CH 8 MICRO-ECON QUIZ

Suppose the government imposes a tax on cheese. The deadweight loss from this tax will likely be greater in the

eighth 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 eighth year.

When a country is on the downward-sloping side of the Laffer curves, a cut in the tax rate will

increase tax revenue and decrease the deadweight loss.

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

$2,250.

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

$2.

Refer to Figure 8-2. Producer surplus without the tax is

$4, and producer surplus with the tax is $1.

Refer to Figure 8-2. The amount of the tax on each unit of the good is

$5.

If the tax on a good is increased from $1 per unit to $4 per unit, the deadweight loss from the tax increases by a factor of

16.

Refer to Figure 8-1. Suppose the government imposes a tax of P'-P'''. Total surplus after the tax is measured by the area

J + K + L + M.

Kate is a personal trainer whose client William pays $80 per hour-long session. William values this service at $100 per hour, while the opportunity cost of Kate's time is $75 per hour. The government places a tax of $10 per hour on personal trainers. After the tax, what is likely to happen in the market for personal training?

Kate and William will agree to a new price somewhere between $85 and $100.

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

Roland and Karla still can engage in a mutually-agreeable trade.

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

T × Q.

Suppose a tax is imposed on bananas. In which of the following cases will the tax cause the equilibrium quantity of bananas to shrink by the largest amount?

The response of buyers and sellers to a change in the price of bananas is strong.

Which of the following scenarios is consistent with the Laffer curve?

The tax rate is 99 percent, and tax revenue is very high.

Suppose a tax is imposed on the sellers of fast-food French fries. The burden of the tax will

be shared by the buyers and sellers of fast-food French fries but not necessarily equally.

If a tax shifts the demand curve downward, we can infer that the tax was levied on

buyers of the good.

To fully understand how taxes affect economic well-being, we must

compare the reduced welfare of buyers and sellers to the amount of revenue the government raises.

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

consumer surplus before the tax.

Refer to Figure 8-2. The imposition of the tax causes the price received by sellers to

decrease by $2.

Refer to Figure 8-7. 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

decrease government revenue and decrease the deadweight loss from the tax.

Suppose the government increases the size of a tax by 20 percent. The deadweight loss from that tax

increases by more than 20 percent.

The Social Security tax is a tax on

labor.

Taxes on labor encourage which of the following?

mothers to stay at home rather than work in the labor force

The size of a tax and the deadweight loss that results from the tax are

positively related.

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

producer surplus after the tax.