Chapter 8 quizzes EC 210

d. regardless of how the tax is levied

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. provided the tax is levied on the buyers c. provided a portion of the tax is levied on the buyers, with the remaining portion levied on the sellers d. regardless of how the tax is levied

b. tax creates a wedge between the price buyers effectively pay and the price sellers receive

When a tax is levied on buyers, the a. tax has no effect on the well-being of sellers b. tax creates a wedge between the price buyers effectively pay and the price sellers receive c. supply curves shifts upward by the amount of the tax d. all of the above are correct

d. both buyers and sellers are made worse off

When at tax is levied on a good, a. only sellers are made worse off b. neither buyers nor sellers are made worse off c. only buyers are made worse off d. both buyers and sellers are made worse off

d. exceeds the revenue raised from the tax by the government

When the government places a tax on a product, the cost of the tax to buyers and sellers a. is less than the revenue raised from the tax by the government b. is equal to the revenue raised from the tax by the government c. without additional information, such as the elasticity of demand for this product, it is impossible tac compare the cost of tax to buyers and sellers with tax revenue d. exceeds the revenue raised from the tax by the government.

a. the equilibrium quantity in the market for the good, producer surplus, and the well-being of buyers of the good

Which of the following quantities decrease in response to a tax on a good? a. the equilibrium quantity in the market for the good, producer surplus, and the well-being of buyers of the good b. none of the above is necessarily correct unless we know whether the tax is levied on buyers or on sellers c. the effective price received by sellers of the good, the wedge between the effective price paid by buyers and the effective price received by sellers, and consumer surplus d. the equilibrium quantity in the market for the good, the effective price of the good paid by buyers and consumers surplus

b. indices buyers to consume less, and sellers to produce less

A deadweight loss is a consequence of a tax on a good because the tax a. induces the government to increase its expenditures b. indices buyers to consume less, and sellers to produce less c. increase the equilibrium price in the market d. imposes a loss on buyers that is greater than the loss to sellers

c. deadweight loss

A loss in total surplus resulting from a tax is called a. economic loss b. a deficit c. deadweight loss d. inefficiency

d. gives sellers an incentive to produce less of the good than the otherwise would produce

A tax on a good a. creates a benefit to the government, the size of which exceeds the loss in surplus to buyers and sellers b. all of the above are correct c. gives buyers an incentive to buy more of the good than they otherwise would buy d. gives sellers an incentive to produce less of the good than they otherwise would produce

a. inelastic demand and inelastic supply

An increase in the size of a tax is most likely to increase tax revenue in a market with a. inelastic demand and inelastic supply b. inelastic demand and elastic supply c. elastic demand and inelastic supply d. elastic demand and elastic supply

b. $0

Andre walks Julia's dog once a day for $50 per week. Julia values this service at $60 per week, while the opportunity cost of Andre's time is $30 per week. The government places a tac of $35 per week on dog walkers. After the tax, what is the total surplus? a. $30 b. $0 c. $25 d. $50

c. all of the above are correct

Assume the supply curve for cigars is a typical upward-sloping straight line, ad the demand curve for cigars is a typical, downward-sloping straight line. Suppose the equilibrium quantity in the marker for cigars is 1,000 per month when there is no tax. Then a tax of $0.50 per cigar is imposed. The effective price paid by buyers increases from $1.50 to $1.90 and the effective price received by sellers falls from $1.50 to $1.40. The government's tax revenue amounts to $475 per month. Which of the following statements is correct? a. the deadweight loss of the tax is $12.50 b. the demand for cigars is less elastic than the supply of cigars c. all of the above are correct d. The tax causes a decrease in consumer surplus of $390 and a decrease in producer surplus of $97.50

c. the size of the deadweight loss of the tax on labor

Concering the labor market and taxes on labor, economists disagree about a. whether or not a tax on labor places a wedge between the wage that firms pay and the wage that workers receive b. all of the above are correct c. the size of the deadweight loss of the tax on labor d. the size of the tax on labor

c. all of the above are correct

Consider a good to which a per-unit tax applies. The size of the deadweight that results from the tax is smaller, the a. less elastic is the demand for the good b. less elastic is the supply of the good c. all of the above are correct d. smaller is the amount of the tax

a. labor tax

Economists generally agree that the most important tax in the U.S. economy is the a. labor tax b. investment tax c. property tax d. sales tax

c. Erin will continue to hire Ernesto to clean her house, but her consumer surplus will decline

Erin would be willing to pay as much as $100 per week to have her house cleaned. Ernesto's opportunity cost of cleaning Erins house is $70 per week. Assume Erin is required to pay a tax of $15 when she hires someone to clean her house. Which of the following is true? a. total economic welfare (consumer surplus plus producer surplus tax revenue) will decrease b. all of the above are correct c. Erin will continue to hire Ernesto to hire Ernesto to clean her house, but her consumer surplus will decline d. Ernesto will continue to lean Erin's house, and his producer surplus will increase

d. rectangle

For a good that is taxed, the area on the relevant supply-and -demand graph that represents government's tax revenue is a a. trapezoid b. none of the above is correct; government's tax revenue is the area between the supply and demand curves, above the horizontal axis, and below the effective price to buyers c. triangle d. rectangle

a. TxQ

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. TxQ b. T/Q c. (TxQ)/Q d. T+Q

d. has a large deadweight loss

If the labor supply curve is very elastic, a tax on labor a. has a relatively small impact on the number of hours that workers choose to work b. raises enough tax revenue to offset the loss in welfare c. results in a large tax burden on the firms that hire labor d. has a large deadweight loss

d. may increase, decrease, or remain the same

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

a. the tax on cartons of cigarettes increases from $10 to $30

In which of the following instances would the deadweight loss of the tax on cartons of cigarettes increase by a factor of 9? a. the tax on cartons of cigarettes increase from $10 to $30 b. the tax on cartons of cigarettes increases from $10 to $11.11 c. The tax on cartons of cigarettes increases from $10 to $90 d. the tax on cartons of cigarettes increases from $10 to $20

b. raise economic well-being and perhaps even tax revenue

Ronald Reagan believed that reducing income tax rates would a. result in large increases in deadweight losses b. raise economic well-being and perhaps even tax revenue c. lower economic well-being, even though tax revenue could possibly increase d. do little, if anything, to encourage hard work

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

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. demand for the product is more elastic than the supply of the product b. supply of the product is more elastic than the demand for the product c. tax is placed on the buyers of the product d. tax is placed on the sellers of the product

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

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. be shared equally by the buyers and sellers of fast-food French Fries c. fall entirely on the sellers of Fast-food French Fries d. be shared by the buyers and sellers of fast-food French fries but not necessarily equally

b. 2,600 to 2,000

Suppose a tax of $3 per unit is imposed on a good. The supply curve is a typical upward-sloping straight line, and the demand curve is a typical downward-sloping stirhgt line. The tax decreases consumer surplus by $3,900 and decreases producer surplus by $3,000. The Tax generates tax revenue of $6,000. The tax decreased the equilibrium quantity of the good from. a. 2,400 to 2,000 b. 2,600 to 2,000 c. 2,000 to 1,500 d. 3,000 to 2,400

d. all of the above are correct

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

c. workers to work overtime

Taxes on labor encourage all of the following except a. older workers to take early retirement form the labor force b. mothers to stay at home rather than work in the labor force c. workers to work overtime d. people to be paid "under the table"

b. unscrupulous people to take part in the underground economy

Taxes on labor have the effect of encouraging a. the elderly to postpone retirement b. unscrupulous people to take part in the underground economy c. second earners within a family to take a job d. workers to work more hours

b. potted plants than in the market for wallpaper because the quantity of potted plants would fall by more than the quantity of wallpaper

The demand for potted plants is is more elastic than the demand for wallpaper. Suppose the government levies an equivalent tax on potted plants and wallpaper. The deadweight loss would be larger in the market for a. potted plants than in the market for wallpaper because the quantity of wallpaper would fall by more than the quantity of potted plants b. potted plants than in the market for wallpaper because the quantity of potted plants would fall by more than the quantity of wallpaper c. wallpaper than in the market for potted plants because the quantity of potted plants would fall by more than the quantity of wallpaper d. wallpaper than in the market for potted plants because the quantity of wallpaper would fall by more than the quantity of potted plants

d. welfare economics

To measure the gains and losses from a tax on a good, economists use the tools of a. international-trade theory b. macroeconomics c. circular-flow analysis d. welfare economics

a. $3

Tom mows Stephanie's lawn for $25. Tom's opportunity cost of mowing Stephanie's lawn is $20 and Stephanie's willingness to pay Tome to mow her law is $28. If Stephanie hires Tom to mow her lawn, Stephanie's consumer surplus is a. $3 b. $25 c. $5 d. $8

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

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. both equilibrium price and quantity will increase c. buyers and sellers will each beat 50 percent of the burden of the tax d. sellers of the good will bear most of the burden of the tax

c. the size of the deadweight loss increases, but the tax revenue first increase, then decreases

Which of the following statements correctly describes the relationship between the size of the deadweight loss and the amount of tax revenue as the size of a tax increases from a small tax to a medium tax and finally to a large tax? a. both the size of the deadweight loss and tax revenue decrease b. both the size of the deadweight loss and tax revenue increase c. the size of the deadweight loss increases, but the tax revenue first increase, then decreases d. the size of the deadweight loss increases

c. a head tax (that is, a tax everyone must pay regardless of what one does or buys)

Which of the following would likely have the smallest deadweight loss relative to the tax revenue? a. a tax on compact discs b. a tax on caviar c. a head tax (that is, a tax everyone must pay regardless of what one does or buys) d. an income tax

b. $6, and consumer surplus with the tax is $1.50

a. $10, and consumer surplus with the tax is $1.50 b. $6, and consumer surplus with the tax is $1.50 c. $6, and consumer surplus with the tax is $4.50 d. $10, and consumer surplus with the tax is $4.50

d. $8,000

a. $16,000 b. $2,000 c. $5,000 d. $8,000

b. $2,400

a. $3,000 b. $2,400 c. $1,500 d. $3,600

c. $4,500

a. $3,600 b. $6,000 c. $4,500 d. $1,500

d. $1.50

a. $4.50 b. $3 c. $0 d. $1.50

d. $340

a. $450 b. $510 c. $120 d. $340

d. $6,000

a. $7,200 b. $3,000 c. $4,800 d. $6,000

d. $2,000

a. $8,000 b. $6,000 c. $4,000 d. $2,000

c. $5

a. $9 b. $4 c. $5 d. $1

b. 1/2 x (P0-P2) x Q2

a. (P0-P5) x Q5 b. 1/2 x (P0-P2) x Q2 c. 1/2 x (P0-P5) x Q5 d. (P0-P2) x Q2

b. 1/2 x (P8-0) x Q2

a. (P5-0) x Q5 b. 1/2 x (P8-0) x Q2 c. 1/2 x (P5-0) x Q5 d. (P8-0) x Q2

b. A

a. A+B+C b. A c. A+B+D+J+K d. B+C

c. A

a. A+B+D+J+K b. B+C c. A d. A+B+C

a. all of the above are correct

a. All of the above are correct b. the difference between the price paid by buyers after the tax is imposed and the price received by sellers after the tax is imposed c. the "tax wedge." d. the size of the tax

c. C+F

a. B+D b. A+C+F+J c. C+F d. B+C+D+F

a. Demand 2 is more inelastic than supply 2

a. Demand 2 is more inelastic than supply 2 b. Supply 2 is more elastic than supply 1 c. Supply 1 is more inelastic than supply 2 d. Demand 2 is more elastic than demand 1

b. J+K+L+M

a. I+Y b. J+K+L+M c. I+Y+B d. I+J+K+L+M+Y

c. J

a. J+K+L b. L+M+Y c. J d. M

B. I+Y

a. J+K+L+M B. I+Y C. J+K+L+M+N D. I+Y+B

c. J

a. M b. J+K+I c. J d. L+M+Y

b. P1

a. P3 b. P1 c. P4 d. P2

d. compared to the original tax, the larger tax will increase tax revenue

a. compared to the original tax, the smaller tax will decrease deadweight loss b. compared to the original tax, the larger tax will increase deadweight loss c. compared to the original tax, the smaller tax will decrease tax revenue d. compared to the original tax, the larger tax will increase tax revenue

b. increase tax revenue

a. decrease producer surplus b. increase tax revenue c. decrease consumer surplus d. increase the deadweight loss

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

a. increase government revenue and increase the deadweight loss form the tax b. decrease government revenue and increase the deadweight loss from the tax c. increase government revenue and decrease the deadweight loss from the lax d. decrease government revenue and decrease the deadweight loss from the tax

d. supply 2 and demand 2

a. supply 1 and demand 1 b. supply 1 and demand 2 c. supply 2 and demand 1 d. supply 2 and demand 2

b. when supply is relatively elastic, the deadweight loss of a tax is larger than when supply is relatively inelastic

a. when demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic b. when supply is relatively elastic, the deadweight loss of a tax is larger than when supply is relatively inelastic c. when demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic d. when supply is relatively inelastic, the deadweight loss of a tax is smaller than when supply is relatively elastic

a. when supply is relatively elastic, the deadweight loss of a tax is larger than when supply is relatively inelastic

a. when supply is relatively elastic, the deadweight loss of a tax is larger than when supply is relatively inelastic b. when demand is relatively elastic, the deadweight loss of a tax is larger than when demand is relatively inelastic c. when demand is relatively inelastic, the deadweight loss of a tax is smaller than when demand is relatively elastic d. when supply is relatively inelastic, the deadweight loss of a tax is small than when supply is relatively elastic