ECON CH8

The loss of consumer surplus associated with some buyers dropping out of the market as a result of the tax is A. $0. B. $1.50. C. $3. D. $4.50.

B

The per-unit burden of the tax on buyers is A.$2. B.$3. C. $4. D. $5.

B

Total surplus without the tax is A. $10, and total surplus with the tax is $2.50. B. $10, and total surplus with the tax is $7.50. C. $20, and total surplus with the tax is $2.50. D. $20, and total surplus with the tax is $7.50.

B

When a tax is imposed on a good for which the demand is relatively elastic and the supply is relatively inelastic, A. buyers of the good will bear most of the burden of the tax. B. sellers of the good will bear most of the burden of the tax. C. buyers and sellers will each bear 50 percent of the burden of the tax. D. the effective price paid by buyers will decrease as a result of the tax.

B

When the tax is imposed in this market, producer surplus is A. $450. B. $600. C. $900. D. $1,500.

B

2.12 The amount of tax revenue received by the government is Question 12 options: A. $2.50. B. $4. C. $5. D.$9.

C

2.11 The price elasticities of supply and demand affect Question 11 options: A. both the size of the deadweight loss from a tax and the tax incidence. B. the size of the deadweight loss from a tax but not the tax incidence. C. the tax incidence but not the size of the deadweight loss from a tax. D. neither the size of the deadweight loss from a tax nor the tax incidence

A

2.13 Producer surplus without the tax is Question 13 options: A. $4, and producer surplus with the tax is $1. B. $4, and producer surplus with the tax is $3. C. $10, and producer surplus with the tax is $1. D. $10, and producer surplus with the tax is $3.

A

2.17 The size of the deadweight loss generated from a tax is affected by the Question 17 options: A. elasticities of both supply and demand. B elasticity of demand only. C. elasticity of supply only. D. total revenue collected by the government.

A

2.21 The per-unit burden of the tax on sellers is Question 21 options: A. $2. B. $3. C. $4. D. $5.

A

2.7 The imposition of the tax causes the price received by sellers to Question 7 options: A. decrease by $2. B. increase by $3. C. decrease by $4. D. increase by $5.

A

Consumer surplus without the tax is A. $6, and consumer surplus with the tax is $1.50. B. $6, and consumer surplus with the tax is $4.50. C. $10, and consumer surplus with the tax is $1.50. D. $10, and consumer surplus with the tax is $4.50.

A

Deadweight loss measures the loss A. in a market to buyers and sellers that is not offset by an increase in government revenue. B. in revenue to the government when buyers choose to buy less of the product because of the tax. C. of equality in a market due to government intervention. D. of total revenue to business firms due to the price wedge caused by the tax.

A

Refer to Figure 8-2. The per-unit burden of the tax on sellers is A.$2. B.$3. C.$4. D.$5.

A

Supply-side economics is a term associated with the views of A. Ronald Reagan and Arthur Laffer. B. Karl Marx. C. Bill Clinton and Greg Mankiw. D. Milton Friedman.

A

The Laffer curve relates A. the tax rate to tax revenue raised by the tax. B. the tax rate to the deadweight loss of the tax. C. the price elasticity of supply to the deadweight loss of the tax. D. government welfare payments to the birth rate.

A

The amount of deadweight loss as a result of the tax is A. $2.50. B. $5. C. $7.50. D. $10.

A

The price that sellers effectively receive after the tax is imposed is A. P1. B. P2. C. P3. D. P4.

A

The size of a tax and the deadweight loss that results from the tax are A. positively related. B. negatively related. C. independent of each other. D. equal to each other.

A

The size of the deadweight loss generated from a tax is affected by the A. elasticities of both supply and demand. B. elasticity of demand only. C. elasticity of supply only. D. total revenue collected by the government.

A

When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic, A. buyers of the good will bear most of the burden of the tax. B. sellers of the good will bear most of the burden of the tax. C. buyers and sellers will each bear 50 percent of the burden of the tax. D. both equilibrium price and quantity will increase.

A

When a tax on a good is enacted, A. buyers and sellers share the burden of the tax regardless of whether the tax is levied on buyers or on sellers. B. buyers always bear the full burden of the tax. C. sellers always bear the full burden of the tax. D. sellers bear the full burden of the tax if the tax is levied on them; buyers bear the full burden of the tax if the tax is levied on them.

A

2.1 The loss of producer surplus associated with some sellers dropping out of the market as a result of the tax is Question 1 options: A. $0. B. $1. C. $2. D. $3.

B

2.10 According to Arthur Laffer, the graph that represents the amount of tax revenue (measured on the vertical axis) as a function of the size of the tax (measured on the horizontal axis) looks like Question 10 options: A. a U. B. an upside-down U. C. a horizontal straight line. D. an upward-sloping line or curve.

B

2.18 The benefit to the government is measured by Question 18 options: A. tax revenue and is represented by area A+B. B. tax revenue and is represented by area B+D. C. the net gain in total surplus and is represented by area B+D. D. the net gain in total surplus and is represented by area C+H.

B

2.22 The imposition of the tax causes the price paid by buyers to Question 22 options: A. decrease by $2. B.increase by $3. C. decrease by $4. D. increase by $5.

B

2.23 A deadweight loss is a consequence of a tax on a good because the tax Question 23 options: 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.

B

2.8 The imposition of the tax causes the quantity sold to Question 8 options: A. increase by 1 unit. B. decrease by 1 unit. C. increase by 2 units. D. decrease by 2 units.

B

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

B

Consumer surplus before the tax was levied is represented by area A. A. B. A+B+C. C. D+H+F. D. F.

B

The benefit to the government is measured by A. tax revenue and is represented by area A+B. B. tax revenue and is represented by area B+D. C. the net gain in total surplus and is represented by area B+D. D. the net gain in total surplus and is represented by area C+H.

B

The imposition of the tax causes the price paid by buyers to A.decrease by $2. B. increase by $3. C. decrease by $4. D. increase by $5.

B

2.14 It does not matter whether a tax is levied on the buyers or the sellers of a good because Question 14 options: 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.

C

2.15 The loss of producer surplus as a result of the tax is Question 15 options: A. $1. B. $2. C. $3. D. $4.

C

2.16 Buyers of a product will bear the larger part of the tax burden, and sellers will bear a smaller part of the tax burden, when the Question 16 options: A. tax is placed on the sellers of the product. B. tax is placed on the buyers of the product. C. supply of the product is more elastic than the demand for the product. D. demand for the product is more elastic than the supply of the product.

C

2.19 If T represents the size of the tax on a good and Q represents the quantity of the good that is sold, total tax revenue received by government can be expressed as Question 19 options: A. T/Q. B. T+Q. C. TxQ. D. (TxQ)/Q.

C

2.24 The loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is Question 24 options: A.$0. B.$1.50. C.$3. D.$4.50.

C

2.25 The benefit that government receives from a tax is measured by Question 25 options: 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.

C

2.3 For an economy that is currently at point D on the curve, a decrease in the tax rate would Question 3 options: A. decrease consumer surplus. B. decrease producer surplus. C. increase tax revenue. D. increase the deadweight loss of the tax.

C

2.4 The loss of consumer surplus as a result of the tax is Question 4 options: A. $1.50. B. $3. C. $4.50. D.$6.

C

2.5 The view held by Arthur Laffer and Ronald Reagan that cuts in tax rates would encourage people to increase the quantity of labor they supplied became known as Question 5 options: A. California economics. B. welfare economics. C. supply-side economics. D. elasticity economics.

C

2.6 The amount of the tax on each unit of the good is Question 6 options: A. $1. B. $4. C. $5. D. $9.

C

If T represents the size of the tax on a good and Q represents the quantity of the good that is sold, total tax revenue received by government can be expressed as A.T/Q. B. T+Q. C. TxQ D.(TxQ)/Q.

C

The benefit that government receives from a tax is measured by 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.

C

The loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is A.$0. B. $1.50. C. $3. D. $4.50.

C

The loss of producer surplus for those sellers of the good who continue to sell it after the tax is imposed is A. $0. B. $1. C. $2. D. $3.

C

2.2 Sellers of a product will bear the larger part of the tax burden, and buyers will bear a smaller part of the tax burden, when the Question 2 options: A. tax is placed on the sellers of the product. B. tax is placed on the buyers of the product. C. supply of the product is more elastic than the demand for the product. D. demand for the product is more elastic than the supply of the product.

D

2.20 Suppose a tax is imposed on the sellers of fast-food French fries. The burden of the tax will Question 20 options: A. fall entirely on the buyers of fast-food French fries. B. fall entirely on the sellers of fast-food French fries. C. be shared equally by the buyers and sellers of fast-food French fries. D. be shared by the buyers and sellers of fast-food French fries but not necessarily equally.

D

2.9 The graph that represents the amount of deadweight loss (measured on the vertical axis) as a function of the size of the tax (measured on the horizontal axis) looks like Question 9 options: A. a U. B. an upside-down U. C. a horizontal straight line. D. an upward-sloping curve.

D

Suppose a tax is imposed on the sellers of fast-food French fries. The burden of the tax will A. fall entirely on the buyers of fast-food French fries. B. fall entirely on the sellers of fast-food French fries. C. be shared equally by the buyers and sellers of fast-food French fries. D. be shared by the buyers and sellers of fast-food French fries but not necessarily equally.

D