Question 1

According to economic theory, mandated employer benefits have a negative impact on wages.

Accepted Answer

A) True 
 B)False

Question 2

Suppose the government considers imposing a tax on two types of goods: luxury goods and necessity goods. Luxury goods have a higher elasticity of demand than necessity goods. Does a tax on luxury goods have a greater deadweight loss than a tax on necessity goods?

Accepted Answer

If luxury goods have a higher

Question 3

The U.S. social security retirement program is considered a transfer payment system.

Accepted Answer

A) True 
 B)False

Question 4

According to current U.S. tax law,

Accepted Answer

A) the employer pays all the 15.3 percent payroll tax on the employee's wage and salary income. 
B) the employee pays all the 15.3 percent payroll tax on his or her wage and salary income. 
C) the employer and employee each pay half of the 15.3 percent payroll tax on the employee's wage and salary income. 
D) the employer and employee each pay the 15.3 percent payroll tax on the employee's wage and salary income. 
E) neither the employer nor the employee pays the payroll tax. 
A) the employer pays all the 15.3 percent payroll tax on the employee's wage and salary income. 
B) the employee pays all the 15.3 percent payroll tax on his or her wage and salary income. 
C) the employer and employee each pay half of the 15.3 percent payroll tax on the employee's wage and salary income. 
D) the employer and employee each pay the 15.3 percent payroll tax on the employee's wage and salary income. 
E) neither the employer nor the employee pays the payroll tax.

Question 5

Which of the following types of tax is more often used at the local level of government?

Accepted Answer

A) Tariff 
B) Corporate income 
C) Personal income 
D) Excise 
E) Property 
A) Tariff 
B) Corporate income 
C) Personal income 
D) Excise 
E) Property

Question 6

Which of the following situations will result in the greatest deadweight loss due to a per-unit tax on a good?

Accepted Answer

A) Supply and demand are both relatively price-inelastic. 
B) Supply is relatively price-inelastic and demand is relatively price-elastic. 
C) Supply and demand are both relatively price-elastic. 
D) Supply is relatively price-elastic and demand is relatively price-inelastic. 
E) Both supply and demand do not exist. 
A) Supply and demand are both relatively price-inelastic. 
B) Supply is relatively price-inelastic and demand is relatively price-elastic. 
C) Supply and demand are both relatively price-elastic. 
D) Supply is relatively price-elastic and demand is relatively price-inelastic. 
E) Both supply and demand do not exist.

Question 7

Exhibit 14-2  
-Refer to Exhibit 14-2. At a tax rate between 50 percent and 100 percent, a small reduction in the tax rate results in ____ in tax revenue.

Accepted Answer

A) an increase 
B) a decrease 
C) no change 
D) a decrease and then an increase 
E) either an increase or a decrease 
A) an increase 
B) a decrease 
C) no change 
D) a decrease and then an increase 
E) either an increase or a decrease

Question 8

Exhibit 14-1  
-Refer to Exhibit 14-1. If an individual's taxable income is $75,000, how much income tax will that individual have to pay?

Accepted Answer

A) $26,250 
B) $22,500 
C) $21,000 
D) $20,000 
E) $11,250 
A) $26,250 
B) $22,500 
C) $21,000 
D) $20,000 
E) $11,250

Question 9

How does a welfare program such as Aid to Families with Dependent Children effectively increase the income tax rate of recipients?

Accepted Answer

Many welfare programs pay less as a reci

Question 10

Consider the following personal income tax schedule for a taxpayer who is not married (single).

Accepted Answer

The answer of Consider the following personal income tax schedule...

Question 11

Which of the following statements about the effects of a tax on a good is true?

Accepted Answer

A) A 10-cent tax charged to a merchant for every bag of potato chips the merchant sells is paid entirely by the merchant. 
B) When price elasticity of supply is very high, the deadweight loss from a per-unit tax on a good is relatively low. 
C) When price elasticity of demand is very low, the deadweight loss from a per-unit tax on a good is relatively high. 
D) The greater the price elasticity of demand for a good, the greater the cost to society of a tax on that good. 
E) A $1,000 tax imposed on car dealers for every car sold will cause the prices of cars to rise $1,000. 
A) A 10-cent tax charged to a merchant for every bag of potato chips the merchant sells is paid entirely by the merchant. 
B) When price elasticity of supply is very high, the deadweight loss from a per-unit tax on a good is relatively low. 
C) When price elasticity of demand is very low, the deadweight loss from a per-unit tax on a good is relatively high. 
D) The greater the price elasticity of demand for a good, the greater the cost to society of a tax on that good. 
E) A $1,000 tax imposed on car dealers for every car sold will cause the prices of cars to rise $1,000.

Question 12

A more efficient tax system imposes smaller deadweight losses and fewer administrative burdens on society.

Accepted Answer

A) True 
 B)False

Question 13

A flat tax system that allows for exemptions and deductions is a

Accepted Answer

A) regressive tax. 
B) zero tax. 
C) constant tax. 
D) proportional tax. 
E) progressive tax. 
A) regressive tax. 
B) zero tax. 
C) constant tax. 
D) proportional tax. 
E) progressive tax.

Question 14

Explain the difference between a marginal income tax rate and an average income tax rate.

Accepted Answer

A marginal tax rate tells what

Question 15

If the Gini coefficient is zero, then there is

Accepted Answer

A) relative income equality. 
B) relative income inequality. 
C) complete income equality. 
D) complete income inequality. 
E) no information on the degree of income equality. 
A) relative income equality. 
B) relative income inequality. 
C) complete income equality. 
D) complete income inequality. 
E) no information on the degree of income equality.

Question 16

As a taxpayer's income rises, the amount of income tax paid falls under the regressive tax system but rises under the progressive tax system.

Accepted Answer

A) True 
 B)False

Question 17

A program designed to help people who are out of work is

Accepted Answer

A) food stamps. 
B) unemployment insurance. 
C) housing assistance. 
D) social security. 
E) supplemental security income. 
A) food stamps. 
B) unemployment insurance. 
C) housing assistance. 
D) social security. 
E) supplemental security income.

Question 18

Suppose a country is concerned about providing adequate incentives for entrepreneurs. What type of tax system should be implemented, progressive or flat?

Accepted Answer

The country should implement a flat tax.

Question 19

An excise tax is the same as a sales tax that consumers pay on the amount they spend in retail stores.

Accepted Answer

A) True 
 B)False

Question 20

For a tax on a good, the deadweight loss is small when price elasticity of demand is low because of

Accepted Answer

A) a large difference between the efficient quantity of demand and the quantity demanded with the tax. 
B) a small difference between the efficient quantity of demand and the quantity demanded with the tax. 
C) a large difference between the efficient quantity of demand and the efficient quantity of supply. 
D) a small difference between the efficient quantity of demand and the efficient quantity of supply. 
E) a small difference between the efficient quantity of supply and the quantity supplied with the tax. 
A) a large difference between the efficient quantity of demand and the quantity demanded with the tax. 
B) a small difference between the efficient quantity of demand and the quantity demanded with the tax. 
C) a large difference between the efficient quantity of demand and the efficient quantity of supply. 
D) a small difference between the efficient quantity of demand and the efficient quantity of supply. 
E) a small difference between the efficient quantity of supply and the quantity supplied with the tax.

Exam 14: Taxes, Transfers, and Income Distribution

According to economic theory, mandated employer benefits have a negative impact on wages.

Suppose the government considers imposing a tax on two types of goods: luxury goods and necessity goods. Luxury goods have a higher elasticity of demand than necessity goods. Does a tax on luxury goods have a greater deadweight loss than a tax on necessity goods?

The U.S. social security retirement program is considered a transfer payment system.

According to current U.S. tax law,

Which of the following types of tax is more often used at the local level of government?

Which of the following situations will result in the greatest deadweight loss due to a per-unit tax on a good?

Exhibit 14-2 -Refer to Exhibit 14-2. At a tax rate between 50 percent and 100 percent, a small reduction in the tax rate results in ____ in tax revenue.

Exhibit 14-1 -Refer to Exhibit 14-1. If an individual's taxable income is $75,000, how much income tax will that individual have to pay?

How does a welfare program such as Aid to Families with Dependent Children effectively increase the income tax rate of recipients?

Consider the following personal income tax schedule for a taxpayer who is not married (single).

Which of the following statements about the effects of a tax on a good is true?

A more efficient tax system imposes smaller deadweight losses and fewer administrative burdens on society.

A flat tax system that allows for exemptions and deductions is a

Explain the difference between a marginal income tax rate and an average income tax rate.

If the Gini coefficient is zero, then there is

As a taxpayer's income rises, the amount of income tax paid falls under the regressive tax system but rises under the progressive tax system.

A program designed to help people who are out of work is

Suppose a country is concerned about providing adequate incentives for entrepreneurs. What type of tax system should be implemented, progressive or flat?

An excise tax is the same as a sales tax that consumers pay on the amount they spend in retail stores.

For a tax on a good, the deadweight loss is small when price elasticity of demand is low because of

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Efficiency of Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

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