Exam 7: Taxes

State governments levy excise taxes on cigarettes because:

_____ tax does NOT distort incentives and is best at promoting economic efficiency.

The _____ rate applies to an additional $1 of taxable income.

A principle suggesting that people with more income or wealth should pay more taxes is the _____ principle.

The amount of tax levied per unit of good or service is called the tax:

A higher tax rate is more likely to increase tax revenue if the price elasticity of demand is _____ and the price elasticity of supply is _____.

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

Suppose the price elasticity of demand is relatively elastic and the price elasticity of supply is relatively inelastic in a specific market. If an excise tax is imposed on this good, who will bear the greater burden of the tax?

If demand is downward-sloping and supply is upward-sloping, which of the following statements about the effects of an excise tax is INCORRECT?

If demand for a good is perfectly inelastic, then consumers will bear the entire burden of an excise tax imposed on that good.

The government imposes a tax of $1,000 per household to fund a new public swimming pool. This tax is:

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 efficiency loss resulting from this tax is:

Eli has annual earnings of $100,000 and Molly has annual earnings of $50,000. Each consumer goes to the mall and purchases a microwave oven for $100, and each pays an additional 7%, or $7, in sales tax. This tax is:

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.

Suppose Governor Meridias decides to initiate a state income tax. The first $50,000 of household income is tax-free, while any income above $50,000 is taxed at 10%. A household earning $50,000 has a marginal tax rate of _____ and an average tax rate of _____.

If personal income up to and including $25,000 is not taxed, income of $25,001 to $50,000 is taxed at 10%, and income over $50,000 is taxed at 20%, then a family earning an income of $75,000 will pay a MARGINAL tax rate of:

A tax system achieves efficiency when:

As part of an antiobesity program, the government levies an excise tax on high-fat foods. We expect consumers to pay almost all of this tax if demand is _____ and supply is _____.

Determining who actually pays the cost imposed by a tax is the study of:

To minimize deadweight loss, markets where demand is relatively _____ and supply is relatively _____ should be taxed.