B)   $40.
C)   $30.
D)   $10.E) B) and C)
F) All of the above

Question 15

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

Accepted Answer

A)   J+K+I.
B)   J.
C)   M.
D)   L+M+Y.E) B) and C)
F) A) and B)

Question 16

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

Accepted Answer

A)   $20.
B)   $200.
C)   $300.
D)   $500.E) A) and B)
F) All of the above

Question 17

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

Accepted Answer

A)   increases by 50 percent.
B)   doubles.
C)   triples.
D)   quadruples.E) B) and C)
F) None of the above

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

When a good is taxed, the burden of the tax

Accepted Answer

A)   falls more heavily on the side of the market that is more elastic.
B)   falls more heavily on the side of the market that is more inelastic.
C)   falls more heavily on the side of the market that is closer to unit elastic.
D)   is distributed independently of relative elasticities of supply and demand.E) B) and C)
F) None of the above

Question 20

Tax revenues increase in direct proportion to increases in the size of the tax.

Accepted Answer

A) True 
 B)False

Exam 8: Application: The Costs of Taxation

The greater the elasticity of demand, the smaller the deadweight loss of a tax.

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When a tax is imposed on the buyers of a good, the demand curve shifts

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In 1776, the American Revolution was sparked by anger over

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It does not matter whether a tax is levied on the buyers or the sellers of a good because

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A tax levied on the buyers of a good shifts the

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Figure 8-15 -Refer to Figure 8-15. Panel a) and Panel b) each illustrate a $4 tax placed on a market. In comparison to Panel b) , Panel a) illustrates which of the following statements?

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When motorcycles are taxed and sellers of motorcycles are required to pay the tax to the government,

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

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

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The benefit that government receives from a tax is measured by

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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 per-unit burden of the tax on buyers is

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Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. When the tax is imposed in this market, the price buyers effectively pay is

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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 consumer surplus after this tax is

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Figure 8-16 -Refer to Figure 8-16. Panel a) and Panel b) each illustrate a $2 tax placed on a market. In comparison to Panel b) , Panel a) illustrates which of the following statements?

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When a good is taxed, the burden of the tax

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

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Taxes cause deadweight losses because taxes

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

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Figure 8-11 -Refer to Figure 8-11. The tax revenue that the government collects equals

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Tax revenues increase in direct proportion to increases in the size of the tax.

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