Question 1

An excise tax that the government collects from the producers of a good:

Accepted Answer

A)  shifts the supply curve upward. 
B)  reduces revenue for the government. 
C)  has an effect similar to that of a tax subsidy. 
D)  shifts the supply curve downward. 
A)  shifts the supply curve upward. 
B)  reduces revenue for the government. 
C)  has an effect similar to that of a tax subsidy. 
D)  shifts the supply curve downward.

Question 2

_____ tax is NOT a major source of revenue for the federal government.

Accepted Answer

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

Question 3

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 producers is equal to:

Accepted Answer

A)  $1.00. 
B)  $0.40. 
C)  $58.80. 
D)  $60.00. 
A)  $1.00. 
B)  $0.40. 
C)  $58.80. 
D)  $60.00.

Question 4

The _____ principle implies that people with _____ should pay more taxes.

Accepted Answer

A)  ability-to-pay; greater benefits received 
B)  benefits; higher incomes 
C)  ability-to-pay; higher incomes 
D)  benefits; fewer benefits 
A)  ability-to-pay; greater benefits received 
B)  benefits; higher incomes 
C)  ability-to-pay; higher incomes 
D)  benefits; fewer benefits

Question 5

If demand is inelastic, then deadweight loss will:

Accepted Answer

A)  be minimized if supply is also inelastic. 
B)  be maximized if supply is also inelastic. 
C)  decrease if demand becomes more elastic. 
D)  increase if supply becomes more inelastic. 
A)  be minimized if supply is also inelastic. 
B)  be maximized if supply is also inelastic. 
C)  decrease if demand becomes more elastic. 
D)  increase if supply becomes more inelastic.

Question 6

A tax that takes a _____ percentage of income as income _____ is a _____ tax.

Accepted Answer

A)  lower; rises; progressive 
B)  lower; rises; regressive 
C)  higher; rises; proportional 
D)  higher; falls; proportional 
A)  lower; rises; progressive 
B)  lower; rises; regressive 
C)  higher; rises; proportional 
D)  higher; falls; proportional

Question 7

If the government wants to limit sales of a particular good, it may do so by imposing a quota. However, the same reduction in sales may be achieved by an appropriately chosen excise tax.

Accepted Answer

A) True 
 B)False

Question 8

Price elasticities of demand and supply will NOT play a major role in determining:

Accepted Answer

A)  the ability of policy makers to change consumption of a good via the imposition of an excise tax. 
B)  the deadweight loss arising from the imposition of an excise tax. 
C)  the burden of the tax on consumers and producers. 
D)  administrative costs of imposing an excise tax. 
A)  the ability of policy makers to change consumption of a good via the imposition of an excise tax. 
B)  the deadweight loss arising from the imposition of an excise tax. 
C)  the burden of the tax on consumers and producers. 
D)  administrative costs of imposing an excise tax.

Question 9

A tax system _____ when taxes are distributed fairly.

Accepted Answer

A)  is efficient 
B)  is equitable 
C)  has no deadweight loss 
D)  is in equilibrium 
A)  is efficient 
B)  is equitable 
C)  has no deadweight loss 
D)  is in equilibrium

Question 10

Use the following to answer questions:
Figure: The Market for Yachts  
-(Figure: The Market for Yachts) Look at the figure The Market for Yachts. If the government imposes a $60,000 tax on yachts (collected from the producers), the price of yachts will rise to _____ and the government will collect _____.

Accepted Answer

A)  $100,000; $120 million 
B)  $120,000; $90 million 
C)  $140,000; $90 million 
D)  $160,000; $120 million 
A)  $100,000; $120 million 
B)  $120,000; $90 million 
C)  $140,000; $90 million 
D)  $160,000; $120 million

Question 11

Because of tax competition, state and local taxes tend to be _____; however, federal taxes tend to be _____.

Accepted Answer

A)  regressive; regressive 
B)  progressive; regressive 
C)  progressive; progressive 
D)  regressive; progressive 
A)  regressive; regressive 
B)  progressive; regressive 
C)  progressive; progressive 
D)  regressive; progressive

Question 12

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 tax revenue?

Accepted Answer

A)  a + b + c 
B)  b + d 
C)  c + e 
D)  d + e + f 
A)  a + b + c 
B)  b + d 
C)  c + e 
D)  d + e + f

Question 13

The FICA tax falls most heavily on workers because the price elasticity of demand for labor is greater than the price elasticity of supply of labor.

Accepted Answer

A) True 
 B)False

Question 14

Since the terrorist attacks of September 11, 2001, the Federal Aviation Agency has added a small security fee to every airplane ticket purchased. This is an example of:

Accepted Answer

A)  the benefits principle of tax fairness. 
B)  a lump-sum tax. 
C)  the ability-to-pay principle of tax fairness. 
D)  a profits tax. 
A)  the benefits principle of tax fairness. 
B)  a lump-sum tax. 
C)  the ability-to-pay principle of tax fairness. 
D)  a profits tax.

Question 15

A _____ tax takes a larger share of the income of high-income taxpayers than of low-income taxpayers.

Accepted Answer

A)  sales 
B)  regressive 
C)  progressive 
D)  flat 
A)  sales 
B)  regressive 
C)  progressive 
D)  flat

Question 16

The burden of a tax on a good falls at least partially on consumers if:

Accepted Answer

A)  the price paid by consumers for the good declines. 
B)  the price paid by consumers for the good increases. 
C)  the wages received by workers who produce the good decline. 
D)  the wages received by workers who produce the good increase. 
A)  the price paid by consumers for the good declines. 
B)  the price paid by consumers for the good increases. 
C)  the wages received by workers who produce the good decline. 
D)  the wages received by workers who produce the good increase.

Question 17

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 the loss of producer surplus due to the tax?

Accepted Answer

A)  d + e 
B)  e 
C)  d 
D)  d + e + f 
A)  d + e 
B)  e 
C)  d 
D)  d + e + f

Question 18

Tax cuts authorized between 2000 and 2004 tended to favor the rich, but the federal tax system remains progressive overall. However, taxes at the state and local level are regressive.

Accepted Answer

A) True 
 B)False

Question 19

The poorest 20% of families in the United States pay a _____ share of their total income in taxes.

Accepted Answer

A)  very large 
B)  somewhat large 
C)  small 
D)  negative 
A)  very large 
B)  somewhat large 
C)  small 
D)  negative

Question 20

The deadweight loss from an excise tax is largest if demand is _____ and supply is _____.

Accepted Answer

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

An excise tax that the government collects from the producers of a good:

_____ tax is NOT a major source of revenue for the federal government.

The _ principle implies that people with _ should pay more taxes.

If demand is inelastic, then deadweight loss will:

A tax that takes a ___ percentage of income as income _ is a ___ tax.

If the government wants to limit sales of a particular good, it may do so by imposing a quota. However, the same reduction in sales may be achieved by an appropriately chosen excise tax.

Price elasticities of demand and supply will NOT play a major role in determining:

A tax system _____ when taxes are distributed fairly.

Use the following to answer questions: Figure: The Market for Yachts -(Figure: The Market for Yachts) Look at the figure The Market for Yachts. If the government imposes a $60,000 tax on yachts (collected from the producers), the price of yachts will rise to _ and the government will collect _.

Because of tax competition, state and local taxes tend to be _; however, federal taxes tend to be _.

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 tax revenue?

The FICA tax falls most heavily on workers because the price elasticity of demand for labor is greater than the price elasticity of supply of labor.

Since the terrorist attacks of September 11, 2001, the Federal Aviation Agency has added a small security fee to every airplane ticket purchased. This is an example of:

A _____ tax takes a larger share of the income of high-income taxpayers than of low-income taxpayers.

The burden of a tax on a good falls at least partially on consumers if:

Tax cuts authorized between 2000 and 2004 tended to favor the rich, but the federal tax system remains progressive overall. However, taxes at the state and local level are regressive.

The poorest 20% of families in the United States pay a _____ share of their total income in taxes.

The deadweight loss from an excise tax is largest if demand is _ and supply 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

An excise tax that the government collects from the producers of a good:

_____ tax is NOT a major source of revenue for the federal government.

The _____ principle implies that people with _____ should pay more taxes.

If demand is inelastic, then deadweight loss will:

A tax that takes a _____ percentage of income as income _____ is a _____ tax.

If the government wants to limit sales of a particular good, it may do so by imposing a quota. However, the same reduction in sales may be achieved by an appropriately chosen excise tax.

Price elasticities of demand and supply will NOT play a major role in determining:

A tax system _____ when taxes are distributed fairly.

Because of tax competition, state and local taxes tend to be _____; however, federal taxes tend to be _____.

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 tax revenue?

The FICA tax falls most heavily on workers because the price elasticity of demand for labor is greater than the price elasticity of supply of labor.

Since the terrorist attacks of September 11, 2001, the Federal Aviation Agency has added a small security fee to every airplane ticket purchased. This is an example of:

A _____ tax takes a larger share of the income of high-income taxpayers than of low-income taxpayers.

The burden of a tax on a good falls at least partially on consumers if:

Tax cuts authorized between 2000 and 2004 tended to favor the rich, but the federal tax system remains progressive overall. However, taxes at the state and local level are regressive.

The poorest 20% of families in the United States pay a _____ share of their total income in taxes.

The deadweight loss from an excise tax is largest if demand is _____ and supply 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

The _ principle implies that people with _ should pay more taxes.

A tax that takes a ___ percentage of income as income _ is a ___ tax.

Because of tax competition, state and local taxes tend to be _; however, federal taxes tend to be _.

The deadweight loss from an excise tax is largest if demand is _ and supply is _.