Application: The Costs of Taxation 2031
77. Refer to Figure 8-1. Suppose the government imposes a tax of P’ – P”’. The deadweight loss
due to the tax is measured by the area
a. J+K+L+M.
b. J+K+L+M+N.
c. I+Y.
d. I+Y+B.
Figure 8-2
The vertical distance between points A and B represents a tax in the market.
2032 Application: The Costs of Taxation
78. Refer to Figure 8-2. The imposition of the tax causes the quantity sold to
a. increase by 1 unit.
b. decrease by 1 unit.
c. increase by 2 units.
d. decrease by 2 units.
79. Refer to Figure 8-2. The imposition of the tax causes the price paid by buyers to
a. decrease by $2.
b. increase by $3.
c. decrease by $4.
d. increase by $5.
80. Refer to Figure 8-2. The imposition of the tax causes the price received by sellers to
a. decrease by $2.
b. increase by $3.
c. decrease by $4.
d. increase by $5.
Application: The Costs of Taxation 2033
81. Refer to Figure 8-2. The amount of the tax on each unit of the good is
a. $1.
b. $4.
c. $5.
d. $9.
82. Refer to Figure 8-2. The per-unit burden of the tax on buyers is
a. $2.
b. $3.
c. $4.
d. $5.
2034 Application: The Costs of Taxation
83. Refer to Figure 8-2. The per-unit burden of the tax on sellers is
a. $2.
b. $3.
c. $4.
d. $5.
84. Refer to Figure 8-2. The amount of tax revenue received by the government is
a. $2.50.
b. $4.
c. $5.
d. $9.
Application: The Costs of Taxation 2035
85. Refer to Figure 8-2. The amount of deadweight loss as a result of the tax is
a. $2.50.
b. $5.
c. $7.50.
d. $10.
86. Refer to Figure 8-2. The loss of consumer surplus as a result of the tax is
a. $1.50.
b. $3.
c. $4.50.
d. $6.
2036 Application: The Costs of Taxation
87. Refer to Figure 8-2. The loss of producer surplus as a result of the tax is
a. $1.
b. $2.
c. $3.
d. $4.
88. Refer to Figure 8-2. Consumer surplus without the tax is
a. $6, and consumer surplus with the tax is $1.50.
b. $6, and consumer surplus with the tax is $4.50.
c. $10, and consumer surplus with the tax is $1.50.
d. $10, and consumer surplus with the tax is $4.50.
Application: The Costs of Taxation 2037
89. Refer to Figure 8-2. Producer surplus without the tax is
a. $4, and producer surplus with the tax is $1.
b. $4, and producer surplus with the tax is $3.
c. $10, and producer surplus with the tax is $1.
d. $10, and producer surplus with the tax is $3.
90. Refer to Figure 8-2. Total surplus without the tax is
a. $10, and total surplus with the tax is $2.50.
b. $10, and total surplus with the tax is $7.50.
c. $20, and total surplus with the tax is $2.50.
d. $20, and total surplus with the tax is $7.50.
2038 Application: The Costs of Taxation
91. Refer to Figure 8-2. The loss of consumer surplus associated with some buyers dropping out of
the market as a result of the tax is
a. $0.
b. $1.50.
c. $3.
d. $4.50.
92. Refer to Figure 8-2. The loss of consumer surplus for those buyers of the good who continue to
buy it after the tax is imposed is
a. $0.
b. $1.50.
c. $3.
d. $4.50.
Application: The Costs of Taxation 2039
93. Refer to Figure 8-2. The loss of producer surplus associated with some sellers dropping out of
the market as a result of the tax is
a. $0.
b. $1.
c. $2.
d. $3.
94. 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
a. $0.
b. $1.
c. $2.
d. $3.
2040 Application: The Costs of Taxation
Figure 8-3
The vertical distance between points A and C represents a tax in the market.
95. Refer to Figure 8-3. The equilibrium price before the tax is imposed is
a. P1.
b. P2.
c. P3.
d. P4.
Application: The Costs of Taxation 2041
96. Refer to Figure 8-3. The price that buyers effectively pay after the tax is imposed is
a. P1.
b. P2.
c. P3.
d. P4.
97. Refer to Figure 8-3. The price that sellers effectively receive after the tax is imposed is
a. P1.
b. P2.
c. P3.
d. P4.
98. Refer to Figure 8-3. The per unit burden of the tax on buyers is
a. P3 – P1.
b. P3 – P2.
c. P2 – P1.
d. P4 – P3.
2042 Application: The Costs of Taxation
Application: The Costs of Taxation 2043
99. Refer to Figure 8-3. The per-unit burden of the tax on sellers is
a. P3 – P1.
b. P3 – P2.
c. P2 – P1.
d. P4 – P3.
100. Refer to Figure 8-3. The amount of the tax on each unit of the good is
a. P3 – P1.
b. P3 – P2.
c. P2 – P1.
d. P4 – P3.
2044 Application: The Costs of Taxation
101. Refer to Figure 8-3. The amount of tax revenue received by the government is equal to the
area
a. P3ACP1.
b. ABC.
c. P2DAP3.
d. P1CDP2.
102. Refer to Figure 8-3. The amount of deadweight loss associated with the tax is equal to
a. P3ACP1.
b. ABC.
c. P2ADP3.
d. P1DCP2.
Application: The Costs of Taxation 2045
103. Refer to Figure 8-3. The loss in consumer surplus caused by the tax is measured by the area
a. P1P3AC.
b. P3ABP2.
c. P1P3ABC.
d. ABC.
104. Refer to Figure 8-3. The loss in producer surplus caused by the tax is measured by the area
a. ABC.
b. P1P3ABC.
c. P1P2BC.
d. P1C0.
2046 Application: The Costs of Taxation
105. Refer to Figure 8-3. Which of the following equations is valid for the tax revenue that the tax
provides to the government?
a. Tax revenue = (P2 – P1)xQ1
b. Tax revenue = (P3 – P1)xQ1
c. Tax revenue = (P3 – P2)xQ1
d. Tax revenue = (P3 – P1)x(Q2 – Q1)
106. Refer to Figure 8-3. Which of the following equations is valid for the deadweight loss of the
tax?
a. Deadweight loss = (1/2)(P2 – P1)(Q2 + Q1)
b. Deadweight loss = (1/2)(P3 – P1)(Q2 + Q1)
c. Deadweight loss = (1/2)(P3 – P2)(Q2 – Q1)
d. Deadweight loss = (1/2)(P3 – P1)(Q2 – Q1)
Application: The Costs of Taxation 2047
Figure 8-4
The vertical distance between points A and B represents a tax in the market.
107. Refer to Figure 8-4. The equilibrium price before the tax is imposed is
a. $12, and the equilibrium quantity is 35.
b. $8, and the equilibrium quantity is 50.
c. $5, and the equilibrium quantity is 35.
d. $5, and the equilibrium quantity is 50.
2048 Application: The Costs of Taxation
108. Refer to Figure 8-4. The price that buyers effectively pay after the tax is imposed is
a. $12.
b. between $8 and $12.
c. between $5 and $8.
d. $5.
109. Refer to Figure 8-4. The price that sellers effectively receive after the tax is imposed is
a. $12.
b. between $8 and $12.
c. between $5 and $8.
d. $5.
Application: The Costs of Taxation 2049
110. Refer to Figure 8-4. The per-unit burden of the tax on buyers is
a. $3.
b. $4.
c. $5.
d. $8.
111. Refer to Figure 8-4. The per-unit burden of the tax on sellers is
a. $7.
b. $5.
c. $4.
d. $3.
112. Refer to Figure 8-4. The amount of the tax on each unit of the good is
a. $5.
b. $7.
c. $8.
d. $12.
2050 Application: The Costs of Taxation
113. Refer to Figure 8-4. The amount of tax revenue received by the government is equal to
a. $245.
b. $350.
c. $490.
d. $700.
114. Refer to Figure 8-4. The amount of deadweight loss as a result of the tax is
a. $35.00.
b. $45.25.
c. $52.50.
d. $105.00.