ECON chapter 8 practice problems

Refer to Figure 8-5 After the tax is levied, consumer surplus is represented by area a. A. b. A+B+C. c. D+H+F. d. F

a. A.

Refer to Figure 8-3 The price that sellers effectively receive after the tax is imposed is a. P1. b. P2. c. P3. d. P4.

a. P1.

In the market for widgets, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. 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 a. 25 per month. b. 50 per month. c. 75 per month. d. 100 per month

b. 50 per month.

Refer to Figure 8-2. The amount of the tax on each unit of the good is a. $1. b. $4. c. $5. d. $9

c. $5

According to the economist Milton Friedman, the "least bad" tax is a tax on a. income received from profits and interest. b. labor income. c. the value of unimproved land. d. the value of land including the improvements to the land

c. the value of unimproved land.

Taxes cause deadweight losses because they a. lead to losses in surplus for consumers and for producers that, when taken together, exceed tax revenue collected by the government. b. distort incentives to both buyers and sellers. c. prevent buyers and sellers from realizing some of the gains from trade. d. All of the above are correct.

d. All of the above are correct.

The deadweight loss from a $2 tax will be smallest in a market with a. elastic demand and elastic supply. b. elastic demand and inelastic supply. c. inelastic demand and elastic supply. d. inelastic demand and inelastic supply

d. inelastic demand and inelastic supply

If the size of a tax increases, tax revenue a. increases. b. decreases. c. remains the same. d. may increase, decrease, or remain the same

d. may increase, decrease, or remain the same

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. buyers of the good will bear most of the burden of the tax.

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

a. deadweight loss due to the tax.

Refer to Figure 8-2. The imposition of the tax causes the price received by sellers to a. decrease by $2. b. increase by $3. c. decrease by $4. d. increase by $5

a. decrease by $2.

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 tax rate to tax revenue raised by the tax.

Refer to Figure 8-1. Suppose the government imposes a tax of P'-P'''. The area measured by J+K+L+M represents a. total surplus after the tax. b. total surplus before the tax. c. deadweight loss from the tax. d. tax revenue

a. total surplus after the tax.

Refer to Figure 8-5 Consumer surplus before the tax was levied is represented by area a. A. b. A+B+C. c. D+H+F. d. F

b. A+B+C.

Refer to Figure 8-1. Suppose the government imposes a tax of P'-P'''. Total surplus after the tax is measured by the area a. I+Y. b. J+K+L+M. c. I+Y+B. d. I+J+K+L+M+Y

b. J+K+L+M.

Refer to Figure 8-3 The equilibrium price before the tax is imposed is a. P1. b. P2. c. P3. d. P4

b. P2.

Refer to Figure 8-3 The per unit burden of the tax on buyers is a. P3 -P1. b. P3-P2. c. P2-P1. d. P4-P3

b. P3-P2.

Refer to Figure 8-2. The imposition of the tax causes the quantity sold to a. increase by 1 unit. b. decrease by 1 unit. c. increase by 2 units. d. decrease by 2 units

b. decrease by 1 unit.

Refer to Figure 8-2. 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. increase by $3.

The benefit to sellers of participating in a market is measured by the a. amount of taxes collected on sales of the good. b. producer surplus. c. amount sellers receive for their product. d. sellers' willingness to se

b. producer surplus.

Refer to Figure 8-5 Producer surplus before the tax was levied is represented by area a. A. b. A+B+C. c. D+H+F. d. F.

c. D+H+F.

Refer to Figure 8-3 The per-unit burden of the tax on sellers is a. P3 -P1. b. P3-P2. c. P2-P1. d. P4-P3

c. P2-P1.

Refer to Figure 8-3 The price that buyers effectively pay after the tax is imposed is a. P1. b. P2. c. P3. d. P4

c. P3.

Which of the following scenarios is not consistent with the Laffer curve? a. The tax rate is very low, and tax revenue is very low. b. The tax rate is very high, and tax revenue is very low. c. The tax rate is very high, and tax revenue is very high. d. The tax rate is moderate (between very high and very low), and tax revenue is relatively high

c. The tax rate is very high, and tax revenue is very high.

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. TxQ.

The decrease in total surplus that results from a market distortion, such as a tax, is called a a. wedge loss. b. revenue loss. c. deadweight loss. d. consumer surplus loss

c. deadweight loss.

The deadweight loss from a $3 tax will be largest in a market with a. inelastic supply and elastic demand. b. inelastic supply and inelastic demand. c. elastic supply and elastic demand. d. elastic supply and inelastic demand

c. elastic supply and elastic demand.

Since the amount of land is fixed, the total supply of land is a. relatively elastic. b. perfectly elastic. c. perfectly inelastic. d. relatively inelastic

c. perfectly inelastic.

Refer to Figure 8-1. Suppose the government imposes a tax of P'-P'''. The area measured by M represents a. consumer surplus after the tax. b. consumer surplus before the tax. c. producer surplus after the tax. d. producer surplus before the ta

c. producer surplus after the tax.

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 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. supply of the product is more elastic than the demand for the product.

The amount of deadweight loss that results from a tax of a given size is determined by a. whether the tax is levied on buyers or sellers. b. the number of buyers in the market relative to the number of sellers. c. the price elasticities of demand and supply. d. the ratio of the tax per unit to the effective price received by seller

c. the price elasticities of demand and supply.

For good B, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. When good B is taxed, the area on the relevant supply-and-demand graph that represents a. government's tax revenue is a rectangle. b. the deadweight loss of the tax is a triangle. c. the loss of consumer surplus caused by the tax is neither a rectangle nor a triangle. d. All of the above are correct

d. All of the above are correct

Refer to Figure 8-5 The loss in total welfare that results from the tax is represented by area a. A+B+D+F. b. A+B+C. c. D+H+F. d. C+H

d. C+H

Refer to Figure 8-5 After the tax is levied, producer surplus is represented by area a. A. b. A+B+C. c. D+H+F. d. F.

d. F.

Refer to Figure 8-1. Suppose the government imposes a tax of P'-P'''. Total surplus before the tax is measured by the area a. I+Y. b. J+K+L+M. c. L+M+Y. d. I+J+K+L+M+Y

d. I+J+K+L+M+Y

Refer to Figure 8-1. Suppose the government imposes a tax of P'-P'''. The consumer surplus before the tax is measured by the area a. M. b. L+M+Y. c. J. d. J+K+I

d. J+K+I

Refer to Figure 8- 5 The tax is levied on a. buyers only. b. sellers only. c. both buyers and sellers. d. This is impossible to determine from the figure

d. This is impossible to determine from the figure

Total surplus with a tax is equal to a. consumer surplus plus producer surplus. b. consumer surplus minus producer surplus. c. consumer surplus plus producer surplus minus tax revenue. d. consumer surplus plus producer surplus plus tax revenue

d. consumer surplus plus producer surplus plus tax revenue

Suppose that the government imposes a tax on dairy products. The deadweight loss from this tax will likely be greater in the a. first year after it is imposed than in the fifth year after it is imposed because demand and supply will be more elastic in the first year than in the fifth year. b. first year after it is imposed than in the fifth year after it is imposed because demand and supply will be less elastic in the first year than in the fifth year. c. fifth year after it is imposed than in the first year after it is imposed because demand and supply will be more elastic in the first year than in the fifth year. d. fifth year after it is imposed than in the first year after it is imposed because demand and supply will be less elastic in the first year than in the fifth year

d. fifth year after it is imposed than in the first year after it is imposed because demand and supply will be less elastic in the first year than in the fifth year

In order for Henry George's single tax on land not to distort economic incentives, the tax would have to be on a. improvements to land. b. land used for commercial purposes. c. land used for residential purposes. d. raw land

d. raw land