Exam 7: Taxes

The _____ tax rate on income represents the additional tax an individual pays if his or her income goes up by $1. This rate has _____ since 2000.

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.

A regressive tax:

Taxation according to the ability-to-pay principle is best illustrated in the United States by:

_____ tax is NOT used in the United States.

The evidence suggests that taken collectively, taxes in the U.S. economy are:

If the main purpose of a tax is to decrease the amount of a harmful activity, such as underage drinking, the government should impose it on harmful activities whose supply is _____ and demand is _____.

According to the _____ principle, those who use public services should bear the burden of the tax that pays for them.

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

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

The price elasticity of demand for a particular cancer drug is zero and the price elasticity of supply is 0.50. If a $1 excise tax is levied on producers, how much of this tax will eventually be paid by consumers?

If demand and supply are both very elastic, a decrease in the rate of an excise tax will likely:

_____ and _____ taxes are the largest sources of state and local government revenue.

Suppose an income tax is levied on none of the first $1,000, 10% of the next $9,000, and 20% of the remainder of earnings. How much tax would Miranda have to pay if she earned $20,000?

The 1990 "yacht tax" caused a large deadweight loss because demand for luxury yachts made in the United States is:

Use the following to answer questions: Figure: The Market for Blue Jeans -(Figure: The Market for Blue Jeans) Look at the 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 consumer and producer surplus after the tax was levied?

Use the following to answer question: Figure: Market for Hotel Rooms -(Figure: The Market for Hotel Rooms) Look at the 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 _____.

If an excise tax is imposed on automobiles and collected from consumers:

The deadweight loss of an excise tax arises because the tax prevents some mutually beneficial transactions.

Use the following to answer questions: Figure: The Market for Lattes -(Figure: The Market for Lattes) If an excise tax of $1.50 is assessed on each latte, government revenue will be: