Ecnomics 2

sample ch8

Multiple Choice

Identify the letter of the choice that best completes the statement or answers the question.

____ 1. To measure the gains and losses from a tax on a good, economists use the tools of

a.|macroeconomics.|

b.|welfare economics.|

c.|international-trade theory.|

d.|circular-flow analysis.|

____ 2. A tax levied on the sellers of a good shifts the

a.|supply curve upward (or to the left).|

b.|supply curve downward (or to the right).|

c.|demand curve upward (or to the right).|

d.|demand curve downward (or to the left).|

Figure 8-1

____ 3. Refer to Figure 8-1. When the market is in equilibrium, total surplus is represented by area

a.|A + B.|

b.|B + C.|

c.|C + D.|

d.|A + D.|

____ 4. The loss in total surplus resulting from a tax is called

a.|a deficit.|

b.|economic loss.|

c.|deadweight loss.|

d.|inefficiency.|

Scenario 8-1

Ryan would be willing to pay as much as $100 per week to have his house cleaned. Tammy's opportunity cost of cleaning Ryan’s house is $70 per week.

____ 5. Refer to Scenario 8-1. Assume Ryan is required to pay a tax of $40 when he hires someone to clean his house for a week. Which of the following is correct?

a.|Ryan will now clean his own house.|

b.|Tammy will continue to clean Ryan's house but her producer surplus will decline.|

c.|Total economic welfare (consumer surplus plus producer surplus plus tax revenue) will increase.|

d.|Ryan will continue to hire Tammy to clean his house but his consumer surplus will decline.|

____ 6. The size of a tax and the deadweight loss that results from the tax are

a.|positively related.|

b.|negatively related.|

c.|independent of each other.|

d.|equal to each other.|

____ 7. Since the amount of land is fixed, the total supply of land is

a.|relatively elastic.|

b.|perfectly elastic.|

c.|perfectly inelastic.|

d.|relatively inelastic.|

____ 8. Studies indicate that if income tax rates in Sweden had been reduced from...