Question 1

_____ taxes are paid on wages.

Accepted Answer

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

Question 2

Use the following to answer questions:
Figure: Income Tax Payments  
-(Figure: Income Tax Payments) Look at the figure Income Tax Payments. Which panel or panels best represent the effects of a progressive 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 3

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 4

Cigarette taxes have eliminated the wedge between the demand price for cigarettes and the supply price of cigarettes.

Accepted Answer

A) True 
 B)False

Question 5

According to the _____ principle, those can afford it should pay more tax.

Accepted Answer

A)  ability-to-pay 
B)  tax fairness 
C)  benefits 
D)  affordability 
A)  ability-to-pay 
B)  tax fairness 
C)  benefits 
D)  affordability

Question 6

A tax that takes a higher percentage of income as income rises is:

Accepted Answer

A)  proportional. 
B)  an ability tax. 
C)  progressive. 
D)  regressive. 
A)  proportional. 
B)  an ability tax. 
C)  progressive. 
D)  regressive.

Question 7

Suppose the government imposes a $4 per month excise tax on cable TV. If the demand for cable TV is perfectly inelastic and the supply curve is elastic (but not perfectly elastic), then the price of cable TV will:

Accepted Answer

A)  increase by more than $4. 
B)  increase by exactly $4. 
C)  increase by less than $4. 
D)  remain constant. 
A)  increase by more than $4. 
B)  increase by exactly $4. 
C)  increase by less than $4. 
D)  remain constant.

Question 8

Use the following to answer questions:
Figure: A Market with a Tax  
-(Figure: A Market with a Tax) Look at the figure A Market with a Tax. The deadweight loss arising from the imposition of this tax is equal to the areas:

Accepted Answer

A)  B + D 
B)  D + E. 
C)  B + C. 
D)  C + F. 
A)  B + D 
B)  D + E. 
C)  B + C. 
D)  C + F.

Question 9

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 10

An analysis of the effect of excise taxes on markets allows us to conclude that:

Accepted Answer

A)  when the price elasticity of supply is equal to zero, an excise tax falls entirely on the consumers. 
B)  when the price elasticity of demand is lower than the price elasticity of supply, an excise tax falls mainly on the producers. 
C)  whether the tax is levied on consumers or producers, the quantity sold will be the same. 
D)  when the price elasticity of demand is higher than the price elasticity of supply, an excise tax falls mainly on the consumers. 
A)  when the price elasticity of supply is equal to zero, an excise tax falls entirely on the consumers. 
B)  when the price elasticity of demand is lower than the price elasticity of supply, an excise tax falls mainly on the producers. 
C)  whether the tax is levied on consumers or producers, the quantity sold will be the same. 
D)  when the price elasticity of demand is higher than the price elasticity of supply, an excise tax falls mainly on the consumers.

Question 11

Use the following to answer questions:
Figure: The Gasoline Market  
-(Figure: The Gasoline Market) Look at the 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 12

Which of the following taxes reflects the ability-to-pay principle?

Accepted Answer

A)  the federal income tax 
B)  the payroll tax 
C)  a sales tax on food 
D)  Social Security tax 
A)  the federal income tax 
B)  the payroll tax 
C)  a sales tax on food 
D)  Social Security tax

Question 13

The benefits principle says that:

Accepted Answer

A)  the amount of tax paid depends on the measure of value. 
B)  those who benefit from public spending should bear the burden of the tax that pays for that spending. 
C)  those with greater ability to pay should pay more tax. 
D)  those who benefit from the tax should pay the same percentage of the tax base as those who do not benefit. 
A)  the amount of tax paid depends on the measure of value. 
B)  those who benefit from public spending should bear the burden of the tax that pays for that spending. 
C)  those with greater ability to pay should pay more tax. 
D)  those who benefit from the tax should pay the same percentage of the tax base as those who do not benefit.

Question 14

Prior to any taxes, the equilibrium price of gasoline is $3 per gallon. Then a $1-per-gallon tax is levied. As a result, the price of gasoline rises to $3.75 per gallon. The incidence of the $1 tax is _____ paid by consumers and _____ paid by producers.

Accepted Answer

A)  $0.25; $0.75 
B)  $0.50; $0.50 
C)  $0; $1.00 
D)  $0.75; $0.25 
A)  $0.25; $0.75 
B)  $0.50; $0.50 
C)  $0; $1.00 
D)  $0.75; $0.25

Question 15

Explain how an excise tax levied on suppliers affects the supply curve.

Accepted Answer

The supply curve shi

Question 16

An excise tax is levied on:

Accepted Answer

A)  each unit of a good or service that is sold. 
B)  earnings. 
C)  the ownership of real estate. 
D)  the inheritance of assets. 
A)  each unit of a good or service that is sold. 
B)  earnings. 
C)  the ownership of real estate. 
D)  the inheritance of assets.

Question 17

If the government wants to minimize the deadweight loss from taxes, it should tax goods for which:

Accepted Answer

A)  the price elasticity of demand is high. 
B)  the price elasticity of demand is low. 
C)  the price elasticity of supply is high. 
D)  the demand is high. 
A)  the price elasticity of demand is high. 
B)  the price elasticity of demand is low. 
C)  the price elasticity of supply is high. 
D)  the demand is high.

Question 18

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

Question 19

Which of the following situations demonstrates the benefits principle?

Accepted Answer

A)  Employed workers pay taxes that are used to fund technical training programs. 
B)  Revenue from the federal tax on gasoline is used to maintain and improve the interstate highway system. 
C)  Most of the revenue from property taxes is used to fund public schools. The taxes are paid by all homeowners. 
D)  Taxes on cigarettes are used to pay state employees' salaries. 
A)  Employed workers pay taxes that are used to fund technical training programs. 
B)  Revenue from the federal tax on gasoline is used to maintain and improve the interstate highway system. 
C)  Most of the revenue from property taxes is used to fund public schools. The taxes are paid by all homeowners. 
D)  Taxes on cigarettes are used to pay state employees' salaries.

Question 20

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

Accepted Answer

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

_____ taxes are paid on wages.

Use the following to answer questions: Figure: Income Tax Payments -(Figure: Income Tax Payments) Look at the figure Income Tax Payments. Which panel or panels best represent the effects of a progressive income tax?

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

Cigarette taxes have eliminated the wedge between the demand price for cigarettes and the supply price of cigarettes.

According to the _____ principle, those can afford it should pay more tax.

A tax that takes a higher percentage of income as income rises is:

Suppose the government imposes a $4 per month excise tax on cable TV. If the demand for cable TV is perfectly inelastic and the supply curve is elastic (but not perfectly elastic), then the price of cable TV will:

Use the following to answer questions: Figure: A Market with a Tax -(Figure: A Market with a Tax) Look at the figure A Market with a Tax. The deadweight loss arising from the imposition of this tax is equal to the areas:

The benefits principle of taxation means individuals pay according to:

An analysis of the effect of excise taxes on markets allows us to conclude that:

Which of the following taxes reflects the ability-to-pay principle?

The benefits principle says that:

Prior to any taxes, the equilibrium price of gasoline is $3 per gallon. Then a $1-per-gallon tax is levied. As a result, the price of gasoline rises to $3.75 per gallon. The incidence of the $1 tax is _ paid by consumers and _ paid by producers.

Explain how an excise tax levied on suppliers affects the supply curve.

An excise tax is levied on:

If the government wants to minimize the deadweight loss from taxes, it should tax goods for which:

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.

Which of the following situations demonstrates the benefits principle?

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

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

_____ taxes are paid on wages.

Use the following to answer questions: Figure: Income Tax Payments -(Figure: Income Tax Payments) Look at the figure Income Tax Payments. Which panel or panels best represent the effects of a progressive income tax?

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

Cigarette taxes have eliminated the wedge between the demand price for cigarettes and the supply price of cigarettes.

According to the _____ principle, those can afford it should pay more tax.

A tax that takes a higher percentage of income as income rises is:

Suppose the government imposes a $4 per month excise tax on cable TV. If the demand for cable TV is perfectly inelastic and the supply curve is elastic (but not perfectly elastic), then the price of cable TV will:

Use the following to answer questions: Figure: A Market with a Tax -(Figure: A Market with a Tax) Look at the figure A Market with a Tax. The deadweight loss arising from the imposition of this tax is equal to the areas:

The benefits principle of taxation means individuals pay according to:

An analysis of the effect of excise taxes on markets allows us to conclude that:

Which of the following taxes reflects the ability-to-pay principle?

The benefits principle says that:

Prior to any taxes, the equilibrium price of gasoline is $3 per gallon. Then a $1-per-gallon tax is levied. As a result, the price of gasoline rises to $3.75 per gallon. The incidence of the $1 tax is _____ paid by consumers and _____ paid by producers.

Explain how an excise tax levied on suppliers affects the supply curve.

An excise tax is levied on:

If the government wants to minimize the deadweight loss from taxes, it should tax goods for which:

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.

Which of the following situations demonstrates the benefits principle?

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

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

Prior to any taxes, the equilibrium price of gasoline is $3 per gallon. Then a $1-per-gallon tax is levied. As a result, the price of gasoline rises to $3.75 per gallon. The incidence of the $1 tax is _ paid by consumers and _ paid by producers.

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.