Question 1

A tax of $10 on an income of $100,$25 on an income of $200,and $60 on an income of $300 is:

Accepted Answer

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

Question 2

For a tax system to achieve equity,it must first achieve efficiency.

Accepted Answer

A) True 
 B)False

Question 3

Recently,the government considered adding an excise tax on CDs that can be used to record music and CD players that can record discs.If this tax were enacted,the MOST likely effect would be:

Accepted Answer

A) that consumers would pay a higher price and producers would sell fewer of these CDs and CD players than before the tax. 
B) no change in consumption or the prices paid by consumers of these CDs and CD players. 
C) that consumers would pay a lower price and producers would receive a higher price for these CDs and CD players than before the tax. 
D) an increase in economic activity due to the tax. 
A) that consumers would pay a higher price and producers would sell fewer of these CDs and CD players than before the tax. 
B) no change in consumption or the prices paid by consumers of these CDs and CD players. 
C) that consumers would pay a lower price and producers would receive a higher price for these CDs and CD players than before the tax. 
D) an increase in economic activity due to the tax.

Question 4

Use the following to answer question:  
-(Scenario: The Market for Good X)Use Scenario: The Market for Good X.If a $1 per unit tax is imposed on this good,the new supply curve will be:

Accepted Answer

A) P = 0.33Q + 1. 
B) P = 50 - 0.5Q 
C) P = 0.33Q - 1. 
D) P = 0.33Q + 1 + 50 - 0.5Q. 
A) P = 0.33Q + 1. 
B) P = 50 - 0.5Q 
C) P = 0.33Q - 1. 
D) P = 0.33Q + 1 + 50 - 0.5Q.

Question 5

Suppose price elasticity of demand is relatively inelastic for good X.If the price elasticity of supply for good X is elastic and an excise tax is imposed on good X,who will bear the greater burden of the tax?

Accepted Answer

A) consumers 
B) producers 
C) both consumers and producers equally 
D) government 
A) consumers 
B) producers 
C) both consumers and producers equally 
D) government

Question 6

To minimize deadweight loss,excise taxes should be levied on goods with inelastic demand and inelastic supply rather than goods with elastic demand and elastic supply.

Accepted Answer

A) True 
 B)False

Question 7

If a tax system is well designed:

Accepted Answer

A) it maximizes efficiency. 
B) it maximizes fairness. 
C) then efficiency can be improved only by making the system less fair. 
D) it maximizes efficiency and equity. 
A) it maximizes efficiency. 
B) it maximizes fairness. 
C) then efficiency can be improved only by making the system less fair. 
D) it maximizes efficiency and equity.

Question 8

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

Accepted Answer

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

Question 9

Brianna and Jess must pay an income tax.Both Brianna and Jess pay $1,000 in taxes each year,but Brianna earns $20,000 and Jess earns $10,000.From this information,you can infer that this tax is:

Accepted Answer

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

Question 10

Use the following to answer question:  
-(Figure: The Market for Blue Jeans)Use Figure: The Market for Blue Jeans.The government recently levied a $10 tax on the producers of blue jeans.What area or areas in the graph identify the loss of producer surplus due to the tax?

Accepted Answer

A) d + e 
B) e 
C) d 
D) d + e + f 
A) d + e 
B) e 
C) d 
D) d + e + f

Question 11

Although employers and wage earners each pay 50% of the FICA tax,the tax reduces wages to the extent that the incidence of the tax falls almost entirely on workers.

Accepted Answer

A) True 
 B)False

Question 12

Use the following to answer question:  
-(Figure: The Market for SUVs)Use Figure: The Market for SUVs.A price _____ of _____ will bring the about the same price and output in the market for SUVs as would an excise tax of $60,000.

Accepted Answer

A) ceiling;$80,000 
B) ceiling;$100,000 
C) floor;$100,000 
D) floor;$160,000 
A) ceiling;$80,000 
B) ceiling;$100,000 
C) floor;$100,000 
D) floor;$160,000

Question 13

Use the following to answer question:  
-(Figure: Tax Incidence)Use Figure: Tax Incidence.All other things unchanged,the effect of an excise tax on gasoline in the long run is most likely illustrated by panel _____,and the greater share of the burden of the excise tax (shown by the tax wedge in each panel)is borne by _____.

Accepted Answer

A) A;buyers 
B) B;sellers 
C) B;buyers 
D) A;sellers 
A) A;buyers 
B) B;sellers 
C) B;buyers 
D) A;sellers

Question 14

A tax leads to a(n)_____ in consumer surplus and a(n)_____ in producer surplus.

Accepted Answer

A) increase;increase 
B) increase;decrease 
C) decrease;increase 
D) decrease;decrease 
A) increase;increase 
B) increase;decrease 
C) decrease;increase 
D) decrease;decrease

Question 15

Use the following to answer question:  
-(Scenario: The Market for Good X)Use Scenario: The Market for Good X.If a $1 per unit tax is imposed,the deadweight loss associated with the tax will be equal to (round all calculations to two decimal places):

Accepted Answer

A) $1.00. 
B) $20.00. 
C) $0.50. 
D) $0.60. 
A) $1.00. 
B) $20.00. 
C) $0.50. 
D) $0.60.

Question 16

_____ taxes are paid on the purchase of most consumption goods.

Accepted Answer

A) Income 
B) Property 
C) Sales 
D) Wealth 
A) Income 
B) Property 
C) Sales 
D) Wealth

Question 17

Use the following to answer question:  
-(Figure: Income Tax Payments)Use Figure: Income Tax Payments.Which panel or panels BEST represent the effects of a proportional income tax?

Accepted Answer

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

Question 18

A tax:

Accepted Answer

A) generates tax revenue and causes deadweight loss. 
B) increases consumer and producer surplus. 
C) produces revenue for the government and increases total surplus. 
D) is always efficient. 
A) generates tax revenue and causes deadweight loss. 
B) increases consumer and producer surplus. 
C) produces revenue for the government and increases total surplus. 
D) is always efficient.

Question 19

(Figure: An Excise Tax)Use Figure: An Excise Tax.If an excise tax equal to $1.10 is imposed on this good,then the price paid by consumers will:

Accepted Answer

A) rise by $1.10. 
B) rise by $1.33. 
C) not rise. 
D) rise by $0.50. 
A) rise by $1.10. 
B) rise by $1.33. 
C) not rise. 
D) rise by $0.50.

Question 20

A tax that rises less than in proportion to income is described as:

Accepted Answer

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

Exam 7: Taxes

A tax of $10 on an income of $100,$25 on an income of $200,and $60 on an income of $300 is:

For a tax system to achieve equity,it must first achieve efficiency.

Recently,the government considered adding an excise tax on CDs that can be used to record music and CD players that can record discs.If this tax were enacted,the MOST likely effect would be:

Use the following to answer question: -(Scenario: The Market for Good X)Use Scenario: The Market for Good X.If a $1 per unit tax is imposed on this good,the new supply curve will be:

Suppose price elasticity of demand is relatively inelastic for good X.If the price elasticity of supply for good X is elastic and an excise tax is imposed on good X,who will bear the greater burden of the tax?

To minimize deadweight loss,excise taxes should be levied on goods with inelastic demand and inelastic supply rather than goods with elastic demand and elastic supply.

If a tax system is well designed:

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

Brianna and Jess must pay an income tax.Both Brianna and Jess pay $1,000 in taxes each year,but Brianna earns $20,000 and Jess earns $10,000.From this information,you can infer that this tax is:

Use the following to answer question: -(Figure: The Market for Blue Jeans)Use Figure: The Market for Blue Jeans.The government recently levied a $10 tax on the producers of blue jeans.What area or areas in the graph identify the loss of producer surplus due to the tax?

Although employers and wage earners each pay 50% of the FICA tax,the tax reduces wages to the extent that the incidence of the tax falls almost entirely on workers.

Use the following to answer question: -(Figure: The Market for SUVs)Use Figure: The Market for SUVs.A price _____ of _____ will bring the about the same price and output in the market for SUVs as would an excise tax of $60,000.

A tax leads to a(n)_____ in consumer surplus and a(n)_____ in producer surplus.

Use the following to answer question: -(Scenario: The Market for Good X)Use Scenario: The Market for Good X.If a $1 per unit tax is imposed,the deadweight loss associated with the tax will be equal to (round all calculations to two decimal places):

_____ taxes are paid on the purchase of most consumption goods.

Use the following to answer question: -(Figure: Income Tax Payments)Use Figure: Income Tax Payments.Which panel or panels BEST represent the effects of a proportional income tax?

A tax:

(Figure: An Excise Tax)Use Figure: An Excise Tax.If an excise tax equal to $1.10 is imposed on this good,then the price paid by consumers will:

A tax that rises less than in proportion to income is described as:

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.A price _ of _ will bring the about the same price and output in the market for SUVs as would an excise tax of $60,000.

A tax leads to a(n)_ in consumer surplus and a(n)_ in producer surplus.