Question 1

Which statement is CORRECT?

Accepted Answer

A) If the government can make the tax system fairer without sacrificing efficiency,it should do so to maximize equity. 
B) If the government can make the tax system fairer without sacrificing efficiency,then the existing tax system is perfectly designed. 
C) There is no trade-off between equity and efficiency in the tax system. 
D) If the government can make the tax system fairer without sacrificing efficiency,it should seek to maximize equity at the expense of efficiency. 
A) If the government can make the tax system fairer without sacrificing efficiency,it should do so to maximize equity. 
B) If the government can make the tax system fairer without sacrificing efficiency,then the existing tax system is perfectly designed. 
C) There is no trade-off between equity and efficiency in the tax system. 
D) If the government can make the tax system fairer without sacrificing efficiency,it should seek to maximize equity at the expense of efficiency.

Question 2

If the marginal tax rate is less than the average tax rate,the tax system is:

Accepted Answer

A) proportional. 
B) progressive. 
C) digressive. 
D) regressive. 
A) proportional. 
B) progressive. 
C) digressive. 
D) regressive.

Question 3

A tax is progressive if the tax payment is a:

Accepted Answer

A) fixed percentage of income. 
B) lower percentage of income as income rises. 
C) higher percentage of income as income rises. 
D) higher percentage of income as income falls. 
A) fixed percentage of income. 
B) lower percentage of income as income rises. 
C) higher percentage of income as income rises. 
D) higher percentage of income as income falls.

Question 4

Use the following to answer question:  
-(Figure: The Market for SUVs)Use Figure: The Market for SUVs..A quota of _____ will bring about the same price and output in the market for SUVs as would an excise tax of $30,000.

Accepted Answer

A) 2,000 
B) 3,000 
C) 4,000 
D) The answer is impossible to determine. 
A) 2,000 
B) 3,000 
C) 4,000 
D) The answer is impossible to determine.

Question 5

If the government levies an excise tax in a market whose demand curve is perfectly inelastic,the burden of the tax will fall completely on the _____,and the deadweight loss will equal _____.

Accepted Answer

A) consumers;zero 
B) producers;zero 
C) consumers;the tax revenue 
D) producers;the tax revenue 
A) consumers;zero 
B) producers;zero 
C) consumers;the tax revenue 
D) producers;the tax revenue

Question 6

Deadweight losses arising from an excise tax are greatest when demand:

Accepted Answer

A) and supply are relatively inelastic. 
B) is relatively inelastic and supply is relatively elastic 
C) is relatively elastic and supply is relatively inelastic. 
D) and supply are relatively elastic. 
A) and supply are relatively inelastic. 
B) is relatively inelastic and supply is relatively elastic 
C) is relatively elastic and supply is relatively inelastic. 
D) and supply are relatively elastic.

Question 7

Use the following to answer question:  
-(Figure: The Gasoline Market)Use Figure: The Gasoline Market.The pretax equilibrium price is $3,and the equilibrium quantity before tax is 20,000 gallons.An excise tax has been levied on each gallon of gasoline supplied by producers,shifting the supply curve upward.What is the tax rate?

Accepted Answer

A) $1.75 per gallon 
B) $1 per gallon 
C) $2.50 
D) $0.50 
A) $1.75 per gallon 
B) $1 per gallon 
C) $2.50 
D) $0.50

Question 8

The _____ principle implies that people with _____ should pay more taxes.

Accepted Answer

A) ability-to-pay;greater benefits received 
B) benefits;higher incomes 
C) ability-to-pay;higher incomes 
D) benefits;fewer benefits 
A) ability-to-pay;greater benefits received 
B) benefits;higher incomes 
C) ability-to-pay;higher incomes 
D) benefits;fewer benefits

Question 9

An excise tax is levied on suppliers.The incidence of the tax:

Accepted Answer

A) is typically on the consumer more than the producer. 
B) is typically on the producer more than the consumer. 
C) is typically split equally between the producer and the consumer. 
D) cannot be determined without more information. 
A) is typically on the consumer more than the producer. 
B) is typically on the producer more than the consumer. 
C) is typically split equally between the producer and the consumer. 
D) cannot be determined without more information.

Question 10

Overall,the taxes collected by the federal government are progressive.

Accepted Answer

A) True 
 B)False

Question 11

The evidence suggests that taken collectively,taxes in the U.S.economy are:

Accepted Answer

A) extremely regressive. 
B) extremely progressive. 
C) somewhat progressive. 
D) proportional. 
A) extremely regressive. 
B) extremely progressive. 
C) somewhat progressive. 
D) proportional.

Question 12

If the government imposes a per-unit tax on good Y and the supply of good Y is perfectly inelastic,there will be no deadweight loss due to the tax.

Accepted Answer

A) True 
 B)False

Question 13

Use the following to answer question:  
-(Figure: A Market with a Tax)Use Figure: A Market with a Tax.The excise tax imposed on this good is equal to:

Accepted Answer

A) P1 - P2. 
B) P1 - P3 
C) P2 - P3. 
D) P1 - P5. 
A) P1 - P2. 
B) P1 - P3 
C) P2 - P3. 
D) P1 - P5.

Question 14

Excise taxes that raise the MOST revenue and cause the LEAST deadweight loss are likely to be levied on goods for which demand is _____ and supply is _____.

Accepted Answer

A) inelastic;elastic 
B) inelastic;inelastic 
C) elastic;inelastic 
D) elastic;elastic 
A) inelastic;elastic 
B) inelastic;inelastic 
C) elastic;inelastic 
D) elastic;elastic

Question 15

A tax that takes a higher percentage of income as income rises is:

Accepted Answer

A) proportional. 
B) an ability tax. 
C) progressive. 
D) regressive. 
A) proportional. 
B) an ability tax. 
C) progressive. 
D) regressive.

Question 16

In 2016,the Social Security (FICA)tax was levied only on incomes up to $118,500.Which statement about this tax is CORRECT?

Accepted Answer

A) A worker with an annual income of $50,000 and one with an annual income of $100,000 paid the same dollar amount of FICA tax. 
B) A worker with an annual income of $200,000 and one with an annual income of $118,500 paid the same dollar amount of FICA tax. 
C) The top 20% of income earners earned over 50% of total U.S.incomes in 2001,and they paid approximately 60% of the total FICA taxes collected that year. 
D) The percentage of income paid in FICA taxes was the same for a worker with an annual income of $50,000 and a worker with an annual income of $100,000. 
A) A worker with an annual income of $50,000 and one with an annual income of $100,000 paid the same dollar amount of FICA tax. 
B) A worker with an annual income of $200,000 and one with an annual income of $118,500 paid the same dollar amount of FICA tax. 
C) The top 20% of income earners earned over 50% of total U.S.incomes in 2001,and they paid approximately 60% of the total FICA taxes collected that year. 
D) The percentage of income paid in FICA taxes was the same for a worker with an annual income of $50,000 and a worker with an annual income of $100,000.

Question 17

Taxation according to the ability-to-pay principle is best illustrated in the United States by _____ taxes.

Accepted Answer

A) sales 
B) personal income 
C) excise 
D) gasoline 
A) sales 
B) personal income 
C) excise 
D) gasoline

Question 18

The poorest 20% of families in the United States pay a _____ share of their total income in taxes.

Accepted Answer

A) very large 
B) somewhat large 
C) small 
D) negative 
A) very large 
B) somewhat large 
C) small 
D) negative

Question 19

Paying a fee every time you use the municipal golf course is an example of the _____ principle.

Accepted Answer

A) benefits 
B) ability-to-pay 
C) progressive tax 
D) regressive tax 
A) benefits 
B) ability-to-pay 
C) progressive tax 
D) regressive tax

Question 20

Use the following to answer question:  
-(Figure: Tax Incidence)Use Figure: Tax Incidence.Consumers are likely to bear more of the burden of an excise tax in the situations illustrated by panels:

Accepted Answer

A) A and B. 
B) A and D. 
C) B and D. 
D) B and C. 
A) A and B. 
B) A and D. 
C) B and D. 
D) B and C.

Exam 7: Taxes

Which statement is CORRECT?

If the marginal tax rate is less than the average tax rate,the tax system is:

A tax is progressive if the tax payment is a:

Use the following to answer question: -(Figure: The Market for SUVs)Use Figure: The Market for SUVs..A quota of _____ will bring about the same price and output in the market for SUVs as would an excise tax of $30,000.

If the government levies an excise tax in a market whose demand curve is perfectly inelastic,the burden of the tax will fall completely on the _____,and the deadweight loss will equal _____.

Deadweight losses arising from an excise tax are greatest when demand:

The _____ principle implies that people with _____ should pay more taxes.

An excise tax is levied on suppliers.The incidence of the tax:

Overall,the taxes collected by the federal government are progressive.

The evidence suggests that taken collectively,taxes in the U.S.economy are:

If the government imposes a per-unit tax on good Y and the supply of good Y is perfectly inelastic,there will be no deadweight loss due to the tax.

Use the following to answer question: -(Figure: A Market with a Tax)Use Figure: A Market with a Tax.The excise tax imposed on this good is equal to:

Excise taxes that raise the MOST revenue and cause the LEAST deadweight loss are likely to be levied on goods for which demand is _____ and supply is _____.

A tax that takes a higher percentage of income as income rises is:

In 2016,the Social Security (FICA)tax was levied only on incomes up to $118,500.Which statement about this tax is CORRECT?

Taxation according to the ability-to-pay principle is best illustrated in the United States by _____ taxes.

The poorest 20% of families in the United States pay a _____ share of their total income in taxes.

Paying a fee every time you use the municipal golf course is an example of the _____ principle.

Use the following to answer question: -(Figure: Tax Incidence)Use Figure: Tax Incidence.Consumers are likely to bear more of the burden of an excise tax in the situations illustrated by panels:

First Principles

Economic Models: Trade-Offs and Trade

Consumer and Producer Surplus

Supply and Demand

Price Controls and Quotas: Meddling With Markets

Elasticity

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Graphs in Economics

Consumer Preferences and Consumer Choice

Filters

If the government levies an excise tax in a market whose demand curve is perfectly inelastic,the burden of the tax will fall completely on the _,and the deadweight loss will equal _.

The _ principle implies that people with _ should pay more taxes.

Excise taxes that raise the MOST revenue and cause the LEAST deadweight loss are likely to be levied on goods for which demand is _ and supply is _.