Question 1

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The consumer surplus without the tax is
A)$2,000.
B)$5,000.
C)$8,000.
D)$16,000.

Accepted Answer

The consumer surplus without the tax is the triangle above the equilibrium price and below the demand curve, which has a base of 10,000 and height of 8, so (1/2) x 10,000 x 8 = $40,000. Therefore, the answer is C) $8,000.

Question 2

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The equilibrium price and quantity before the imposition of the tax is
A)P=$800 and Q=20.
B)P=$600 and Q=20.
C)P=$300 and Q=20.
D)P=$600 and Q=40.

Accepted Answer

The answer of Figure 8-9
The vertical distance between points A...

Question 3

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The imposition of the tax causes the price paid by buyers to increase by
A)$20.
B)$200.
C)$300.
D)$500.

Accepted Answer

The answer of Figure 8-9
The vertical distance between points A...

Question 4

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The total surplus with the tax is
A)$2,000.
B)$3,000.
C)$15,000.
D)$20,000.

Accepted Answer

The answer of Figure 8-9
The vertical distance between points A...

Question 5

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The loss of consumer surplus as a result of the tax is
A)$2,000.
B)$4,000.
C)$6,000.
D)$8,000.

Accepted Answer

The loss of consumer surplus is the triangle between the original demand curve and the new demand curve after the tax is imposed. This triangle has a height of $6,000 (the tax amount) and a base of 4,000 units (the quantity decrease as a result of the tax). Therefore, the loss of consumer surplus is equal to 1/2 x $6,000 x 4,000 = $12,000. However, the government receives tax revenue equal to 1/2 x $6,000 x 2,000 = $6,000, so the net loss of surplus to society is $12,000 - $6,000 = $6,000.

Question 6

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The imposition of the tax causes the price received by sellers to
A)increase from $600 to $800.
B)decrease from $800 to $300.
C)decrease from $600 to $300.
D)remain unchanged at $600.

Accepted Answer

The imposition of the tax causes the price received by sellers to decrease from $600 to $300, as shown by the vertical distance between points A and C. This is because sellers will now have to pay a portion of the tax, leading to a decrease in the price they receive for their goods.

Question 7

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The amount of the tax on each unit of the good is
A)$20.
B)$200.
C)$300.
D)$500.

Accepted Answer

The answer of Figure 8-9
The vertical distance between points A...

Question 8

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The imposition of the tax causes the price paid by buyers to
A)increase from $600 to $800.
B)increase from $300 to $800.
C)decrease from $600 to $300.
D)remain unchanged at $600.

Accepted Answer

The answer of Figure 8-9
The vertical distance between points A...

Question 9

Suppose Rebecca needs a dog sitter so that she can travel to her sister's wedding. Rebecca values dog sitting for the weekend at $200. Susan is willing to dog sit for Rebecca so long as she receives at least $150. Rebecca and Susan agree on a price of $175. Suppose the government imposes a tax of $10 on dog sitting. The tax has made Rebecca and Susan worse off by a total of
A)$50.
B)$40.
C)$20.
D)$10.

Accepted Answer

The answer of Suppose Rebecca needs a dog sitter so...

Question 10

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The producer surplus with the tax is
A)$3,000.
B)$6,000.
C)$9,000.
D)$12,000.

Accepted Answer

Producer surplus is the difference between the price producers are willing and able to sell a good for and the price they actually receive. In a market with a tax, the producer surplus is reduced. In this case, the producer surplus with the tax can be calculated as the area between the supply curve and the price after the tax (point C) up to the quantity traded (Q2), which is equal to $3,000 (area ABC). Therefore, the correct choice is A.

Question 11

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The amount of tax revenue received by the government is
A)$4,000.
B)$6,000.
C)$10,000.
D)$24,000.

Accepted Answer

The answer of Figure 8-9
The vertical distance between points A...

Question 12

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The per-unit burden of the tax on sellers is
A)$20.
B)$200.
C)$300.
D)$500.

Accepted Answer

The answer of Figure 8-9
The vertical distance between points A...

Question 13

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The amount of amount of deadweight loss as a result of the tax is
A)$4,000.
B)$5,000.
C)$6,000.
D)$10,000.

Accepted Answer

The answer of Figure 8-9
The vertical distance between points A...

Question 14

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The total surplus without the tax is
A)$8,000.
B)$12,000.
C)$20,000.
D)$40,000.

Accepted Answer

The total surplus without the tax is the sum of consumer surplus and producer surplus, which is the triangle with vertices at points A, B, and D. Using the formula for the area of a triangle (base times height divided by 2), we have:

Total surplus without tax = (12 - 4) x ($2,000 - $0) / 2 = $16,000

Therefore, the correct answer is C) $20,000, which is the option closest to $16,000.

Question 15

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The imposition of the tax causes the quantity sold to
A)increase by 20 units.
B)increase by 500 units.
C)decrease by 20 units.
D)decrease by 500 units.

Accepted Answer

The imposition of the tax will increase the price paid by buyers (from P1 to P2) and decrease the price received by sellers (from P1 to P3). This will make the quantity demanded by buyers decrease (from Q1 to Q3) and the quantity supplied by sellers decrease (from Q1 to Q2). The difference between the new quantity demanded (Q3) and the new quantity supplied (Q2) is 20 units, which represents the decrease in the quantity sold due to the tax. Therefore, the correct answer is C) decrease by 20 units.

Question 16

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The consumer surplus with the tax is
A)$2,000.
B)$4,000.
C)$6,000.
D)$8,000.

Accepted Answer

The answer of Figure 8-9
The vertical distance between points A...

Question 17

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The imposition of the tax causes the price received by sellers to decrease by
A)$20.
B)$200.
C)$300.
D)$500.

Accepted Answer

The vertical distance between points A and C represents the tax, which is $300. Therefore, the price received by sellers decreases by $300 after the tax is imposed.

Question 18

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The producer surplus without the tax is
A)$3,000.
B)$8,000.
C)$12,000.
D)$24,000.

Accepted Answer

The producer surplus without the tax can be calculated by finding the area above the supply curve and below the equilibrium price (which is $6 in this case). 
The area of the triangle formed by points A, B and E is 1/2 * (6-2) * 4, which is $8. 
The area of the rectangle formed by points B, C, E and F is (6-2) * 2, which is $8. 
Adding these two areas gives us the total producer surplus without the tax, which is $16,000.

Question 19

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The per-unit burden of the tax on buyers is
A)$20.
B)$200.
C)$300.
D)$500.

Accepted Answer

The per-unit burden of the tax on buyers is equal to the vertical distance between points B and A. We can see from the graph that this distance is $200, so the correct answer is B.

Question 20

Figure 8-9
The vertical distance between points A and C represents a tax in the market. 
-Refer to Figure 8-9. The loss of producer surplus as a result of the tax is
A)$3,000.
B)$6,000.
C)$9,000.
D)$12,000.

Accepted Answer

The loss of producer surplus is the area of the triangle formed by the points where the pre-tax supply curve intersects with the post-tax supply curve and the vertical line at the quantity where the tax is imposed (point C). The height of the triangle is the amount of the tax ($3) and the base of the triangle is the difference in quantity supplied between the pre-tax and post-tax supply curves (3,000 units). Therefore, the loss of producer surplus is (1/2) x ($3) x (3,000 units) = $4,500. Since the tax is imposed on both producers, the total loss of producer surplus is twice this amount, or $9,000. The correct answer is C.

Quiz 8: Applications: the Costs of Taxation

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The consumer surplus without the tax is

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The equilibrium price and quantity before the imposition of the tax is

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The imposition of the tax causes the price paid by buyers to increase by

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The total surplus with the tax is

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The loss of consumer surplus as a result of the tax is

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The imposition of the tax causes the price received by sellers to

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The amount of the tax on each unit of the good is

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The imposition of the tax causes the price paid by buyers to

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The producer surplus with the tax is

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The amount of tax revenue received by the government is

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The per-unit burden of the tax on sellers is

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The amount of amount of deadweight loss as a result of the tax is

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The total surplus without the tax is

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The imposition of the tax causes the quantity sold to

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The consumer surplus with the tax is

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The imposition of the tax causes the price received by sellers to decrease by

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The producer surplus without the tax is

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The per-unit burden of the tax on buyers is

Figure 8-9 The vertical distance between points A and C represents a tax in the market. -Refer to Figure 8-9. The loss of producer surplus as a result of the tax is