Question 1

If demand is downward-sloping and supply is upward-sloping,which statement about the effects of an excise tax is INCORRECT?

Accepted Answer

A) The lower the elasticity of supply relative to the elasticity of demand,the lower the burden of the tax borne by suppliers. 
B) An excise tax causes a deadweight loss because consumer and producer surpluses are reduced by more than the revenue the government collects. 
C) An excise tax drives a wedge between the price paid by consumers and the price received by producers. 
D) An excise tax is inefficient because it distorts incentives at the margin for both consumers and producers. 
A) The lower the elasticity of supply relative to the elasticity of demand,the lower the burden of the tax borne by suppliers. 
B) An excise tax causes a deadweight loss because consumer and producer surpluses are reduced by more than the revenue the government collects. 
C) An excise tax drives a wedge between the price paid by consumers and the price received by producers. 
D) An excise tax is inefficient because it distorts incentives at the margin for both consumers and producers.

Question 2

The administrative costs of a tax include the costs incurred by the government in collecting the tax (such as the costs of operating the Internal Revenue Service)but exclude the costs incurred by individuals in paying the tax (such as accountants' fees).

Accepted Answer

A) True 
 B)False

Question 3

If the government imposes a $5 excise tax on leather shoes and the price of leather shoes increases by $2:

Accepted Answer

A) the government will receive less tax revenue than anticipated. 
B) consumers are paying more of the tax than the producers. 
C) producers are paying more of the tax than are the consumers. 
D) the quantity of shoes sold will increase. 
A) the government will receive less tax revenue than anticipated. 
B) consumers are paying more of the tax than the producers. 
C) producers are paying more of the tax than are the consumers. 
D) the quantity of shoes sold will increase.

Question 4

A regressive tax:

Accepted Answer

A) takes a higher percentage of income as income rises. 
B) rises less than in proportion to income. 
C) takes a fixed percentage of income regardless of the taxpayer's level of income. 
D) takes a larger share of the income of high-income taxpayers than of low-income taxpayers. 
A) takes a higher percentage of income as income rises. 
B) rises less than in proportion to income. 
C) takes a fixed percentage of income regardless of the taxpayer's level of income. 
D) takes a larger share of the income of high-income taxpayers than of low-income taxpayers.

Question 5

Use the following to answer question:  
-(Figure: The Market for Hamburgers)Use Figure: The Market for Hamburgers.If the market is originally in equilibrium and the government imposes an excise tax of $0.80 per unit of the good sold,the government's revenue from the tax will be:

Accepted Answer

A) $175. 
B) $240. 
C) $105. 
D) $90. 
A) $175. 
B) $240. 
C) $105. 
D) $90.

Question 6

Use the following to answer question:  
-(Figure and Table: The Market for Taxi Rides)Use Figure and Table: The Market for Taxi Rides.The figure represents a competitive market for taxi rides.If the government imposes an excise tax of $2 per ride (causing the supply curve to shift upward by that amount),then the government will collect tax revenues of _____,BUT the tax will cause a _____ deadweight loss to society.

Accepted Answer

A) $8 million;$1 million 
B) $16 million;$2 million 
C) $24 million;$4.5 million 
D) $48 million;$6 million 
A) $8 million;$1 million 
B) $16 million;$2 million 
C) $24 million;$4.5 million 
D) $48 million;$6 million

Question 7

Use the following to answer question:  
-(Figure: The Market for SUVs)Use Figure: The Market for SUVs.If the government imposes a $60,000 tax on SUVs (collected from the producers),consumers will pay _____ of the tax and producers will pay _____.

Accepted Answer

A) $30,000;$30,000 
B) $40,000;$20,000 
C) $20,000;$40,000 
D) $10,000;$50,000 
A) $30,000;$30,000 
B) $40,000;$20,000 
C) $20,000;$40,000 
D) $10,000;$50,000

Question 8

Use the following to answer question:  
-(Figure: The Market for Lattes)Use Figure: The Market for Lattes.If an excise tax of $1.50 is assessed on each latte,government revenue will be:

Accepted Answer

A) $400. 
B) $600. 
C) $800. 
D) $1,200. 
A) $400. 
B) $600. 
C) $800. 
D) $1,200.

Question 9

Suppose the government imposes a $9 per month tax on cell phone service.If the demand curve for cell phone service is perfectly elastic and the supply curve is upward-sloping,the monthly price for cell phone service will:

Accepted Answer

A) increase by $4.50. 
B) increase by more than $9. 
C) increase by $9. 
D) not change. 
A) increase by $4.50. 
B) increase by more than $9. 
C) increase by $9. 
D) not change.

Question 10

The price that buyers pay and the price that sellers receive in the presence of an excise tax are unaffected by which of these groups officially pays the tax.

Accepted Answer

A) True 
 B)False

Question 11

If the government decides to impose a $700 tax on U.S.citizens vacationing abroad,then the deadweight loss from this tax will be:

Accepted Answer

A) relatively small. 
B) relatively large. 
C) zero. 
D) absorbed by foreign governments. 
A) relatively small. 
B) relatively large. 
C) zero. 
D) absorbed by foreign governments.

Question 12

If the demand curve is downward-sloping and supply is perfectly elastic,then the burden of an excise tax is:

Accepted Answer

A) borne entirely by consumers. 
B) borne entirely by producers. 
C) shared by consumers and producers,with the burden falling mainly on consumers. 
D) shared by consumers and producers,with the burden falling mainly on producers. 
A) borne entirely by consumers. 
B) borne entirely by producers. 
C) shared by consumers and producers,with the burden falling mainly on consumers. 
D) shared by consumers and producers,with the burden falling mainly on producers.

Question 13

A progressive tax:

Accepted Answer

A) takes a larger share of the income of high-income taxpayers than of low-income taxpayers. 
B) takes a smaller share of the income of high-income taxpayers than of low-income taxpayers. 
C) takes the same share of the income of high-income taxpayers as it does of low-income taxpayers. 
D) has no deadweight loss. 
A) takes a larger share of the income of high-income taxpayers than of low-income taxpayers. 
B) takes a smaller share of the income of high-income taxpayers than of low-income taxpayers. 
C) takes the same share of the income of high-income taxpayers as it does of low-income taxpayers. 
D) has no deadweight loss.

Question 14

A tax system _____ when it minimizes the direct and indirect costs to the economy of tax collection.

Accepted Answer

A) is efficient 
B) is equitable 
C) has no deadweight loss 
D) is in equilibrium 
A) is efficient 
B) is equitable 
C) has no deadweight loss 
D) is in equilibrium

Question 15

Use the following to answer question:  
-(Figure: The Market for Lattes)Use Figure: The Market for Lattes.If an excise tax of $2.25 is assessed on each latte,government revenue will be:

Accepted Answer

A) $225. 
B) $400. 
C) $450. 
D) $1,800. 
A) $225. 
B) $400. 
C) $450. 
D) $1,800.

Question 16

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,shifting the supply curve upward.The deadweight loss from this tax is equal to:

Accepted Answer

A) $1.50. 
B) $5,000. 
C) $15,000. 
D) $4,375. 
A) $1.50. 
B) $5,000. 
C) $15,000. 
D) $4,375.

Question 17

A(n)_____ tax tends to encourage consumption and discourage saving and investing.

Accepted Answer

A) consumption 
B) sales 
C) poll 
D) income 
A) consumption 
B) sales 
C) poll 
D) income

Question 18

State governments levy excise taxes on cigarettes because:

Accepted Answer

A) they want to subsidize tobacco farming. 
B) they want to discourage cigarette smuggling. 
C) it is an easy way to raise tax revenue while discouraging smoking. 
D) they want to minimize the tax burden on consumers. 
A) they want to subsidize tobacco farming. 
B) they want to discourage cigarette smuggling. 
C) it is an easy way to raise tax revenue while discouraging smoking. 
D) they want to minimize the tax burden on consumers.

Question 19

Use the following to answer question:  
-(Figure: Tax Incidence)Use Figure: Tax Incidence.Based on the figure,the deadweight loss of an excise tax is likely to be greater in panel _____ than in panel _____.

Accepted Answer

A) C;D 
B) C;A 
C) D;A 
D) B;A 
A) C;D 
B) C;A 
C) D;A 
D) B;A

Question 20

Given any upward-sloping supply curve for a good,the more inelastic the demand curve,the _____ equilibrium output will fall and the _____ will be the deadweight loss when the government imposes an excise tax.

Accepted Answer

A) more;smaller 
B) more;larger 
C) less;smaller 
D) less;larger 
A) more;smaller 
B) more;larger 
C) less;smaller 
D) less;larger

If demand is downward-sloping and supply is upward-sloping,which statement about the effects of an excise tax is INCORRECT?

The administrative costs of a tax include the costs incurred by the government in collecting the tax (such as the costs of operating the Internal Revenue Service)but exclude the costs incurred by individuals in paying the tax (such as accountants' fees).

If the government imposes a $5 excise tax on leather shoes and the price of leather shoes increases by $2:

A regressive tax:

Use the following to answer question: -(Figure: The Market for Hamburgers)Use Figure: The Market for Hamburgers.If the market is originally in equilibrium and the government imposes an excise tax of $0.80 per unit of the good sold,the government's revenue from the tax will be:

Use the following to answer question: -(Figure: The Market for SUVs)Use Figure: The Market for SUVs.If the government imposes a $60,000 tax on SUVs (collected from the producers),consumers will pay _ of the tax and producers will pay _.

Use the following to answer question: -(Figure: The Market for Lattes)Use Figure: The Market for Lattes.If an excise tax of $1.50 is assessed on each latte,government revenue will be:

Suppose the government imposes a $9 per month tax on cell phone service.If the demand curve for cell phone service is perfectly elastic and the supply curve is upward-sloping,the monthly price for cell phone service will:

The price that buyers pay and the price that sellers receive in the presence of an excise tax are unaffected by which of these groups officially pays the tax.

If the government decides to impose a $700 tax on U.S.citizens vacationing abroad,then the deadweight loss from this tax will be:

If the demand curve is downward-sloping and supply is perfectly elastic,then the burden of an excise tax is:

A progressive tax:

A tax system _____ when it minimizes the direct and indirect costs to the economy of tax collection.

Use the following to answer question: -(Figure: The Market for Lattes)Use Figure: The Market for Lattes.If an excise tax of $2.25 is assessed on each latte,government revenue will be:

A(n)_____ tax tends to encourage consumption and discourage saving and investing.

State governments levy excise taxes on cigarettes because:

Use the following to answer question: -(Figure: Tax Incidence)Use Figure: Tax Incidence.Based on the figure,the deadweight loss of an excise tax is likely to be greater in panel _ than in panel _.

Given any upward-sloping supply curve for a good,the more inelastic the demand curve,the _ equilibrium output will fall and the _ will be the deadweight loss when the government imposes an excise tax.

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

Exam 7: Taxes

If demand is downward-sloping and supply is upward-sloping,which statement about the effects of an excise tax is INCORRECT?

The administrative costs of a tax include the costs incurred by the government in collecting the tax (such as the costs of operating the Internal Revenue Service)but exclude the costs incurred by individuals in paying the tax (such as accountants' fees).

If the government imposes a $5 excise tax on leather shoes and the price of leather shoes increases by $2:

A regressive tax:

Use the following to answer question: -(Figure: The Market for Hamburgers)Use Figure: The Market for Hamburgers.If the market is originally in equilibrium and the government imposes an excise tax of $0.80 per unit of the good sold,the government's revenue from the tax will be:

Use the following to answer question: -(Figure: The Market for SUVs)Use Figure: The Market for SUVs.If the government imposes a $60,000 tax on SUVs (collected from the producers),consumers will pay _____ of the tax and producers will pay _____.

Use the following to answer question: -(Figure: The Market for Lattes)Use Figure: The Market for Lattes.If an excise tax of $1.50 is assessed on each latte,government revenue will be:

Suppose the government imposes a $9 per month tax on cell phone service.If the demand curve for cell phone service is perfectly elastic and the supply curve is upward-sloping,the monthly price for cell phone service will:

The price that buyers pay and the price that sellers receive in the presence of an excise tax are unaffected by which of these groups officially pays the tax.

If the government decides to impose a $700 tax on U.S.citizens vacationing abroad,then the deadweight loss from this tax will be:

If the demand curve is downward-sloping and supply is perfectly elastic,then the burden of an excise tax is:

A progressive tax:

A tax system _____ when it minimizes the direct and indirect costs to the economy of tax collection.

Use the following to answer question: -(Figure: The Market for Lattes)Use Figure: The Market for Lattes.If an excise tax of $2.25 is assessed on each latte,government revenue will be:

A(n)_____ tax tends to encourage consumption and discourage saving and investing.

State governments levy excise taxes on cigarettes because:

Use the following to answer question: -(Figure: Tax Incidence)Use Figure: Tax Incidence.Based on the figure,the deadweight loss of an excise tax is likely to be greater in panel _____ than in panel _____.

Given any upward-sloping supply curve for a good,the more inelastic the demand curve,the _____ equilibrium output will fall and the _____ will be the deadweight loss when the government imposes an excise tax.

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

Use the following to answer question: -(Figure: The Market for SUVs)Use Figure: The Market for SUVs.If the government imposes a $60,000 tax on SUVs (collected from the producers),consumers will pay _ of the tax and producers will pay _.

Use the following to answer question: -(Figure: Tax Incidence)Use Figure: Tax Incidence.Based on the figure,the deadweight loss of an excise tax is likely to be greater in panel _ than in panel _.

Given any upward-sloping supply curve for a good,the more inelastic the demand curve,the _ equilibrium output will fall and the _ will be the deadweight loss when the government imposes an excise tax.