Question 1

Figure 8-10 
-Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. The size of the tax is
A)P0-P2.
B)P2-P8.
C)P2-P5.
D)P5-P8.

Accepted Answer

The answer of Figure 8-10 
-Refer to Figure 8-10. Suppose...

Question 2

Figure 8-10 
-Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. The price that sellers receive is
A)P0.
B)P2.
C)P5.
D)P8.

Accepted Answer

The answer of Figure 8-10 
-Refer to Figure 8-10. Suppose...

Question 3

Figure 8-10 
-Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. Without the tax, the total surplus is
A)[1/2 x (P0-P5) x Q5] + [1/2 x (P5-0) x Q5].
B)[1/2 x (P0-P2) x Q2] +[(P2-P8) x Q2] + [1/2 x (P8-0) x Q2].
C)(P2-P8) x Q2.
D)1/2 x (P2-P8) x (Q5-Q2).

Accepted Answer

Without the tax, the total surplus is the area of the triangle formed by points (0,P0), (Q5,P5), and (Q5,0) plus the area of the triangle formed by points (0,P5), (Q5,P5), and (Q5,0). This can be expressed as:
[1/2 x (P0-P5) x Q5] + [1/2 x (P5-0) x Q5].
Since the tax reduces the quantity sold to Q2, we need to find the new total surplus. This can be calculated by finding the new consumer surplus and producer surplus and adding them together. The new consumer surplus is the area of the triangle formed by points (0,P0), (Q2,P2), and (Q2,0), and the new producer surplus is the area of the triangle formed by points (0,P8), (Q2,P2), and (Q2,0). The government revenue is the rectangle formed by points (Q2,P8), (Q2,P2), (Q5,P2), and (Q5,P8). Therefore, the new total surplus can be expressed as:
[1/2 x (P0-P2) x Q2] +[(P2-P8) x Q2] + [1/2 x (P8-0) x Q2].
This simplifies to choice A.

Question 4

Figure 8-10 
-Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. The deadweight loss of the tax is
A)[1/2 x (P0-P5) x Q5] + [1/2 x (P5-0) x Q5].
B)[1/2 x (P0-P2) x Q2] +[(P2-P8) x Q2] + [1/2 x (P8-0) x Q2].
C)(P2-P8) x Q2.
D)1/2 x (P2-P8) x (Q5-Q2).

Accepted Answer

The answer of Figure 8-10 
-Refer to Figure 8-10. Suppose...

Question 5

Figure 8-11 
-Refer to Figure 8-11. Neither a shift of the demand curve nor a shift of the supply curve is shown on the figure. However, we know that, when the tax is imposed,
A)the demand curve will shift.
B)the supply curve will shift.
C)either the demand curve or the supply curve will shift.
D)None of the above are correct; the tax causes neither the demand curve nor the supply curve to shift.

Accepted Answer

The answer of Figure 8-11 
-Refer to Figure 8-11. Neither...

Question 6

Figure 8-10 
-Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. The price that buyers pay is
A)P0.
B)P2.
C)P5.
D)P8.

Accepted Answer

When the quantity sold in the market reduces to Q2, the corresponding price that buyers pay is P2, which is equal to the price received by sellers plus the tax (P5 - T). Therefore, P2 = P5 - T, and solving for P5 gives P5 = P2 + T. As T is a positive tax, P5 will be greater than P2. Therefore, the only option that corresponds to the price buyers pay after the tax is imposed is P2, making choice B the correct answer.

Question 7

Figure 8-10 
-Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. Without the tax, the producer surplus is
A)(P5-0) x Q5.
B)1/2 x (P5-0) x Q5.
C)(P8-0) x Q2.
D)1/2 x (P8-0) x Q2.

Accepted Answer

The answer of Figure 8-10 
-Refer to Figure 8-10. Suppose...

Question 8

Figure 8-11 
-Refer to Figure 8-11. The tax revenue that the government collects equals
A)  .
B)  .
C)  .
D)  .

Accepted Answer

The answer of Figure 8-11 
-Refer to Figure 8-11. The...

Question 9

Figure 8-11 
-Refer to Figure 8-11. The length of the line segment connecting points A and B represents
A)the difference between the price paid by buyers after the tax is imposed and the price received by sellers after the tax is imposed.
B)the size of the tax.
C)the "tax wedge."
D)All of the above are correct.

Accepted Answer

The answer of Figure 8-11 
-Refer to Figure 8-11. The...

Question 10

Figure 8-10 
-Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. The tax revenue is
A)(P0-P2) x Q2.
B)(P2-P8) x Q2.
C)(P2-P5) x Q5.
D)(P5-P8) x Q5.

Accepted Answer

The tax revenue is calculated by finding the area of the rectangle formed by the difference between the price with tax (P2) and the price without tax (P8), multiplied by the quantity sold after the tax (Q2). This is represented by (P2-P8) x Q2. Therefore, the correct answer is B. Choice A is incorrect because it uses the wrong price difference (P0-P2) instead of (P2-P8). Choices C and D are incorrect because they use the wrong quantity (Q5 instead of Q2) and the wrong price difference (P2-P5 and P5-P8 instead of P2-P8).

Question 11

Figure 8-11 
-Refer to Figure 8-11. The size of the tax is represented by the
A)length of the line segment connecting points A and B.
B)length of the line segment connecting points A and C.
C)length of the line segment connecting points B and C.
D)area of the triangle bounded by the points A, B, and C.

Accepted Answer

The answer of Figure 8-11 
-Refer to Figure 8-11. The...

Question 12

Figure 8-11 
-Refer to Figure 8-11. The deadweight loss of the tax is represented by the
A)length of the line segment connecting points A and B.
B)length of the line segment connecting points A and C.
C)length of the line segment connecting points B and C.
D)area of the triangle bounded by the points A, B, and C.

Accepted Answer

The deadweight loss is the loss of consumer and producer surplus due to the tax. It is represented by the area of the triangle bounded by the points A, B, and C. This triangle represents the reduction in quantity exchanged as a result of the tax. Therefore, the correct choice is D.

Question 13

Figure 8-10 
-Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. With the tax, the total surplus is
A)[1/2 x (P0-P5) x Q5] + [1/2 x (P5-0) x Q5].
B)[1/2 x (P0-P2) x Q2] +[(P2-P8) x Q2] + [1/2 x (P8-0) x Q2].
C)(P2-P8) x Q2.
D)1/2 x (P2-P8) x (Q5-Q2).

Accepted Answer

With the tax imposed, the new equilibrium quantity is Q2. The total surplus is the sum of consumer surplus and producer surplus plus the tax revenue. Consumer surplus is given by 1/2 x (P0-P2) x Q2. Producer surplus is given by 1/2 x (P8-P5) x Q2. Tax revenue is given by (P2-P5) x Q2. Therefore, the total surplus is [1/2 x (P0-P2) x Q2] + [1/2 x (P8-P5) x Q2] + [(P2-P5) x Q2], which simplifies to [1/2 x (P0-P2) x Q2] + [(P2-P8) x Q2] + [1/2 x (P8-0) x Q2], which is Option B.

Question 14

Figure 8-10 
-Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. With the tax, the consumer surplus is
A)(P0-P2) x Q2.
B)1/2 x (P0-P2) x Q2.
C)(P0-P5) x Q5.
D)1/2 x (P0-P5) x Q5.

Accepted Answer

The answer of Figure 8-10 
-Refer to Figure 8-10. Suppose...

Question 15

Figure 8-11 -Refer to Figure 8-11. The price labeled as P₁ on the vertical axis represents the price A)received by sellers before the tax is imposed. B)received by sellers after the tax is imposed. C)paid by buyers before the tax is imposed. D)paid by buyers after the tax is imposed.

Accepted Answer

P₁ represents the price received by sellers after the tax is imposed. This is because the price received by sellers before the tax is imposed is labeled as P1, which is lower than the P₁ price point. The P₁ price point takes into account the tax that is added to the price, so it is the price received by sellers after the tax is imposed.

Question 16

Figure 8-11 -Refer to Figure 8-11. Suppose Q₁ = 4; Q₂ = 7; P₁ = $6; P₂ = $8; and P₃ = $10. Then the deadweight loss of the tax is A)$6. B)$8. C)$9. D)$12.

Accepted Answer

The answer of Figure 8-11 
-Refer to Figure 8-11. Suppose...

Question 17

Figure 8-11 -Refer to Figure 8-11. The price labeled as P₃ on the vertical axis represents the price A)received by sellers before the tax is imposed. B)received by sellers after the tax is imposed. C)paid by buyers before the tax is imposed. D)paid by buyers after the tax is imposed.

Accepted Answer

The answer of Figure 8-11 
-Refer to Figure 8-11. The...

Question 18

Figure 8-10 
-Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. Without the tax, the consumer surplus is
A)(P0-P2) x Q2.
B)1/2 x (P0-P2) x Q2.
C)(P0-P5) x Q5.
D)1/2 x (P0-P5) x Q5.

Accepted Answer

The answer of Figure 8-10 
-Refer to Figure 8-10. Suppose...

Question 19

Figure 8-11 -Refer to Figure 8-11. The price labeled as P₂ on the vertical axis represents the A)difference between the price paid by buyers after the tax is imposed and the price paid by buyers before the tax is imposed. B)difference between the price received by sellers before the tax is imposed and the price received by sellers after the tax is imposed. C)price of the good before the tax is imposed. D)price of the good after the tax is imposed.

Accepted Answer

The answer of Figure 8-11 
-Refer to Figure 8-11. The...

Question 20

Figure 8-10 
-Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. With the tax, the producer surplus is
A)(P5-0) x Q5.
B)1/2 x (P5-0) x Q5.
C)(P8-0) x Q2.
D)1/2 x (P8-0) x Q2.

Accepted Answer

The answer of Figure 8-10 
-Refer to Figure 8-10. Suppose...

Quiz 8: Applications: the Costs of Taxation

Figure 8-10 -Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. The size of the tax is

Figure 8-10 -Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. The price that sellers receive is

Figure 8-10 -Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. Without the tax, the total surplus is

Figure 8-10 -Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. The deadweight loss of the tax is

Figure 8-11 -Refer to Figure 8-11. Neither a shift of the demand curve nor a shift of the supply curve is shown on the figure. However, we know that, when the tax is imposed,

Figure 8-10 -Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. The price that buyers pay is

Figure 8-10 -Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. Without the tax, the producer surplus is

Figure 8-11 -Refer to Figure 8-11. The tax revenue that the government collects equals

Figure 8-11 -Refer to Figure 8-11. The length of the line segment connecting points A and B represents

Figure 8-10 -Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. The tax revenue is

Figure 8-11 -Refer to Figure 8-11. The size of the tax is represented by the

Figure 8-11 -Refer to Figure 8-11. The deadweight loss of the tax is represented by the

Figure 8-10 -Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. With the tax, the total surplus is

Figure 8-10 -Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. With the tax, the consumer surplus is

Figure 8-11 -Refer to Figure 8-11. The price labeled as P1 on the vertical axis represents the price

Figure 8-11 -Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then the deadweight loss of the tax is

Figure 8-11 -Refer to Figure 8-11. The price labeled as P3 on the vertical axis represents the price

Figure 8-10 -Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. Without the tax, the consumer surplus is

Figure 8-11 -Refer to Figure 8-11. The price labeled as P2 on the vertical axis represents the

Figure 8-10 -Refer to Figure 8-10. Suppose the government imposes a tax that reduces the quantity sold in the market after the tax to Q2. With the tax, the producer surplus is

Figure 8-11 -Refer to Figure 8-11. The price labeled as P₁ on the vertical axis represents the price

Figure 8-11 -Refer to Figure 8-11. Suppose Q₁ = 4; Q₂ = 7; P₁ = $6; P₂ = $8; and P₃ = $10. Then the deadweight loss of the tax is

Figure 8-11 -Refer to Figure 8-11. The price labeled as P₃ on the vertical axis represents the price

Figure 8-11 -Refer to Figure 8-11. The price labeled as P₂ on the vertical axis represents the