Question 1

The argument for progressive taxes is based on the ability-to-pay principle.

Accepted Answer

A) True 
 B)False

Question 2

If a tax system is designed to minimize the sum of its deadweight loss and its administrative cost,its principal goal is:

Accepted Answer

A) maximizing efficiency. 
B) maximizing equity. 
C) maximizing revenue. 
D) minimizing the tax burden. 
A) maximizing efficiency. 
B) maximizing equity. 
C) maximizing revenue. 
D) minimizing the tax burden.

Question 3

Suppose Congress passed a new tax system,such that all federal,state,and local taxes were replaced with one tax: a tax of $14,000 for every person 18 and over.This new tax system would clearly improve:

Accepted Answer

A) tax equity. 
B) tax fairness. 
C) tax efficiency. 
D) government revenue. 
A) tax equity. 
B) tax fairness. 
C) tax efficiency. 
D) government revenue.

Question 4

Annual _____ taxes are paid on the value of a home.

Accepted Answer

A) income 
B) profits 
C) sales 
D) property 
A) income 
B) profits 
C) sales 
D) property

Question 5

If the government removed the excise tax on gasoline,assuming that neither demand nor supply is perfectly inelastic,which effect would NOT occur?

Accepted Answer

A) an increase in consumer surplus 
B) an increase in producer surplus 
C) a decrease in producer surplus 
D) an increase in total surplus 
A) an increase in consumer surplus 
B) an increase in producer surplus 
C) a decrease in producer surplus 
D) an increase in total surplus

Question 6

The richest 20% of families in the United States pay a much _____ share of total income taxes collected and a _____ share of FICA taxes than their share of total income.

Accepted Answer

A) higher;lower 
B) lower;higher 
C) higher;higher 
D) lower;lower 
A) higher;lower 
B) lower;higher 
C) higher;higher 
D) lower;lower

Question 7

Use the following to answer question:  
-(Table: The Market for Fried Twinkies)Use Table: The Market for Fried Twinkies.Of the $0.30 tax per fried Twinkie,consumers actually pay _____,while producers actually pay _____.

Accepted Answer

A) $0.30;$0.00 
B) $0.15;$0.15 
C) $0.20;$0.10 
D) $0.00;$0.30 
A) $0.30;$0.00 
B) $0.15;$0.15 
C) $0.20;$0.10 
D) $0.00;$0.30

Question 8

Use the following to answer question:  
-(Figure: The Shrimp Market)Use Figure: The Shrimp Market.If the government wants to limit shrimp sales to 500 pounds,it can impose a _____ excise tax on sellers,and the total tax revenue generated will be _____.

Accepted Answer

A) $5;$2,500 
B) $7.50;$7,500 
C) $10;$2,500 
D) The answer cannot be determined from the information provided. 
A) $5;$2,500 
B) $7.50;$7,500 
C) $10;$2,500 
D) The answer cannot be determined from the information provided.

Question 9

Suppose the government imposes a $10 per month tax on cell phone service.If the demand curve for cell phone service is perfectly inelastic and the supply curve is upward-sloping,the monthly price for cell phone service will increase by:

Accepted Answer

A) $5. 
B) less than $10. 
C) $10. 
D) $0. 
A) $5. 
B) less than $10. 
C) $10. 
D) $0.

Question 10

(Figure: The Market for Hotel Rooms)Use Figure: The Market for Hotel Rooms.Suppose with no tax the equilibrium price is $110 and the equilibrium quantity is 250.If the local government levies a tax of $30 per night on each hotel room rented,the new equilibrium price will equal _____ and the new equilibrium quantity will equal _____.

Accepted Answer

A) $140;100 
B) $130;150 
C) $120;200 
D) $110;250 
A) $140;100 
B) $130;150 
C) $120;200 
D) $110;250

Question 11

A tax of $20 on an income of $200,$40 on an income of $300,and $80 on an income of $400 is:

Accepted Answer

A) progressive. 
B) proportional. 
C) regressive. 
D) constant-rate. 
A) progressive. 
B) proportional. 
C) regressive. 
D) constant-rate.

Question 12

Income tax rates are such that Mr.R.Hood earns $35,000 per year and pays $7,000 in taxes,while Mr.G.Gisbourne earns $1 million per year and pays $200,000 in taxes.This tax is:

Accepted Answer

A) progressive. 
B) regressive. 
C) proportional. 
D) a lump-sum tax. 
A) progressive. 
B) regressive. 
C) proportional. 
D) a lump-sum tax.

Question 13

A tax of $15 on an income of $200,$10 on an income of $300,and $8 on an income of $400 is:

Accepted Answer

A) constant-rate. 
B) proportional. 
C) progressive. 
D) regressive. 
A) constant-rate. 
B) proportional. 
C) progressive. 
D) regressive.

Question 14

The burden of a tax system comes from its:

Accepted Answer

A) effect on elasticity. 
B) effect on marginal incentives. 
C) inequity. 
D) government revenue. 
A) effect on elasticity. 
B) effect on marginal incentives. 
C) inequity. 
D) government revenue.

Question 15

Demand for Gala apples is relatively elastic compared to the supply of Gala apples,so if a tax is imposed on the consumers of Gala apples,the tax incidence:

Accepted Answer

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

Question 16

Determining who actually pays the cost imposed by a tax is the study of:

Accepted Answer

A) public interest theory. 
B) rational choice theory. 
C) tax incidence. 
D) budget analysis. 
A) public interest theory. 
B) rational choice theory. 
C) tax incidence. 
D) budget analysis.

Question 17

Use the following to answer question:  
-(Scenario: The Market for Good X)Use Scenario: The Market for Good X.The per-unit tax incidence on consumers is equal to (round all calculations to two decimal places):

Accepted Answer

A) $1.00. 
B) $0.60. 
C) $58.80. 
D) $60.00. 
A) $1.00. 
B) $0.60. 
C) $58.80. 
D) $60.00.

Question 18

The percentage of an increase in income that is taxed is:

Accepted Answer

A) the marginal rate. 
B) a regressive tax. 
C) a flat tax. 
D) after tax. 
A) the marginal rate. 
B) a regressive tax. 
C) a flat tax. 
D) after tax.

Question 19

The benefits principle of taxation means individuals pay according to:

Accepted Answer

A) whether and how much they use a good or service. 
B) benefits gained by society as a whole. 
C) benefits to government from having taxpayers. 
D) ability to pay. 
A) whether and how much they use a good or service. 
B) benefits gained by society as a whole. 
C) benefits to government from having taxpayers. 
D) ability to pay.

Question 20

If personal income up to and including $25,000 is not taxed,income of $25,001 to $50,000 is taxed at 10%,and income over $50,000 is taxed at 20%,then a family earning an income of $75,000 will pay a marginal tax rate of _____%.

Accepted Answer

A) 5 
B) 7.5 
C) 10 
D) 20 
A) 5 
B) 7.5 
C) 10 
D) 20

Exam 7: Taxes

The argument for progressive taxes is based on the ability-to-pay principle.

If a tax system is designed to minimize the sum of its deadweight loss and its administrative cost,its principal goal is:

Suppose Congress passed a new tax system,such that all federal,state,and local taxes were replaced with one tax: a tax of $14,000 for every person 18 and over.This new tax system would clearly improve:

Annual _____ taxes are paid on the value of a home.

If the government removed the excise tax on gasoline,assuming that neither demand nor supply is perfectly inelastic,which effect would NOT occur?

The richest 20% of families in the United States pay a much _____ share of total income taxes collected and a _____ share of FICA taxes than their share of total income.

Use the following to answer question: -(Table: The Market for Fried Twinkies)Use Table: The Market for Fried Twinkies.Of the $0.30 tax per fried Twinkie,consumers actually pay _____,while producers actually pay _____.

Use the following to answer question: -(Figure: The Shrimp Market)Use Figure: The Shrimp Market.If the government wants to limit shrimp sales to 500 pounds,it can impose a _____ excise tax on sellers,and the total tax revenue generated will be _____.

Suppose the government imposes a $10 per month tax on cell phone service.If the demand curve for cell phone service is perfectly inelastic and the supply curve is upward-sloping,the monthly price for cell phone service will increase by:

A tax of $20 on an income of $200,$40 on an income of $300,and $80 on an income of $400 is:

Income tax rates are such that Mr.R.Hood earns $35,000 per year and pays $7,000 in taxes,while Mr.G.Gisbourne earns $1 million per year and pays $200,000 in taxes.This tax is:

A tax of $15 on an income of $200,$10 on an income of $300,and $8 on an income of $400 is:

The burden of a tax system comes from its:

Demand for Gala apples is relatively elastic compared to the supply of Gala apples,so if a tax is imposed on the consumers of Gala apples,the tax incidence:

Determining who actually pays the cost imposed by a tax is the study of:

Use the following to answer question: -(Scenario: The Market for Good X)Use Scenario: The Market for Good X.The per-unit tax incidence on consumers is equal to (round all calculations to two decimal places):

The percentage of an increase in income that is taxed is:

The benefits principle of taxation means individuals pay according to:

If personal income up to and including $25,000 is not taxed,income of $25,001 to $50,000 is taxed at 10%,and income over $50,000 is taxed at 20%,then a family earning an income of $75,000 will pay a marginal tax rate of _____%.

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

The richest 20% of families in the United States pay a much _ share of total income taxes collected and a _ share of FICA taxes than their share of total income.

Use the following to answer question: -(Table: The Market for Fried Twinkies)Use Table: The Market for Fried Twinkies.Of the $0.30 tax per fried Twinkie,consumers actually pay _,while producers actually pay _.

Use the following to answer question: -(Figure: The Shrimp Market)Use Figure: The Shrimp Market.If the government wants to limit shrimp sales to 500 pounds,it can impose a _ excise tax on sellers,and the total tax revenue generated will be _.