Question 1

Oliver Wendell Holmes once said taxes

Accepted Answer

A)  are the price we pay for a civilized society.
B)  are a fact of life.
C)  cannot be escaped unless you are in jail.
D)  can be avoided only by the rich.

Question 2

If a tax did not induce buyers or sellers to change their behavior,it would not cause a deadweight loss.

Accepted Answer

A) True 
 B)False

Question 3

Suppose the equilibrium quantity in the market for widgets is 200 per month when there is no tax.Then a tax of $5 per widget is imposed.As a result,the government is able to raise $750 per month in tax revenue.We can conclude that the equilibrium quantity of widgets has fallen by

Accepted Answer

A)  25 per month.
B)  50 per month.
C)  75 per month.
D)  100 per month.

Question 4

Figure 8-5
 
-Refer to Figure 8-5.What happens to producer surplus when a tax is imposed in this market?

Accepted Answer

A)  It falls by $600.
B)  It falls by $900.
C)  It falls by $1,800.
D)  It falls by $2,100.

Question 5

Anger over British taxes played a significant role in bringing about

Accepted Answer

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

Question 6

If the tax on a good is increased from $0.10 per unit to $0.40 per unit,the deadweight loss from the tax

Accepted Answer

A)  remains constant.
B)  increases by a factor of 4.
C)  increases by a factor of 9.
D)  increases by a factor of 16.

Question 7

Figure 8-2
 
-Refer to Figure 8-2.The amount of deadweight loss associated with the tax is equal to

Accepted Answer

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

Question 8

Figure 8-7 The graph below represents a $10 per unit tax on a good. On the graph, Q represents quantity and P represents price.
 
-Refer to Figure 8-7.The deadweight loss of the tax is represented by the area

Accepted Answer

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

Question 9

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) .

Question 10

Figure 8-5
 
-Refer to Figure 8-5.Total surplus with the tax in place is

Accepted Answer

A)  $1,500.
B)  $3,600.
C)  $4,500.
D)  $6,000.

Question 11

Figure 8-5
 
-Refer to Figure 8-5.Without a tax,total surplus in this market is

Accepted Answer

A)  $3,000.
B)  $4,800.
C)  $6,000.
D)  $7,200.

Question 12

Scenario 8-2
Tom mows Stephanie's lawn for $25. Tom's opportunity cost of mowing Stephanie's lawn is $20, and Stephanie's willingness to pay Tom to mow her lawn is $28.
-Refer to Scenario 8-2.Assume Ryan is required to pay a tax of $10 each time he mows a lawn.Which of the following results is most likely?

Accepted Answer

A)  Stephanie now will decide to mow her own lawn, and Ryan will decide it is no longer in his interest to mow Stephanie's lawn.
B)  Stephanie still is willing to pay Ryan to mow her lawn, but Ryan will decline her offer.
C)  Ryan still is willing to mow Stephanie's lawn, but Stephanie will decide to mow her own lawn.
D)  Ryan and Stephanie still can engage in a mutually-agreeable trade.

Question 13

A tax on raw land causes

Accepted Answer

A)  a large deadweight loss.
B)  no deadweight loss.
C)  landlords to bear none of the burden of the tax.
D)  the generation of such a large amount of tax revenue that all other taxes could be eliminated.

Question 14

Suppose a tax of $4 per unit is imposed on a good,and the tax causes the equilibrium quantity of the good to decrease from 2,000 units to 1,700 units.The tax decreases consumer surplus by $3,000 and it decreases producer surplus by $4,400.The deadweight loss of the tax is

Accepted Answer

A)  $200.
B)  $400.
C)  $600.
D)  $1,200.

Question 15

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

Accepted Answer

A)  units of the good that is being taxed.
B)  units of another good that is not being taxed.
C)  dollars.
D)  abstract units of measurement that reflect the well-being of the society.

Question 16

The result of the large tax cuts in the first Reagan Administration demonstrated very convincingly that Arthur Laffer was correct when he asserted that cuts in tax rates would increase tax revenue.

Accepted Answer

A) True 
 B)False

Question 17

Deadweight loss is the

Accepted Answer

A)  decline in total surplus that results from a tax.
B)  decline in government revenue when taxes are reduced in a market.
C)  decline in consumer surplus when a tax is placed on buyers.
D)  loss of profits to business firms when a tax is imposed.

Question 18

Studies indicate that if income tax rates in Sweden had been reduced from their high 1980s levels,income tax collections would have

Accepted Answer

A)  decreased moderately.
B)  decreased significantly.
C)  risen.
D)  remained roughly constant.

Question 19

Figure 8-3
 
-Refer to Figure 8-3.The equilibrium price before the tax is imposed is

Accepted Answer

A)  $24 and the equilibrium quantity is 70.
B)  $16 and the equilibrium quantity is 100.
C)  $10 and the equilibrium quantity is 70.
D)  $8 and the equilibrium quantity is 100.

Question 20

Scenario 8-2
Tom mows Stephanie's lawn for $25. Tom's opportunity cost of mowing Stephanie's lawn is $20, and Stephanie's willingness to pay Tom to mow her lawn is $28.
-Refer to Scenario 8-2.Assume Ryan is required to pay a tax of $3 each time he mows a lawn.Which of the following results is most likely?

Accepted Answer

A)  Stephanie now will decide to mow her own lawn, and Ryan will decide it is no longer in his interest to mow Stephanie's lawn.
B)  Stephanie still is willing to pay Ryan to mow her lawn, but Ryan will decline her offer.
C)  Ryan still is willing to mow Stephanie's lawn, but Stephanie will decide to mow her own lawn.
D)  Ryan and Stephanie still can engage in a mutually-agreeable trade.

Exam 8: Application: the Costs of Taxation

Deadweight loss is the

Correct Answer
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Correct Answer
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Anger over British taxes played a significant role in bringing about

Correct Answer
verified

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

Correct Answer
verified

Suppose a tax of $4 per unit is imposed on a good,and the tax causes the equilibrium quantity of the good to decrease from 2,000 units to 1,700 units.The tax decreases consumer surplus by $3,000 and it decreases producer surplus by $4,400.The deadweight loss of the tax is

Correct Answer
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Oliver Wendell Holmes once said taxes

Correct Answer
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If a tax did not induce buyers or sellers to change their behavior,it would not cause a deadweight loss.

Correct Answer
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A tax on raw land causes

Correct Answer
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Correct Answer
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Figure 8-5 -Refer to Figure 8-5.Without a tax,total surplus in this market is

Correct Answer
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Figure 8-7 The graph below represents a $10 per unit tax on a good. On the graph, Q represents quantity and P represents price. -Refer to Figure 8-7.The deadweight loss of the tax is represented by the area

Correct Answer
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If the tax on a good is increased from $0.10 per unit to $0.40 per unit,the deadweight loss from the tax

Correct Answer
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Figure 8-5 -Refer to Figure 8-5.Total surplus with the tax in place is

Correct Answer
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Figure 8-2 -Refer to Figure 8-2.The amount of deadweight loss associated with the tax is equal to

Correct Answer
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Figure 8-3 -Refer to Figure 8-3.The equilibrium price before the tax is imposed is

Correct Answer
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Figure 8-5 -Refer to Figure 8-5.What happens to producer surplus when a tax is imposed in this market?

Correct Answer
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Suppose the equilibrium quantity in the market for widgets is 200 per month when there is no tax.Then a tax of $5 per widget is imposed.As a result,the government is able to raise $750 per month in tax revenue.We can conclude that the equilibrium quantity of widgets has fallen by

Correct Answer
verified

The result of the large tax cuts in the first Reagan Administration demonstrated very convincingly that Arthur Laffer was correct when he asserted that cuts in tax rates would increase tax revenue.

Correct Answer
verified

Studies indicate that if income tax rates in Sweden had been reduced from their high 1980s levels,income tax collections would have

Correct Answer
verified

A tax levied on the buyers of a good shifts the

Correct Answer
verified

Exam 8: Application: the Costs of Taxation

Deadweight loss is the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Anger over British taxes played a significant role in bringing about

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose a tax of $4 per unit is imposed on a good,and the tax causes the equilibrium quantity of the good to decrease from 2,000 units to 1,700 units.The tax decreases consumer surplus by $3,000 and it decreases producer surplus by $4,400.The deadweight loss of the tax is

Correct AnswerverifiedShow Answer

Oliver Wendell Holmes once said taxes

Correct AnswerverifiedShow Answer

If a tax did not induce buyers or sellers to change their behavior,it would not cause a deadweight loss.

Correct AnswerverifiedShow Answer

A tax on raw land causes

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 8-5 -Refer to Figure 8-5.Without a tax,total surplus in this market is

Correct AnswerverifiedShow Answer

Figure 8-7 The graph below represents a $10 per unit tax on a good. On the graph, Q represents quantity and P represents price. -Refer to Figure 8-7.The deadweight loss of the tax is represented by the area

Correct AnswerverifiedShow Answer

If the tax on a good is increased from $0.10 per unit to $0.40 per unit,the deadweight loss from the tax

Correct AnswerverifiedShow Answer

Figure 8-5 -Refer to Figure 8-5.Total surplus with the tax in place is

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Figure 8-2 -Refer to Figure 8-2.The amount of deadweight loss associated with the tax is equal to

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Figure 8-3 -Refer to Figure 8-3.The equilibrium price before the tax is imposed is

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Figure 8-5 -Refer to Figure 8-5.What happens to producer surplus when a tax is imposed in this market?

Correct AnswerverifiedShow Answer

Suppose the equilibrium quantity in the market for widgets is 200 per month when there is no tax.Then a tax of $5 per widget is imposed.As a result,the government is able to raise $750 per month in tax revenue.We can conclude that the equilibrium quantity of widgets has fallen by

Correct AnswerverifiedShow Answer

The result of the large tax cuts in the first Reagan Administration demonstrated very convincingly that Arthur Laffer was correct when he asserted that cuts in tax rates would increase tax revenue.

Correct AnswerverifiedShow Answer

Studies indicate that if income tax rates in Sweden had been reduced from their high 1980s levels,income tax collections would have

Correct AnswerverifiedShow Answer

A tax levied on the buyers of a good shifts the

Correct AnswerverifiedShow Answer

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