Question 1

If you want to reduce the inefficiency costs of taxation, you should devise taxes to fall on goods for which the supply is _____ and the demand is _____.

Accepted Answer

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

Question 2

Use the following to answer questions:
Scenario: The Market for Good X:
The market for good X can be depicted with the following demand and supply equations:
Demand: P = 50 - 0.5Q
Supply: P = 0.33Q
where P is price per unit and Q represents quantity in units. Policy makers plan on imposing a $1 per unit tax on this good.
-(Scenario: The Market for Good X) Look at the scenario The Market for Good X. The per-unit tax incidence on consumers is equal to:

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. B

Question 3

Assuming a normal upward-sloping supply curve and downward-sloping demand curve, if the government imposes a $5 excise tax on leather shoes and collects the tax from the suppliers, the price of leather shoes will:

Accepted Answer

A)  increase by $5. 
B)  increase by more than $5. 
C)  increase by less than $5. 
D)  increase, but we cannot determine by how much. 
A)  increase by $5. 
B)  increase by more than $5. 
C)  increase by less than $5. 
D)  increase, but we cannot determine by how much. C

Question 4

Use the following to answer questions:
Figure: The Shrimp Market  
-(Figure: The Shrimp Market) Look at the figure The Shrimp Market. If the government wants to limit shrimp sales to 250 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 5

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 6

Use the following to answer questions:  
-(Table: The Market for Fried Twinkies) Look at the table The Market for Fried Twinkies. As a result of the $0.30 tax per fried Twinkie, the government will receive total tax revenue of:

Accepted Answer

A)  $500. 
B)  $1,000. 
C)  $1,500. 
D)  The total is impossible to calculate. 
A)  $500. 
B)  $1,000. 
C)  $1,500. 
D)  The total is impossible to calculate.

Question 7

Use the following to answer questions:
Figure: The Market for Music Downloads  
-(Figure: The Market for Music Downloads) Look at the graph The Market for Music Downloads. If the government imposes a tax of $3 in this market, the government will receive tax revenue of:

Accepted Answer

A)  $20. 
B)  $30. 
C)  $60. 
D)  $75. 
A)  $20. 
B)  $30. 
C)  $60. 
D)  $75.

Question 8

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 9

Which of the following is an excise tax?

Accepted Answer

A)  a tax of $0.41 per gallon of gas 
B)  a tax of 12.4% of your wages 
C)  a tax on the value of your property 
D)  a one-time local per capita tax of $50 
A)  a tax of $0.41 per gallon of gas 
B)  a tax of 12.4% of your wages 
C)  a tax on the value of your property 
D)  a one-time local per capita tax of $50

Question 10

Suppose the price elasticity of demand for yachts equals 4.04, while the price elasticity of supply for yachts equals 0.22. If Congress reinstates a luxury tax on yachts, who will pay more of the tax?

Accepted Answer

A)  Yacht builders will pay more. 
B)  Yacht buyers will pay more. 
C)  Yacht builders and buyers will pay equally. 
D)  It's impossible to tell without additional information. 
A)  Yacht builders will pay more. 
B)  Yacht buyers will pay more. 
C)  Yacht builders and buyers will pay equally. 
D)  It's impossible to tell without additional information.

Question 11

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 12

Use the following to answer questions:
Figure: The Market for Productivity Apps  
-(Figure: The Market for Productivity Apps) Look at the figure The Market for Productivity Apps. If the government imposes a tax of $1 in this market, consumers will pay _____ more per app and purchase _____ fewer apps.

Accepted Answer

A)  $1; 5 
B)  $1; 25 
C)  $0.50; 5 
D)  $0.50; 20 
A)  $1; 5 
B)  $1; 25 
C)  $0.50; 5 
D)  $0.50; 20

Question 13

Use the following to answer questions:  
-(Table: The Market for Fried Twinkies) Look at the table The Market for Fried Twinkies. The government decides to tax fried Twinkies at a rate of $0.30 per Twinkie and collect that tax from the producers. According to the table, consumers will pay _____ per Twinkie and buy _____ Twinkies after the tax.

Accepted Answer

A)  $1.20; 8,000 
B)  $1.30; 7,000 
C)  $1.40; 6,000 
D)  $1.50; 5,000 
A)  $1.20; 8,000 
B)  $1.30; 7,000 
C)  $1.40; 6,000 
D)  $1.50; 5,000

Question 14

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 15

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 16

Use the following to answer questions:
Figure: The Market for Productivity Apps  
-(Figure: The Market for Productivity Apps) Look at the figure The Market for Productivity Apps. If the government imposes a tax of $1 in this market, producers will receive _____ less per app and sell _____ fewer apps.

Accepted Answer

A)  $1; 5 
B)  $1; 25 
C)  $0.50; 5 
D)  $0.50; 20 
A)  $1; 5 
B)  $1; 25 
C)  $0.50; 5 
D)  $0.50; 20

Question 17

The benefits principle says that taxes should be used to benefit the maximum number of people.

Accepted Answer

A) True 
 B)False

Question 18

Use the following to answer questions:  
-(Table: Three Tax Structure Proposals) Look at the table Three Tax Structure Proposals. If one wished to use a proportional or flat tax structure, one should use proposal _____, in which the percentage of income taxed is _____.

Accepted Answer

A)  1; 20% 
B)  2; 10% 
C)  3; 20% 
D)  2; 20% 
A)  1; 20% 
B)  2; 10% 
C)  3; 20% 
D)  2; 20%

Question 19

State governments levy excise taxes on alcohol because:

Accepted Answer

A)  they want to subsidize alcohol production. 
B)  they want to encourage individuals to produce their own alcohol. 
C)  it discourages drinking alcohol while raising revenue for the government. 
D)  it is politically popular with religious groups. 
A)  they want to subsidize alcohol production. 
B)  they want to encourage individuals to produce their own alcohol. 
C)  it discourages drinking alcohol while raising revenue for the government. 
D)  it is politically popular with religious groups.

Question 20

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.

If you want to reduce the inefficiency costs of taxation, you should devise taxes to fall on goods for which the supply is _ and the demand is _.

Assuming a normal upward-sloping supply curve and downward-sloping demand curve, if the government imposes a $5 excise tax on leather shoes and collects the tax from the suppliers, the price of leather shoes will:

Use the following to answer questions: Figure: The Shrimp Market -(Figure: The Shrimp Market) Look at the figure The Shrimp Market. If the government wants to limit shrimp sales to 250 pounds, it can impose a _ excise tax on sellers, and the total tax revenue generated will be _.

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 questions: -(Table: The Market for Fried Twinkies) Look at the table The Market for Fried Twinkies. As a result of the $0.30 tax per fried Twinkie, the government will receive total tax revenue of:

Use the following to answer questions: Figure: The Market for Music Downloads -(Figure: The Market for Music Downloads) Look at the graph The Market for Music Downloads. If the government imposes a tax of $3 in this market, the government will receive tax revenue of:

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

Which of the following is an excise tax?

Suppose the price elasticity of demand for yachts equals 4.04, while the price elasticity of supply for yachts equals 0.22. If Congress reinstates a luxury tax on yachts, who will pay more of the tax?

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 questions: Figure: The Market for Productivity Apps -(Figure: The Market for Productivity Apps) Look at the figure The Market for Productivity Apps. If the government imposes a tax of $1 in this market, consumers will pay _ more per app and purchase _ fewer apps.

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

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 _.

Use the following to answer questions: Figure: The Market for Productivity Apps -(Figure: The Market for Productivity Apps) Look at the figure The Market for Productivity Apps. If the government imposes a tax of $1 in this market, producers will receive _ less per app and sell _ fewer apps.

The benefits principle says that taxes should be used to benefit the maximum number of people.

Use the following to answer questions: -(Table: Three Tax Structure Proposals) Look at the table Three Tax Structure Proposals. If one wished to use a proportional or flat tax structure, one should use proposal _, in which the percentage of income taxed is _.

State governments levy excise taxes on alcohol because:

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

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Elasticity

International Trade

Decision Making by Individuals 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 Common Resources

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

Exam 7: Taxes

If you want to reduce the inefficiency costs of taxation, you should devise taxes to fall on goods for which the supply is _____ and the demand is _____.

Assuming a normal upward-sloping supply curve and downward-sloping demand curve, if the government imposes a $5 excise tax on leather shoes and collects the tax from the suppliers, the price of leather shoes will:

Use the following to answer questions: Figure: The Shrimp Market -(Figure: The Shrimp Market) Look at the figure The Shrimp Market. If the government wants to limit shrimp sales to 250 pounds, it can impose a _____ excise tax on sellers, and the total tax revenue generated will be _____.

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 questions: -(Table: The Market for Fried Twinkies) Look at the table The Market for Fried Twinkies. As a result of the $0.30 tax per fried Twinkie, the government will receive total tax revenue of:

Use the following to answer questions: Figure: The Market for Music Downloads -(Figure: The Market for Music Downloads) Look at the graph The Market for Music Downloads. If the government imposes a tax of $3 in this market, the government will receive tax revenue of:

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

Which of the following is an excise tax?

Suppose the price elasticity of demand for yachts equals 4.04, while the price elasticity of supply for yachts equals 0.22. If Congress reinstates a luxury tax on yachts, who will pay more of the tax?

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 questions: Figure: The Market for Productivity Apps -(Figure: The Market for Productivity Apps) Look at the figure The Market for Productivity Apps. If the government imposes a tax of $1 in this market, consumers will pay _____ more per app and purchase _____ fewer apps.

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

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 _____.

Use the following to answer questions: Figure: The Market for Productivity Apps -(Figure: The Market for Productivity Apps) Look at the figure The Market for Productivity Apps. If the government imposes a tax of $1 in this market, producers will receive _____ less per app and sell _____ fewer apps.

The benefits principle says that taxes should be used to benefit the maximum number of people.

Use the following to answer questions: -(Table: Three Tax Structure Proposals) Look at the table Three Tax Structure Proposals. If one wished to use a proportional or flat tax structure, one should use proposal _____, in which the percentage of income taxed is _____.

State governments levy excise taxes on alcohol because:

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

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Elasticity

International Trade

Decision Making by Individuals 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 Common Resources

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

If you want to reduce the inefficiency costs of taxation, you should devise taxes to fall on goods for which the supply is _ and the demand is _.

Use the following to answer questions: Figure: The Shrimp Market -(Figure: The Shrimp Market) Look at the figure The Shrimp Market. If the government wants to limit shrimp sales to 250 pounds, it can impose a _ excise tax on sellers, and the total tax revenue generated will be _.

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 questions: Figure: The Market for Productivity Apps -(Figure: The Market for Productivity Apps) Look at the figure The Market for Productivity Apps. If the government imposes a tax of $1 in this market, consumers will pay _ more per app and purchase _ fewer apps.

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 _.

Use the following to answer questions: Figure: The Market for Productivity Apps -(Figure: The Market for Productivity Apps) Look at the figure The Market for Productivity Apps. If the government imposes a tax of $1 in this market, producers will receive _ less per app and sell _ fewer apps.

Use the following to answer questions: -(Table: Three Tax Structure Proposals) Look at the table Three Tax Structure Proposals. If one wished to use a proportional or flat tax structure, one should use proposal _, in which the percentage of income taxed is _.