Principles of Microeconomics 6th Edition By N. Gregory Mankiw – Test Bank

Principles of Microeconomics 6th Edition By N. Gregory Mankiw – Test Bank

Chapter 8 Application: The Costs of Taxation
MULTIPLE CHOICE
1. In 1776, the American Revolution was sparked by anger over
a. the extravagant lifestyle of British royalty.
b. the crimes of British soldiers stationed in the American colonies.
c. British taxes imposed on the American colonies.
d. the failure of the British to protect American colonists from attack by hostile Native Americans.
ANS: C PTS: 1 DIF: 1 REF: 8-0
NAT: Analytic LOC: Supply and demand TOP: Taxes
MSC: Definitional
2. Anger over British taxes played a significant role in bringing about the
a. election of John Adams as the second American president.
b. American Revolution.
c. War of 1812.
d. “no new taxes” clause in the U.S. Constitution.
ANS: B PTS: 1 DIF: 1 REF: 8-0
NAT: Analytic LOC: Supply and demand TOP: Taxes
MSC: Definitional
3. Who once said that taxes are the price we pay for a civilized society?
a. Aristotle
b. George Washington
c. Oliver Wendell Holmes, Jr.
d. Ronald Reagan
ANS: C PTS: 1 DIF: 1 REF: 8-0
NAT: Analytic LOC: Supply and demand TOP: Taxes
MSC: Definitional
4. Who once said that taxes are the price we pay for a civilized society?
a. Milton Friedman
b. Theodore Roosevelt
c. Arthur Laffer
d. Oliver Wendell Holmes, Jr.
ANS: D PTS: 1 DIF: 1 REF: 8-0
NAT: Analytic LOC: Supply and demand TOP: Taxes
MSC: Definitional
5. To fully understand how taxes affect economic well-being, we must
a. 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.
b. compare the taxes raised in the United States with those raised in other countries, especially France.
c. compare the reduced welfare of buyers and sellers to the amount of revenue the government raises.
d. 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.
ANS: C PTS: 1 DIF: 2 REF: 8-0
NAT: Analytic LOC: Supply and demand TOP: Taxes | Economic welfare
MSC: Interpretive
6. To fully understand how taxes affect economic well-being, we must compare the
a. benefit to buyers with the loss to sellers.
b. price paid by buyers to the price received by sellers.
c. profits earned by firms to the losses incurred by consumers.
d. decrease in total surplus to the increase in revenue raised by the government.
ANS: D PTS: 1 DIF: 2 REF: 8-0
NAT: Analytic LOC: Supply and demand TOP: Taxes | Economic welfare
MSC: Interpretive
7. To fully understand how taxes affect economic well-being, we must compare the
a. consumer surplus to the producer surplus.
b. price paid by buyers to the price received by sellers.
c. reduced welfare of buyers and sellers to the revenue raised by the government.
d. consumer surplus to the deadweight loss.
ANS: C PTS: 1 DIF: 2 REF: 8-0
NAT: Analytic LOC: Supply and demand TOP: Taxes | Economic welfare
MSC: Interpretive
8. Which of the following tools help us evaluate how taxes affect economic well-being?
(i) consumer surplus
(ii) producer surplus
(iii) tax revenue
(iv) deadweight loss
a. (i) and (ii) only
b. (i), (ii), and (iii) only
c. (iii) and (iv) only
d. (i), (ii), (iii), and (iv)
ANS: D PTS: 1 DIF: 2 REF: 8-0
NAT: Analytic LOC: Supply and demand TOP: Taxes
MSC: Interpretive