CHAP 8

To fully understand how taxes affect economic well-being, we must

• assume that economic well-being is not affected if all tax revenue is spent on goods and services for the people who are being taxed.
• compare the taxes raised in the United States with those raised in other countries, especially France.
• compare the reduced welfare of buyers and sellers to the amount of revenue the government raises.
• take into account the fact that almost all taxes reduce the welfare of buyers, increase the welfare of sellers, and raise revenue for the government.

Which of the following tools help us evaluate how taxes affect economic well-being?

• (i) and (ii) only
• (i), (ii), and (iii) only
• (iii) and (iv) only
• (i), (ii), (iii), and (iv)

When a tax is levied on a good, the buyers and sellers of the good share the burden,

• provided the tax is levied on the sellers.
• provided the tax is levied on the buyers.
• provided a portion of the tax is levied on the buyers, with the remaining portion levied on the sellers.
• regardless of how the tax is levied.

A tax on a good

• raises the price that buyers effectively pay and raises the price that sellers effectively receive.
• raises the price that buyers effectively pay and lowers the price that sellers effectively receive.
• lowers the price that buyers effectively pay and raises the price that sellers effectively receive.
• lowers the price that buyers effectively pay and lowers the price that sellers effectively receive.

A tax affects

• buyers only.
• sellers only.
• buyers and sellers only.
• buyers, sellers, and the government.

What happens to the total surplus in a market when the government imposes a tax?

• Total surplus increases by the amount of the tax.
• Total surplus increases but by less than the amount of the tax.
• Total surplus decreases.
• Total surplus is unaffected by the tax.

When a tax is imposed on a good, the

• supply curve for the good always shifts.
• demand curve for the good always shifts.
• amount of the good that buyers are willing to buy at each price always remains unchanged.
• equilibrium quantity of the good always decreases.

A tax levied on the sellers of a good shifts the

• supply curve upward (or to the left).
• supply curve downward (or to the right).
• demand curve upward (or to the right).
• demand curve downward (or to the left).

A tax levied on the buyers of a good shifts the

• supply curve upward (or to the left).
• supply curve downward (or to the right).
• demand curve downward (or to the left).
• demand curve upward (or to the right).

Suppose a tax is imposed on the sellers of fast-food French fries. The burden of the tax will

• fall entirely on the buyers of fast-food French fries.
• fall entirely on the sellers of fast-food French fries.
• be shared equally by the buyers and sellers of fast-food French fries.
• be shared by the buyers and sellers of fast-food French fries but not necessarily equally.