Microeconomics Quiz: The Cost Of Taxation
(180).jpg "Microeconomics Quiz: The Cost Of Taxation")
Taxation affects most of us and each citizen with an income is taxed in most countries. In our microeconomics class we got to understand much about the cost of taxation. How attentive have you been these past few chapters, do you think you can handle a quiz on it? Take up the quiz below and get to find out for sure. All the best!
- 1.In general, a tax raises the price the buyers pay, lowers the price the sellers receive, and reduces the quantity sold
- A.
True
- B.
False
- 2.If a tax is placed on a good and it reduces the quantity sold, there must be a deadweight loss from the tax
- A.
True
- B.
False
- 3.Deadweight loss is the reduction in consumer suprlus that results from a tax
- A.
True
- B.
False
- 4.When a tax is placed on a good, the revenue the government collects is exactly equal to the loss of consumer and producer surplus from the tax
- A.
True
- B.
False
- 5.If John values having his hair cut at $20 and Mary's cost of providing the haircut is $10, any tax on haircuts larger than $10 will eliminate the gains from trade and cause a $20 loss of total surplus
- A.
True
- B.
False
- 6.A tax causes a deadweight loss because it eliminates some of the potential gains from trade
- A.
True
- B.
False
- 7.A larger tax always generates more tax revenue
- A.
True
- B.
False
- 8.A larger tax always generates a larger deadweight loss
- A.
True
- B.
False
- 9.If an income tax rate is high enough, a reduction in the tax rate could increase tax revenue
- A.
True
- B.
False
- 10.A tax collected from buyers generates a smaller deadweight loss than a tax collected from sellers
- A.
True
- B.
False
- 11.If a tax is doubled, the deadweight loss from the tax more than doubles
- A.
True
- B.
False
- 12.A deadweight loss results when a tax causes market participants to fail to produce and consume units on which the benefits to the buyers exceed the costs to sellers
- A.
True
- B.
False
- 13.If there is no tax placed on the product in this market, consumer surplus is the area
- A.
A + B + C
- B.
D + C + B
- C.
A + B + E
- D.
C + D + F
- E.
A
- 14.If there is no tax placed on the product in this market, producer surplus is the area
- A.
A + B + C + D
- B.
C + D + F
- C.
D
- D.
C + F
- E.
A + B + E
- 15.If a tax is placed on the product in this market, consumer surplus is the area
- A.
A
- B.
A + B
- C.
A + B + E
- D.
A + B + C + D
- E.
D
- 16.If a tax is placed on the product in this market, producer surplus is the area
- A.
A
- B.
A + B + E
- C.
C + D + E
- D.
D
- E.
A + B + C + D
- 17.If a tax is placed on the product in this market, tax revenue paid by the buyers is the area
- A.
A
- B.
B
- C.
C
- D.
B + C
- E.
B + C + E + F
- 18.If tax is placed on the product in this market, tax revenue paid by the sellers is the area
- A.
A
- B.
B
- C.
C
- D.
C + F
- E.
B + C + E + F
- 19.If there is no tax placed on the product in this market, total surplus is the area
- A.
A + B + C + D
- B.
A + B + C + D + E + F
- C.
B + C + E + F
- D.
E + F
- E.
A + D + E + F
- 20.If a tax is placed on the product in this market, total surplus is the area
- A.
A + B + C + D
- B.
A + B + C + D + E + F
- C.
B + C + E + F
- D.
E + F
- E.
A + D
- 21.If a tax is placed on the product in this market, deadweight loss is the area
- A.
B + C
- B.
B + C + E + F
- C.
A + B + C + D
- D.
E + F
- E.
A + D
- 22.The graph that shows the relationship between the size of a tax and the tax revenue collected by the government is known as a
- A.
Deadweight curve
- B.
Tax revenue curve
- C.
Laffer curve
- D.
Reagan curve
- E.
None of the above is true
- 23.If a tax on a good is doubled, the deadweight loss from the tax
- A.
Stays the same
- B.
Doubles
- C.
Increases by a factor of four
- D.
Could rise or fall
- 24.The reduction of a tax
- A.
Could increase tax revenue if the tax had been extremely high
- B.
Will always reduce tax revenue regardless of the prior size of the tax
- C.
Will have no impact on tax revenue
- D.
Causes a market to become less efficient
- 25.When a tax distorts incentives to buyers and sellers so that fewer goods are produced and sold, the tax has
- A.
Increase efficiency
- B.
Reduced the price buyers pay
- C.
Generated no tax revenue
- D.
Caused a deadweight loss
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