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Exam 8: Application: the Costs of Taxation

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Question 231

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Labor taxes may distort labor markets greatly if

A) labor supply is highly inelastic.
B) many workers choose to work 40 hours per week regardless of their earnings.
C) the number of hours many part-time workers want to work is very sensitive to the wage rate.
D) "underground" workers do not respond to changes in the wages of legal jobs because they prefer not to pay taxes.

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

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Question 232

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

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) B) and C)

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Question 233

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The more inelastic are demand and supply, the greater is the deadweight loss of a tax.

Economists use the government's tax revenue to measure the public benefit from a tax.

Figure 8-10 -Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. Without the tax, the total surplus is

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

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, buyers effectively pay what amount of the $10 tax?

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2. The loss of producer surplus for those sellers of the good who continue to sell it after the tax is imposed is

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

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

Figure 8-5 Suppose that the government imposes a tax of P3 - P1. -Refer to Figure 8-5. The tax causes a reduction in producer surplus that is represented by area

Figure 8-8 Suppose the government imposes a $10 per unit tax on a good. -Refer to Figure 8-8. The government collects tax revenue that is the area

For widgets, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. A tax of $15 per unit is imposed on widgets. The tax reduces the equilibrium quantity in the market by 300 units. The deadweight loss from the tax is

Figure 8-11 -Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then, when the tax is imposed,

Figure 8-1 -Refer to Figure 8-1. Suppose the government imposes a tax of P' - P'''. The area measured by J+K+L+M represents

If a tax shifts the supply curve upward (or to the left) , we can infer that the tax was levied on

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

Suppose Rebecca needs a dog sitter so that she can travel to her sister's wedding. Rebecca values dog sitting for the weekend at $200. Susan is willing to dog sit for Rebecca so long as she receives at least $175. Rebecca and Susan agree on a price of $185. Suppose the government imposes a tax of $30 on dog sitting. The tax has made Rebecca and Susan worse off by a total of

Figure 8-6 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-6. Without a tax, consumer surplus in this market is

Figure 8-2 The vertical distance between points A and B represents a tax in the market. -Refer to Figure 8-2. The loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is