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Chapter 8—Application: The Costs of Taxation
MULTIPLE CHOICE
1. To fully understand how taxes affect economic well-being, what must we do?
a. assume that economic well-being is not affected if all tax revenue is spent on goods and
services for the Canadian public
b. know the dollar amount of all taxes raised in the country each year
c. compare the reduced welfare of buyers and sellers to the amount of government revenue
raised
d. compare the expenditures of the provincial governments with that of the federal
government
ANS: C PTS: 1 DIF: Average REF: 171-172
BLM: Remember NOT: Micro TB_8-1
3. When a tax is levied on a good, which of quantity sold and price will change?
a. The quantity of the good sold will decrease but the price of the good sold will not change.
b. The price of the good sold will increase but the quantity of the good sold will not change.
c. The quantity of the good sold will decrease but the price of the good sold will increase.
d. The price of the good sold will decrease but the quantity of the good sold will increase.
ANS: C PTS: 1 DIF: Challenging REF: 173-174
BLM: Remember NOT: Micro TB_8-3
5. When a good is taxed, who is worse off and who is better off?
a. Both buyers and sellers are worse off.
b. Buyers are worse off and sellers are better off.
c. Sellers are worse off and buyers are better off.
d. Both buyers and sellers are better off.
ANS: A PTS: 1 DIF: Average REF: 173-174
BLM: Remember NOT: Micro TB_8-5
7. Economic analysis uses which of the following to judge the effect of taxes on economic welfare?
a. government spending
b. consumer and producer surplus
c. equilibrium price and quantity
d. opportunity cost
ANS: B PTS: 1 DIF: Easy REF: 171
BLM: Remember NOT: Micro TB_8-7
10. If a tax is imposed on the buyer of a product, what is the effect on the demand curve?
a. It shifts downward by the amount of the tax.
b. It shifts upward by the amount of the tax.
c. It shifts downward by less than the amount of the tax.
d. It shifts upward by more than the amount of the tax.
ANS: A PTS: 1 DIF: Average REF: 172-173
BLM: Remember NOT: Micro TB_8-10
12. When will buyers of a product pay the majority of a tax placed on a product?
a. when the tax is placed on the seller of the product
b. when demand is more elastic than supply
c. when supply is more elastic than demand
d. when the tax is placed on the buyer of the product
ANS: C PTS: 1 DIF: Challenging REF: 172-173
BLM: Remember NOT: Micro TB_8-12
13. If a tax is imposed on a market with elastic demand and inelastic supply, who bears most of the burden
of the tax?
a. Buyers will bear most of the burden of the tax.
b. Sellers will bear most of the burden of the tax.
c. The burden of the tax will be shared equally between buyers and sellers.
d. The burden of the tax will be shared equally between buyers and the government.
ANS: B PTS: 1 DIF: Challenging REF: 177-179
BLM: Remember NOT: Micro TB_8-13
14. Suppose a tax is imposed on the buyers of a product. On whom will the burden of the tax fall?
a. On the buyers and the government
b. On the sellers and the government
c. On the buyers, sellers and the government
d. On the buyers and the sellers
ANS: D PTS: 1 DIF: Average REF: 172-173
BLM: Remember NOT: Micro TB_8-14
15. Why does it NOT matter whether a tax is levied on the buyer or seller of the good?
a. because sellers always bear the full burden of the tax
b. because buyers always bear the full burden of the tax
c. because buyers and sellers will share the burden of the tax
d. because government bears the full burden of the tax
ANS: C PTS: 1 DIF: Average REF: 172-173
BLM: Remember NOT: Micro TB_8-15
16. Suppose a tax is imposed on a market with an inelastic demand and an elastic supply. How is the
burden of the tax divided?
a. Sellers pay the majority of the tax.
b. Buyers pay the majority of the tax.
c. The tax burden is equally divided between buyers and sellers.
d. The tax burden is divided, but it cannot be determined how.
ANS: B PTS: 1 DIF: Challenging REF: 177-179
BLM: Remember NOT: Micro TB_8-16
17. When a tax is placed on the buyers of orange juice, what is the result?
a. The size of the orange juice market is reduced.
b. The price of orange juice decreases.
c. The supply of orange juice decreases.
d. The price of orange juice increases, and the equilibrium quantity of orange juice is
unchanged.
ANS: A PTS: 1 DIF: Average REF: 172-173
BLM: Remember NOT: Micro TB_8-17
18. Which of the following outcomes will occur as a result of a tax, whether the tax is placed on the buyer
or the seller?
a. The size of the market is reduced.
b. The price the seller receives is higher.
c. The supply curve will shift upward.
d. The demand curve will shift upward.
ANS: A PTS: 1 DIF: Average REF: 172-173
BLM: Remember NOT: Micro TB_8-18
19. When a tax is placed on the buyer of a product, what is the result?
a. Buyers pay less and sellers receive more.
b. Buyers pay less and sellers receive less.
c. Buyers pay more and sellers receive more.
d. Buyers pay more and sellers receive less.
ANS: D PTS: 1 DIF: Average REF: 172-173
BLM: Remember NOT: Micro TB_8-19
20. When a tax is levied on a good, what is the effect on buyers and sellers, and who is worse off?
a. Buyers pay less, sellers receive less, and they are both worse off.
b. Buyers pay more, sellers receive more, and they are both worse off.
c. Buyers pay less, sellers receive more, and they are both worse off.
d. Buyers pay more, sellers receive less, and they are both worse off.
ANS: D PTS: 1 DIF: Average REF: 172-173
BLM: Remember NOT: Micro TB_8-20
22. What will a tax placed on chocolate do to the equilibrium price and quantity?
a. It will reduce the equilibrium price of chocolate and increase the equilibrium quantity.
b. It will increase the equilibrium price of chocolate and reduce the equilibrium quantity.
c. It will increase the equilibrium price of chocolate and increase the equilibrium quantity.
d. It will reduce the equilibrium price of chocolate and reduce the equilibrium quantity.
ANS: B PTS: 1 DIF: Challenging REF: 172-173
BLM: Higher Order NOT: Micro TB_8-22
Figure 8-1
23. Refer to Figure 8-1. If the market is in equilibrium, what area represents consumer surplus?
a. A
b. B
c. C
d. D
ANS: B PTS: 1 DIF: Easy REF: 172-173
BLM: Higher Order NOT: Micro TB_8-23
24. Refer to Figure 8-1. When the market is in equilibrium, what area represents producer surplus?
a. A +B
b. B+C
c. C+D
d. A+D
ANS: C PTS: 1 DIF: Easy REF: 172-173
BLM: Higher Order NOT: Micro TB_8-24
25. Refer to Figure 8-1. Which area represents total economic surplus?
a. A + B
b. B + C
c. C + D
d. A + D
ANS: B PTS: 1 DIF: Average REF: 172-173
BLM: Higher Order NOT: Micro TB_8-25
26. When a tax is levied on the sellers of a good, what happens to the supply curve?
a. It shifts left (up) by less than the tax.
b. It shifts right (down) by less than the tax.
c. It shifts left (up) by an amount equal to the tax.
d. It shifts right (down) by an amount equal to the tax.
ANS: C PTS: 1 DIF: Average REF: 172-173
BLM: Remember NOT: Micro TB_8-26
27. When a tax is levied on the sellers of a good, how does the supply curve shift?
a. up by the amount of the tax
b. down by the amount of the tax
c. up by more than the tax
d. down by less than the tax
ANS: A PTS: 1 DIF: Average REF: 172-173
BLM: Remember NOT: Micro TB_8-27
28. Suppose a $2 tax is placed on the sellers of potting soil. How will the supply curve shift?
a. right (downward) by exactly $2
b. left (upward) by less than $2
c. left (upward) by exactly $2
d. right (downward) by less than $2
ANS: C PTS: 1 DIF: Average REF: 172-173
BLM: Higher Order NOT: Micro TB_8-28
30. When a tax on a good is enacted, who bears the burden of the tax?
a. Buyers and sellers share the burden of the tax regardless of whom it is levied on.
b. Buyers always bear the full burden of the tax.
c. Sellers always bear the full burden of the tax.
d. Sellers bear the full burden if the tax is levied on them, but buyers bear the full burden if
the tax is levied on them.
ANS: A PTS: 1 DIF: Challenging REF: 172-173
BLM: Remember NOT: Micro TB_8-30
32. When a tax is levied on a good, what happens to the market price and why?
a. The market price falls because quantity demanded falls.
b. The market price falls because quantity supplied falls.
c. The market price rises because both quantity demanded and quantity supplied falls.
d. The market price rises because both quantity demanded and quantity supplied rises.
ANS: C PTS: 1 DIF: Average REF: 172-173
BLM: Remember NOT: Micro TB_8-32
34. How is the benefit received by the government from a tax measured?
a. by deadweight loss
b. by tax revenue
c. by equilibrium price
d. by equilibrium quantity
ANS: B PTS: 1 DIF: Easy REF: 172-173
BLM: Remember NOT: Micro TB_8-34
37. When a tax is imposed on a product, what happens to quantity demanded and quantity supplied?
a. Quantity demanded will increase and quantity supplied will decrease.
b. Quantity demanded will decrease and quantity supplied will increase.
c. Quantity demanded and quantity supplied will both increase.
d. Quantity demanded and quantity supplied will both decrease.
ANS: D PTS: 1 DIF: Average REF: 174
BLM: Higher Order NOT: Micro TB_8-37
Figure 8-2
38. Refer to Figure 8-2. What is the equilibrium price and quantity before the tax?
a. P1 and Q1
b. P2 and Q2
c. P3 and Q1
d. P3 and Q2
ANS: B PTS: 1 DIF: Average REF: 174
BLM: Higher Order NOT: Micro TB_8-38
39. Refer to Figure 8-2. What is the price paid and quantity supplied after the tax?
a. P1 and Q1
b. P2 and Q2
c. P3 and Q1
d. P3 and Q2
ANS: C PTS: 1 DIF: Average REF: 174
BLM: Higher Order NOT: Micro TB_8-39
40. Refer to Figure 8-2. What is the price sellers receive after the tax?
a. P1
b. P2
c. P3 – P1
d. P3 – P2
ANS: A PTS: 1 DIF: Average REF: 174
BLM: Higher Order NOT: Micro TB_8-40
41. Refer to Figure 8-2. What is the per unit burden of the tax on buyers?
a. (P3 – P1) / (Q2 – Q1)
b. P3 – P2
c. (P2 – P1) / (Q2 – Q1)
d. P2 – P1
ANS: B PTS: 1 DIF: Challenging REF: 174
BLM: Higher Order NOT: Micro TB_8-41
42. Refer to Figure 8-2. What is the per-unit burden of the tax on the sellers?
a. (P3 – P1)/(Q2 – Q1)
b. P3 – P2
c. (P2 – P1)/(Q2 – Q1)
d. P2 – P1
ANS: D PTS: 1 DIF: Challenging REF: 174
BLM: Higher Order NOT: Micro TB_8-42
43. Refer to Figure 8-2. What is the amount of the tax imposed?
a. P3 – P1
b. P3
c. P2 – P1
d. P2
ANS: A PTS: 1 DIF: Average REF: 174
BLM: Higher Order NOT: Micro TB_8-43
44. Refer to Figure 8-2. What area represents the amount of tax revenue received by the government?
a. P3ACP1
b. ABC
c. P2DAP3
d. P1CDP2
ANS: A PTS: 1 DIF: Challenging REF: 174
BLM: Higher Order NOT: Micro TB_8-44
45. Refer to Figure 8-2. What area represents the amount of deadweight loss associated with the tax?
a. P3ACP1
b. ABC
c. P2DAP3
d. P1CDP2
ANS: B PTS: 1 DIF: Challenging REF: 174
BLM: Higher Order NOT: Micro TB_8-45
46. Suppose the government places a tax on a product. How does the cost of the tax compare with the
revenue raised?
a. The cost of the tax to buyers and sellers is less than the revenue raised from the tax by the
government.
b. The cost of the tax to buyers and sellers equals the revenue raised from the tax by the
government.
c. The cost of the tax to buyers and sellers exceeds the revenue raised from the tax by the
government.
d. Without additional information, such as the elasticity of demand for this product, it is
impossible to compare tax cost with tax revenue.
ANS: C PTS: 1 DIF: Challenging REF: 174-175
BLM: Remember NOT: Micro TB_8-46
47. When a tax is imposed on a good, what do we know about the losses to buyers and sellers?
a. They are equal to the revenue raised by the government.
b. They are less than the revenue raised by the government.
c. They exceed the revenue raised by the government.
d. They cannot be compared to the tax revenue raised by the government since the amount of
the tax will vary from good to good.
ANS: C PTS: 1 DIF: Challenging REF: 174-175
BLM: Remember NOT: Micro TB_8-47
49. What is the loss in total surplus resulting from a tax called?
a. a deficit
b. economic loss
c. deadweight loss
d. inefficiency
ANS: C PTS: 1 DIF: Easy REF: 174-175
BLM: Remember NOT: Micro TB_8-49
53. When evaluating the size of the deadweight loss due to a tax, what do we know?
a. the greater the elasticities of supply and demand, the greater the deadweight loss
b. the smaller the elasticities of supply and demand, the greater the deadweight loss
c. the smaller the decrease in both quantity demanded and quantity supplied, the greater the
deadweight loss
d. the greater the elasticities of supply and demand, the smaller the deadweight loss
ANS: A PTS: 1 DIF: Average REF: 177
BLM: Remember NOT: Micro TB_8-53
54. How is the amount of deadweight loss that will result from a tax determined?
a. by the price elasticity of demand and supply
b. by the number of buyers of the product in the market
c. by the number of suppliers of the product in the market
d. by the percentage of the purchase price that the tax represents
ANS: A PTS: 1 DIF: Average REF: 177
BLM: Remember NOT: Micro TB_8-54
55. Assume that the demand for pretzels is relatively inelastic and that the demand for potato chips is
relatively elastic. If the same percentage tax were placed on both goods, the tax on which product
would create a larger deadweight loss?
a. pretzels, if the supply of the pretzels is also relatively inelastic
b. potato chips, if the supply of the potato chips is also relatively elastic
c. pretzels, if the supply of the pretzels is relatively elastic
d. potato chips, if the supply of the potato chips is relatively inelastic
ANS: B PTS: 1 DIF: Average REF: 177
BLM: Higher Order NOT: Micro TB_8-55
Figure 8-3
56. Refer to Figure 8-3. What is the equilibrium price before the tax?
a. $8
b. $10
c. $16
d. $24
ANS: C PTS: 1 DIF: Easy REF: 174
BLM: Higher Order NOT: Micro TB_8-56
57. Refer to Figure 8-3. What is the price that will be paid after the tax?
a. $8
b. $10
c. $16
d. $24
ANS: D PTS: 1 DIF: Challenging REF: 174
BLM: Higher Order NOT: Micro TB_8-57
58. Refer to Figure 8-3. What is the price sellers receive after the tax?
a. $8
b. $10
c. $14
d. $24
ANS: B PTS: 1 DIF: Average REF: 174
BLM: Higher Order NOT: Micro TB_8-58
59. Refer to Figure 8-3. What is the per-unit burden of the tax on buyers?
a. $6
b. $8
c. $14
d. $16
ANS: B PTS: 1 DIF: Challenging REF: 174
BLM: Higher Order NOT: Micro TB_8-59
60. Refer to Figure 8-3. What is the amount of the tax imposed?
a. $6
b. $8
c. $14
d. $16
ANS: C PTS: 1 DIF: Challenging REF: 174
BLM: Higher Order NOT: Micro TB_8-61
61. Refer to Figure 8-3. What is the amount of tax revenue received by the government?
a. $210
b. $420
c. $560
d. $980
ANS: D PTS: 1 DIF: Challenging REF: 174
BLM: Higher Order NOT: Micro TB_8-62
62. Refer to Figure 8-3. What is the amount of deadweight loss as a result of the tax?
a. $210
b. $420
c. $560
d. $980
ANS: A PTS: 1 DIF: Challenging REF: 174
BLM: Higher Order NOT: Micro TB_8-63
63. Refer to Figure 8-3. What is the per-unit burden of the tax on the sellers?
a. $6
b. $8
c. $14
d. $16
ANS: A PTS: 1 DIF: Challenging REF: 174
BLM: Higher Order NOT: Micro TB_8-60
Figure 8-4
64. Refer to Figure 8-4. What is the equilibrium market price and quantity before the tax is imposed?
a. P1 and Q1
b. P2 and Q2
c. P3 and Q1
d. P1 and Q2
ANS: A PTS: 1 DIF: Easy REF: 174-175
BLM: Higher Order NOT: Micro TB_8-64
65. Refer to Figure 8-4. What is the price buyers pay after the tax and the quantity buyers receive?
a. P1 and Q1
b. P2 and Q2
c. P3 and Q2
d. P3 and Q1
ANS: C PTS: 1 DIF: Average REF: 174-175
BLM: Higher Order NOT: Micro TB_8-65
66. Refer to Figure 8-4. What is the price sellers receive after the tax and the quantity sold?
a. P1 and Q1
b. P2 and Q2
c. P3 and Q2
d. P2 and Q1
ANS: B PTS: 1 DIF: Average REF: 174-175
BLM: Higher Order NOT: Micro TB_8-66
67. Refer to Figure 8-4. Which area represents consumer surplus before the tax was levied?
a. A
b. A +B
c. A + B + C
d. D + E + F
ANS: A PTS: 1 DIF: Average REF: 174-175
BLM: Higher Order NOT: Micro TB_8-67
68. Refer to Figure 8-4. Which area represents producer surplus before the tax?
a. A
b. A + B + C
c. D + E
d. D + E + F
ANS: A PTS: 1 DIF: Average REF: 174-175
BLM: Higher Order NOT: Micro TB_8-68
69. Refer to Figure 8-4. Which area represents consumer surplus after the tax is levied on the consumer?
a. A
b. A + B
c. A + B + C
d. D + E + F
ANS: A PTS: 1 DIF: Average REF: 174-175
BLM: Higher Order NOT: Micro TB_8-70
70. Refer to Figure 8-4. Which area represents producer surplus after the tax is levied on the consumer?
a. A
b. A + B + C
c. D + E
d. F
ANS: D PTS: 1 DIF: Average REF: 174-175
BLM: Higher Order NOT: Micro TB_8-71
71. Refer to Figure 8-4. Which area represents producer surplus after the tax is levied on the consumer?
a. A
b. A + B + C
c. D + E
d. F
ANS: A PTS: 1 DIF: Average REF: 174-175
BLM: Higher Order NOT: Micro TB_8-72
72. Refer to Figure 8-4. Assume the tax was levied on the consumer. Which area represents a reduction in
consumer surplus?
a. A
b. B + C
c. C + E
d. D + E
ANS: A PTS: 1 DIF: Average REF: 174-175
BLM: Higher Order NOT: Micro TB_8-73
73. Refer to Figure 8-4. Assume the tax was levied on the producer. Which area represents a reduction in
consumer surplus?
a. A
b. B + C
c. C + E
d. D + E
ANS: A PTS: 1 DIF: Average REF: 174-175
BLM: Higher Order NOT: Micro TB_8-74
74. Refer to Figure 8-4. Assume the tax was levied on the consumer. Which area represents a reduction in
producer surplus?
a. A
b. B + C
c. D + E
d. D + E + F
ANS: A PTS: 1 DIF: Average REF: 174-175
BLM: Higher Order NOT: Micro TB_8-75
75. Refer to Figure 8-4. Which area represents the benefit to the government (total tax revenue)?
a. A + B
b. B + D
c. B + D + F
d. D + F
ANS: B PTS: 1 DIF: Average REF: 174-175
BLM: Higher Order NOT: Micro TB_8-76
76. Refer to Figure 8-4. Which area represents the total surplus (consumer, producer, and government)
with the tax?
a. A + B + C
b. A + B + D
c. A + B + D + F
d. D + E + F
ANS: C PTS: 1 DIF: Average REF: 174-175
BLM: Higher Order NOT: Micro TB_8-77
77. Refer to Figure 8-4. Which area represents the loss in total welfare resulting from the levying of the
tax on the buyer?
a. A + B + C
b. D + E + F
c. A + B + D + F
d. C + E
ANS: D PTS: 1 DIF: Average REF: 174-175
BLM: Higher Order NOT: Micro TB_8-78
78. Refer to Figure 8-4. Which area represents the loss in total welfare resulting from the levying of the
tax on the seller?
a. A + B + C
b. A + B D + F
c. C + E
d. D + E + F
ANS: C PTS: 1 DIF: Average REF: 174-175
BLM: Higher Order NOT: Micro TB_8-79
79. Refer to Figure 8-4. Which area represents the loss in total welfare resulting from the levying of the
tax on the seller?
a. A + B + C
b. A + B D + F
c. C + E
d. D + E + F
ANS: A PTS: 1 DIF: Average REF: 174-175
BLM: Higher Order NOT: Micro TB_8-69
Figure 8-5
80. Refer to Figure 8-5. Without the tax, what would the equilibrium price and quantity be?
a. $6 and 300
b. $10 and 300
c. $10 and 600
d. $16 and 300
ANS: C PTS: 1 DIF: Easy REF: 174-175
BLM: Higher Order NOT: Micro TB_8-80
81. Refer to Figure 8-5. Without the tax, what would consumer surplus in this market be?
a. $1500
b. $2400
c. $3000
d. $3600
ANS: D PTS: 1 DIF: Challenging REF: 174-175
BLM: Higher Order NOT: Micro TB_8-81
82. Refer to Figure 8-5. Without the tax, what would producer surplus in this market be?
a. $1500
b. $2400
c. $3000
d. $3600
ANS: B PTS: 1 DIF: Challenging REF: 174-175
BLM: Higher Order NOT: Micro TB_8-82
83. Refer to Figure 8-5. Without the tax, what would total surplus in this market be?
a. $2400
b. $3000
c. $3600
d. $6000
ANS: D PTS: 1 DIF: Challenging REF: 174-175
BLM: Higher Order NOT: Micro TB_8-83
84. Refer to Figure 8-5. If the tax is imposed in this market, what would be the price buyers would now
pay for the good?
a. $2
b. $6
c. $10
d. $16
ANS: D PTS: 1 DIF: Average REF: 174-175
BLM: Higher Order NOT: Micro TB_8-84
85. Refer to Figure 8-5. If the tax is imposed on the buyer, what would be the price buyers would now pay
for the good?
a. $2
b. $6
c. $10
d. $16
ANS: D PTS: 1 DIF: Average REF: 174-175
BLM: Higher Order NOT: Micro TB_8-85
86. Refer to Figure 8-5. If the tax is imposed on the seller, what would be the price buyers would now pay
for the good?
a. $2
b. $6
c. $10
d. $16
ANS: D PTS: 1 DIF: Average REF: 174-175
BLM: Higher Order NOT: Micro TB_8-86
87. Refer to Figure 8-5. If the tax is imposed in this market, what would be the price sellers would receive
for their product?
a. $2
b. $6
c. $10
d. $16
ANS: B PTS: 1 DIF: Average REF: 174-175
BLM: Higher Order NOT: Micro TB_8-87
88. Refer to Figure 8-5. If the tax is imposed on the buyer, what would be the price sellers would receive
for their product?
a. $2
b. $6
c. $10
d. $16
ANS: B PTS: 1 DIF: Average REF: 174-175
BLM: Higher Order NOT: Micro TB_8-88
89. Refer to Figure 8-5. If the tax is imposed on the seller, what would be the price sellers would receive
for their product?
a. $2
b. $6
c. $10
d. $16
ANS: B PTS: 1 DIF: Average REF: 174-175
BLM: Higher Order NOT: Micro TB_8-89
90. Refer to Figure 8-5. If the tax is imposed in this market, what would consumer surplus be?
a. $600
b. $900
c. $1500
d. $2200
ANS: B PTS: 1 DIF: Challenging REF: 174-175
BLM: Higher Order NOT: Micro TB_8-90
91. Refer to Figure 8-5. If the tax is imposed on the buyer, what would consumer surplus be?
a. $600
b. $900
c. $1500
d. $2200
ANS: B PTS: 1 DIF: Challenging REF: 174-175
BLM: Higher Order NOT: Micro TB_8-91
92. Refer to Figure 8-5. If the tax is imposed on the seller, what would consumer surplus be?
a. $600
b. $900
c. $1500
d. $2200
ANS: B PTS: 1 DIF: Challenging REF: 174-175
BLM: Higher Order NOT: Micro TB_8-92
93. Refer to Figure 8-5. If the tax is imposed in this market, what would producer surplus be?
a. $600
b. $900
c. $1200
d. $1500
ANS: A PTS: 1 DIF: Challenging REF: 174-175
BLM: Higher Order NOT: Micro TB_8-93
94. Refer to Figure 8-5. If the tax is imposed on the buyer, what would producer surplus be?
a. $600
b. $900
c. $1200
d. $1500
ANS: A PTS: 1 DIF: Challenging REF: 174-175
BLM: Higher Order NOT: Micro TB_8-94
95. Refer to Figure 8-5. If the tax is imposed on the seller, what would producer surplus be?
a. $600
b. $900
c. $1200
d. $1500
ANS: A PTS: 1 DIF: Challenging REF: 174-175
BLM: Higher Order NOT: Micro TB_8-95
96. Refer to Figure 8-5. When the tax is placed on this good, what are the quantity sold and the price
buyers will pay?
a. 300 and buyers will still pay $10
b. 600 and buyers will still pay $10
c. 300 and buyers will now pay $16
d. 600 and buyers will now pay $16
ANS: C PTS: 1 DIF: Challenging REF: 174-175
BLM: Higher Order NOT: Micro TB_8-96
97. Refer to Figure 8-5. If the government imposes the tax in this market, what will the tax revenue be?
a. $600
b. $900
c. $1500
d. $3000
ANS: D PTS: 1 DIF: Challenging REF: 174-175
BLM: Higher Order NOT: Micro TB_8-97
98. Refer to Figure 8-5. What is the amount of the tax placed on this product?
a. $4
b. $6
c. $8
d. $10
ANS: D PTS: 1 DIF: Average REF: 174-175
BLM: Higher Order NOT: Micro TB_8-98
99. Refer to Figure 8-5. What would total surplus with a tax imposed in this market be?
a. $1500
b. $3600
c. $4500
d. $6000
ANS: C PTS: 1 DIF: Challenging REF: 174-175
BLM: Higher Order NOT: Micro TB_8-99