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c.
$10.
d.
$16.
135. Refer to Figure 8-6. When the tax is imposed in this market, buyers effectively pay what amount of the $10 tax?
a.
$0
b.
$4
c.
$6
d.
$10
136. Refer to Figure 8-6. When the tax is imposed in this market, sellers effectively pay what amount of the $10 tax?
a.
$0
b.
$4
c.
$6
d.
$10
137. Refer to Figure 8-6. When the tax is imposed in this market, the price sellers effectively receive is
a.
$4.
b.
$6.
c.
$10.
d.
$16.
138. Refer to Figure 8-6. When the tax is imposed in this market, consumer surplus is
a.
$600.
b.
$900.
c.
$1,500.
d.
$3,000.
139. Refer to Figure 8-6. When the tax is imposed in this market, producer surplus is
a.
$450.
b.
$600.
c.
$900.
d.
$1,500.
140. Refer to Figure 8-6. When the tax is placed on this good, the quantity sold
a.
is 600, and buyers effectively pay $10.
b.
is 300, and buyers effectively pay $10.
c.
is 600, and buyers effectively pay $16.
d.
is 300, and buyers effectively pay $16.
141. Refer to Figure 8-6. When the government imposes the tax in this market, tax revenue is
a.
$600.
b.
$900.
c.
$1,500.
d.
$3,000.
142. Refer to Figure 8-6. The amount of the tax on each unit of the good is
a.
$6.
b.
$8.
c.
$10.
d.
$12.
143. Refer to Figure 8-6. Total surplus with the tax in place is
a.
$1,500.
b.
$3,600.
c.
$4,500.
d.
$6,000.
144. Refer to Figure 8-6. What happens to consumer surplus when the tax is imposed in this market?
a.
Consumer surplus falls by $3,600.
b.
Consumer surplus falls by $2,700.
c.
Consumer surplus falls by $1,800.
d.
Consumer surplus falls by $900.
145. Refer to Figure 8-6. What happens to producer surplus when the tax is imposed in this market?
a.
Producer surplus falls by $600.
b.
Producer surplus falls by $900.
c.
Producer surplus falls by $1,800.
d.
Producer surplus falls by $2,100.
146. Refer to Figure 8-6. What happens to total surplus in this market when the tax is imposed?
a.
Total surplus increases by $1,500.
b.
Total surplus increases by $3,000.
c.
Total surplus decreases by $1,500.
d.
Total surplus decreases by $,3000.
147. Refer to Figure 8-6. The tax results in a deadweight loss that amounts to
a.
$600.
b.
$900.
c.
$1,500.
d.
$1,800.
Figure 8-7
The vertical distance between points A and B represents a tax in the market.
148. Refer to Figure 8-7. Before the tax is imposed, the equilibrium price is
a.
$32, and the equilibrium quantity is 15.
b.
$24, and the equilibrium quantity is 15.
c.
$24, and the equilibrium quantity is 25.
d.
$16, and the equilibrium quantity is 15.
149. Refer to Figure 8-7. As a result of the tax, buyers effectively pay
a.
$32 for each unit of the good, and sellers effectively receive $24 for each unit of the good.
b.
$32 for each unit of the good, and sellers effectively receive $16 for each unit of the good.
c.
$24 for each unit of the good, and sellers effectively receive $16 for each unit of the good.
d.
$28 for each unit of the good, and sellers effectively receive $20 for each unit of the good.
150. Refer to Figure 8-7. Suppose a 20th unit of the good were sold by a seller to a buyer. Which of the following
statements is correct?
a.
For the 20th unit, the difference between the buyer’s value and the seller’s cost is less than the tax per unit.
b.
For the 20th unit, the difference between the buyer’s value and the seller’s cost is greater than the tax per unit.
c.
For the 20th unit, the difference between the buyer’s value and the seller’s cost is equal to the tax per unit.
d.
It makes sense for the buyer to buy and for the seller to sell the 20th unit, with or without the tax in place.
151. Refer to Figure 8-7. Which of the following statements summarizes the incidence of the tax?
a.
For each unit of the good that is sold, buyers bear one-half of the tax burden, and sellers bear one-half of the
tax burden.
b.
For each unit of the good that is sold, buyers bear one-third of the tax burden, and sellers bear two-thirds of the
tax burden.
c.
For each unit of the good that is sold, buyers bear one-fourth of the tax burden, and sellers bear three-fourths
of the tax burden.
d.
For each unit of the good that is sold, buyers bear three-fourths of the tax burden, and sellers bear one-fourth
of the tax burden.
152. Refer to Figure 8-7. Which of the following statements is correct?
a.
Total surplus before the tax is imposed is $500.
b.
After the tax is imposed, consumer surplus is 45 percent of its pre-tax value.
c.
After the tax is imposed, producer surplus is 45 percent of its pre-tax value.
d.
All of the above are correct.
153. Refer to Figure 8-7. Which of the following statements is correct?
a.
Total surplus before the tax is imposed is $180.
b.
After the tax is imposed, consumer surplus is 25 percent of its pre-tax value.
c.
After the tax is imposed, producer surplus is 36 percent of its pre-tax value.
d.
All of the above are correct.
154. Refer to Figure 8-7. As a result of the tax,
a.
consumer surplus decreases from $200 to $80.
b.
producer surplus decreases from $200 to $145.
c.
the market experiences a deadweight loss of $80.
d.
All of the above are correct.
155. Refer to Figure 8-7. As a result of the tax, consumer surplus decreases by
a.
$130, producer surplus decreases by $170, tax revenue is $240, and deadweight loss is $60.
b.
$150, producer surplus decreases by $150, tax revenue is $240, and deadweight loss is $60.
c.
$160, producer surplus decreases by $160, tax revenue is $240, and deadweight loss is $80.
d.
$240, producer surplus decreases by $240, tax revenue is $400, and deadweight loss is $80.
156. Refer to Figure 8-7. Which of the following statements is correct?
a.
The loss of producer surplus that is associated with some sellers dropping out of the market as a result of the
tax is $60.
b.
The loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is
$120.
c.
The loss of consumer surplus caused by this tax exceeds the loss of producer surplus caused by this tax.
d.
This tax produces $320 in tax revenue for the government.
157. Refer to Figure 8-7. The deadweight loss associated with this tax amounts to
a.
$80, and this figure represents the amount by which tax revenue to the government exceeds the combined loss
of producer and consumer surpluses.
b.
$80, and this figure represents the surplus that is lost because the tax discourages mutually advantageous
trades between buyers and sellers.
c.
$60, and this figure represents the amount by which tax revenue to the government exceeds the combined loss
of producer and consumer surpluses.
d.
$60, and this figure represents the surplus that is lost because the tax discourages mutually advantageous
trades between buyers and sellers.
Figure 8-8
Suppose the government imposes a $10 per unit tax on a good.
158. Refer to Figure 8-8. The tax causes consumer surplus to decrease by the area
a.
A.
b.
B+C.
c.
A+B+C.
d.
A+B+C+D+F.
159. Refer to Figure 8-8. After the tax goes into effect, consumer surplus is the area
a.
A.
b.
B+C.
c.
A+B+C.
d.
A+B+D+J+K.
160. Refer to Figure 8-8. The tax causes producer surplus to decrease by the area
a.
D+F.
b.
D+F+G.
c.
D+F+J.
d.
D+F+G+H.
161. Refer to Figure 8-8. After the tax goes into effect, producer surplus is the area
a.
D+F+G+H+J.
b.
D+F+G+H.
c.
D+F+J.
d.
J.
162. Refer to Figure 8-8. The government collects tax revenue that is the area
a.
L.
b.
B+D.
c.
C+F.
d.
F+G+L.
163. Refer to Figure 8-8. The decrease in consumer and producer surpluses that is not offset by tax revenue is the area
a.
C.
b.
F.
c.
G.
d.
C+F.
164. Refer to Figure 8-8. The deadweight loss of the tax is the area
a.
B+D.
b.
C+F.
c.
A+C+F+J.
d.
B+C+D+F.
165. Refer to Figure 8-8. One effect of the tax is to
a.
reduce consumer surplus from $180 to $72.
b.
reduce producer surplus from $96 to $24.
c.
create a deadweight loss of $72.
d.
All of the above are correct.
166. Refer to Figure 8-8. One effect of the tax is to
a.
reduce consumer surplus by $108.
b.
reduce producer surplus by $72.
c.
create a deadweight loss of $60.
d.
All of the above are correct.
167. Refer to Scenario 8-1. If Erin pays Ernesto $90 to clean her house, Erin’s consumer surplus is
a.
$80.
b.
$30.
c.
$20.
d.
$10.
168. Refer to Scenario 8-1. If Ernesto cleans Erin's house for $90, Ernesto’s producer surplus is
a.
$80.
b.
$30.
c.
$20.
d.
$10.
169. Refer to Scenario 8-1. Assume Erin is required to pay a tax of $40 when she hires someone to clean her house for a
week. Which of the following is correct?
a.
Erin will now clean her own house.
b.
Ernesto will continue to clean Erin’s house, but his producer surplus will decline.
c.
Total economic welfare (consumer surplus plus producer surplus plus tax revenue) will increase.
d.
Erin will continue to hire Ernesto to clean her house, but her consumer surplus will decline.
170. Refer to Scenario 8-1. Assume Erin is required to pay a tax of $5 when she hires someone to clean her house.
Which of the following is true?
a.
Erin will continue to hire Ernesto to clean her house, but her consumer surplus will decline.
b.
Ernesto will continue to clean Erin's house, and his producer surplus will increase.
c.
Total economic welfare (consumer surplus plus producer surplus plus tax revenue) will decrease.
d.
All of the above are correct.
171. Refer to Scenario 8-2. If Karla hires Roland to mow her lawn, Karla’s consumer surplus is
a.
$3.
b.
$5.
c.
$8.
d.
$25.
172. Refer to Scenario 8-2. If Karla hires Roland to mow her lawn, Roland’s producer surplus is
a.
$2.
b.
$3.
c.
$5.
d.
$25.
173. Refer to Scenario 8-2. Assume Roland is required to pay a tax of $3 each time he mows a lawn. Which of the
following results is most likely?
a.
Karla now will decide to mow her own lawn, and Roland will decide it is no longer in his interest to mow
Karla’s lawn.
b.
Karla is willing to pay Roland to mow her lawn, but Roland will decline her offer.
c.
Roland is willing to mow Karla’s lawn, but Karla will decide to mow her own lawn.
d.
Roland and Karla still can engage in a mutually-agreeable trade.
174. Refer to Scenario 8-2. Assume Roland is required to pay a tax of $10 each time he mows a lawn. Which of the
following results is most likely?
a.
Karla now will decide to mow her own lawn, and Roland will decide it is no longer in his interest to mow
Karla’s lawn.
b.
Karla still is willing to pay Roland to mow her lawn, but Roland will decline her offer.
c.
Roland still is willing to mow Karla’s lawn, but Karla will decide to mow her own lawn.
d.
Roland and Karla still can engage in a mutually-agreeable trade.
175. Suppose a tax of $5 per unit is imposed on a good, and the tax causes the equilibrium quantity of the good to
decrease from 200 units to 100 units. The tax decreases consumer surplus by $450 and decreases producer surplus by
$300. The deadweight loss from the tax is
a.
$250.
b.
$500.
c.
$750.
d.
$1,000.
176. Suppose a tax of $4 per unit is imposed on a good, and the tax causes the equilibrium quantity of the good to
decrease from 2,000 units to 1,700 units. The tax decreases consumer surplus by $3,000 and decreases producer surplus
by $4,400. The deadweight loss of the tax is
a.
$200.
b.
$400.
c.
$600.
d.
$1,200.
177. 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 straight 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.
2,000 to 1,500.
b.
2,400 to 2,000.
c.
2,600 to 2,000.
d.
3,000 to 2,400.
178. Suppose a tax of $5 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 straight line. The tax decreases consumer surplus by $10,000 and decreases
producer surplus by $15,000. The deadweight loss of the tax is $2,500. The tax decreased the equilibrium quantity of the
good from
a.
6,500 to 5,500.
b.
5,500 to 4,500.
c.
5,000 to 3,000.
d.
6,000 to 4,000.
179. A tax of $0.25 is imposed on each bag of potato chips that is sold. The tax decreases producer surplus by $600 per
day, generates tax revenue of $1,220 per day, and decreases the equilibrium quantity of potato chips by 120 bags per day.
The tax
a.
decreases consumer surplus by $645 per day.
b.
decreases the equilibrium quantity from 6,000 bags per day to 5,880 bags per day.
c.
decreases total surplus from $3,000 to $1,800 per day.
d.
creates a deadweight loss of $15 per day.
180. Suppose a tax is imposed on each new hearing aid that is sold. The supply curve is a typical upward-sloping straight
line, and the demand curve is a typical downward-sloping straight line. As a result of the tax, the equilibrium quantity of
hearing aids decreases from 10,000 to 9,000, and the deadweight loss of the tax is $60,000. We can conclude that the tax
on each hearing aid is
a.
$60.
b.
$120.
c.
$160.
d.
$200.
181. Suppose a tax of $3 is imposed on each new garden hose that is sold, resulting in a deadweight loss of $22,500. The
supply curve is a typical upward-sloping straight line, and the demand curve is a typical downward-sloping straight line.
Before the tax was imposed, the equilibrium quantity of garden hoses was 100,000. We can conclude that the equilibrium
quantity of garden hoses after the tax is imposed is
a.
75,000.
b.
85,000.
c.
90,000.
d.
95,000.
182. Tom walks Bethany’s dog once a day for $50 per week. Bethany values this service at $60 per week, while the
opportunity cost of Tom’s time is $30 per week. The government places a tax of $35 per week on dog walkers. Before the
tax, what is the total surplus?
a.
$60
b.
$50
c.
$30
d.
$25
183. Tom walks Bethany’s dog once a day for $50 per week. Bethany values this service at $60 per week, while the
opportunity cost of Tom’s time is $30 per week. The government places a tax of $35 per week on dog walkers. After the
tax, what is the loss in total surplus?
a.
$50
b.
$30
c.
$25
d.
$0
184. Tom walks Bethany’s dog once a day for $50 per week. Bethany values this service at $60 per week, while the
opportunity cost of Tom’s time is $30 per week. The government places a tax of $35 per week on dog walkers. After the
tax, what is the total surplus?
a.
$50
b.
$30
c.
$25
d.
$0
185. Diana is a personal trainer whose client Charles pays $80 per hour-long session. Charles values this service at $100
per hour, while the opportunity cost of Diana’s time is $75 per hour. The government places a tax of $10 per hour on
personal trainers. Before the tax, what is the total surplus?
a.
$25
b.
$20
c.
$5
d.
$0
186. Kate is a personal trainer whose client William pays $80 per hour-long session. William values this service at $100
per hour, while the opportunity cost of Kate’s time is $75 per hour. The government places a tax of $10 per hour on
personal trainers. After the tax, what is likely to happen in the market for personal training?
a.
Kate and William will agree to a new price somewhere between $85 and $100.
b.
Kate and William will agree to a new price somewhere between $70 and $110.
c.
Kate will no longer offer personal training services to William because she must charge more than $100 in
order to cover her opportunity costs and pay the tax.
d.
The price will remain at $80, and Kate will pay the $10 tax.
187. A tax
a.
lowers the price buyers pay and raises the price sellers receive.
b.
raises the price buyers pay and lowers the price sellers receive.
c.
places a wedge between the price buyers pay and the price sellers receive.
d.
Both b) and c) are correct.
188. 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 $175. Rebecca and Susan agree
on a price of $185. Suppose the government imposes a tax of $30 on dog sitting. What is the deadweight loss of the tax?
a.
the maximum value that Rebecca would pay for dog sitting
b.
the $30 tax
c.
the lost benefit to Rebecca and Susan because after the tax, Susan will not dog sit for Rebecca
d.
the lost benefit to Rebecca of being unable to hire a dog sitter because Rebecca is the one who would pay the
tax
189. 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 $175. Rebecca and Susan agree
on a price of $185. Suppose the government imposes a tax of $30 on dog sitting. The tax has made Rebecca and Susan
worse off by a total of
a.
$30.
b.
$25.
c.
$10.
d.
$5.
190. 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.
Figure 8-9
The vertical distance between points A and C represents a tax in the market.
191. 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.
192. 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.
193. Refer to Figure 8-9. The imposition of the tax causes the price paid by buyers to increase by
