Microeconomics Homework Ch. 8

A tax levied on the sellers of a good shifts the A. supply curve upward (or to the left). B. supply curve downward (or to the right). C. demand curve upward (or to the right). D. demand curve downward (or to the left).

A

A tax on a good A. raises the price that buyers effectively pay and lowers the price that sellers effectively receive. B. lowers the price that buyers effectively pay and lowers the price that sellers effectively receive. C. lowers the price that buyers effectively pay and raises the price that sellers effectively receive. D. raises the price that buyers effectively pay and raises the price that sellers effectively receive.

A

The equilibrium price before the tax is imposed is A. P2. B. P4. C. P1. D. P3.

A

The higher a country's tax rates, the more likely that country will be A. on the negatively sloped part of the Laffer curve. B. experiencing small deadweight losses. C. on the positively sloped part of the Laffer curve. D. at the top of the Laffer curve.

A

The tax causes a reduction in consumer surplus that is represented by area A. B+C. B. F. C. A. D. C+H.

A

What happens to the total surplus in a market when the government imposes a tax? A. Total surplus decreases. B. Total surplus increases but by less than the amount of the tax. C. Total surplus increases by the amount of the tax. D. Total surplus is unaffected by the tax.

A

When the tax is placed on this good, the quantity sold A. is 300, and buyers effectively pay $16. B. is 600, and buyers effectively pay $10. C. is 600, and buyers effectively pay $16. D. is 300, and buyers effectively pay $10.

A

After the tax is levied, consumer surplus is represented by area A. D+H+F. B. A. C. A+B+C. D. F.

B

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

B

If the government changed the per-unit tax from $5.00 to $2.50, then the price paid by buyers would be $7.50, the price received by sellers would be $5, and the quantity sold in the market would be 1.5 units. Compared to the original tax rate, this lower tax rate would A. increase government revenue and increase the deadweight loss from the tax. B. decrease government revenue and decrease the deadweight loss from the tax. C. decrease government revenue and increase the deadweight loss from the tax. D. increase government revenue and decrease the deadweight loss from the tax.

B

Panel (a) and Panel (b) each illustrate a $4 tax placed on a market. In comparison to Panel (a), Panel (b) illustrates which of the following statements? A. When demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic. B. When demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic. C. When supply is relatively elastic, the deadweight loss of a tax is larger than when supply is relatively inelastic. D. When supply is relatively inelastic, the deadweight loss of a tax is smaller than when supply is relatively elastic.

B

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

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 deadweight loss from a tax of $8 per unit will be smallest in a market with A. elastic demand and inelastic supply. B. inelastic demand and inelastic supply. C. elastic demand and elastic supply. D. inelastic demand and elastic supply.

B

The loss in total welfare that results from the tax is represented by area A. A+B+D+F. B. C+H. C. D+H+F. D. A+B+C.

B

When a tax is levied on a good, the buyers and sellers of the good share the burden, A. provided the tax is levied on the sellers. B. regardless of how the tax is levied. C. provided the tax is levied on the buyers. D. provided a portion of the tax is levied on the buyers, with the remaining portion levied on the sellers.

B

When the tax is imposed in this market, sellers effectively pay what amount of the $10 tax? A. $10 B. $4 C. $6 D. $0

B

Which of the following statements is correct? A. Supply 1 is more elastic than supply 2. B. Demand 2 is more elastic than demand 1. C. Demand 1 is more elastic than supply 1. D. All of the above are correct.

B

Without a tax, producer surplus in this market is A. $3,000. B. $2,400. C. $1,500. D. $3,600.

B

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 A. supply of the product is more elastic than the demand for the product. B. tax is placed on the sellers of the product. C. demand for the product is more elastic than the supply of the product. D. tax is placed on the buyers of the product.

C

The government's benefit from a tax can be measured by A. consumer surplus. B. producer surplus. C. tax revenue. D. All of the above are correct.

C

The original tax can be represented by the vertical distance AB. Suppose the government is deciding whether to lower the tax to CD or raise it to FG. Which of the following statements is correct? A. Compared to the original tax, the larger tax will decrease both tax revenue and deadweight loss. B. Compared to the original tax, the smaller tax will increase both tax revenue and deadweight loss. C. Compared to the original tax, the larger tax will decrease tax revenue and increase deadweight loss. D. Both a and b are correct.

C

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

C

The tax is levied on A. buyers only. B. sellers only. C. This is impossible to determine from the figure. D. both buyers and sellers.

C

To measure the gains and losses from a tax on a good, economists use the tools of A. circular-flow analysis. B. international-trade theory. C. welfare economics. D. macroeconomics.

C

When the government imposes the tax in this market, tax revenue is A. $900. B. $600. C. $3,000. D. $1,500.

C

Which of the following combinations will minimize the deadweight loss from a tax? A. supply 2 and demand 2 B. supply 2 and demand 1 C. supply 1 and demand 1 D. supply 1 and demand 2

C

Assume that for good X the supply curve for a good is a typical, upward-sloping straight line, and the demand curve is a typical downward-sloping straight line. If the good is taxed, and the tax is tripled, the A. base of the triangle that represents the deadweight loss triples. B. height of the triangle that represents the deadweight loss triples. C. deadweight loss of the tax increases by a factor of nine. D. All of the above are correct.

D

If the government changed the per-unit tax from $5.00 to $7.50, then the price paid by buyers would be $10.50, the price received by sellers would be $3, and the quantity sold in the market would be 0.5 units. Compared to the original tax rate, this higher tax rate would A. decrease government revenue and decrease the deadweight loss from the tax. B. increase government revenue and increase the deadweight loss from the tax. C. increase government revenue and decrease the deadweight loss from the tax. D. decrease government revenue and increase the deadweight loss from the tax.

D

If the size of a tax increases, tax revenue A. decreases. B. increases. C. remains the same. D. may increase, decrease, or remain the same.

D

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

D

The tax results in a deadweight loss that amounts to A. $900. B. $1,800. C. $600. D. $1,500.

D

The total surplus with the tax is represented by area A. A+B+C. B. D+H+F. C. C+H. D. A+B+D+F.

D

What happens to producer surplus when the tax is imposed in this market? A. Producer surplus falls by $900. B. Producer surplus falls by $2,100. C. Producer surplus falls by $600. D. Producer surplus falls by $1,800.

D

When a country is on the downward-sloping side of the Laffer curves, a cut in the tax rate will A. decrease tax revenue and increase the deadweight loss. B. decrease tax revenue and decrease the deadweight loss. C. increase tax revenue and increase the deadweight loss. D. increase tax revenue and decrease the deadweight loss.

D

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

D