Exam 7: Taxes

An efficient way to finance the provision of city services such as street cleaning would be to charge all city residents a lump-sum tax. Such a tax would be:

If the government imposes a $500 excise tax on SUVs and the demand curve for SUVs is downward-sloping, suppliers of SUVs will simply raise the price by $500 and consumers will bear the entire burden of the tax.

The administrative costs of a tax include the costs incurred by the government in collecting the tax (such as the costs of operating the Internal Revenue Service) but exclude the costs incurred by individuals in paying the tax (such as accountants' fees).

The two principles of tax fairness are:

A tax that takes a _____ is _____.

Use the following to answer questions: Figure: Tax Incidence -(Figure: Tax Incidence) Look at the figure Tax Incidence. All other things unchanged, when a good or service is characterized by a relatively inelastic demand, as shown in panel _____, the greater share of the burden of an excise tax on it is borne by _____.

If the elasticity of demand is _____ and the elasticity of supply is _____, tax revenue is likely to increase.

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 excise tax imposed on this good is equal to:

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 transfer of consumer surplus to the government is equal to the area:

A politician says that a tax on good X will not increase the price of good X paid by consumers. Is there any way that this can be an accurate statement?

If a tax system is designed to minimize the sum of its deadweight loss and its administrative cost, its principal goal is:

In the United States, taxes tend to be regressive at:

Economic policies often involve trade-offs between efficiency and equity. Fortunately, tax policy is an exception because it is easy to find taxes that are both efficient and fair.

Use the following to answer questions: Figure: The Market for Hamburgers -(Figure: The Market for Hamburgers) Look at the figure The Market for Hamburgers. If the market is originally in equilibrium and the government imposes an excise tax of $0.80 per unit of the good sold, the government's revenue from the tax will be:

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. If a $1 per unit tax is imposed, the price of good X will increase by:

Tax incidence refers to:

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 $30,000 tax on yachts and collects it from the yacht suppliers, the _____ curve will shift _____ by _____.

Use the following to answer questions: Figure: Tax Incidence -(Figure: Tax Incidence) Look at the figure Tax Incidence. Producers are likely to bear more of the burden of an excise tax in the situations illustrated by panels:

Use the following to answer questions: Figure: Tax Incidence -(Figure: Tax Incidence) Look at the figure Tax Incidence. Consumers are likely to bear more of the burden of an excise tax in the situations illustrated by panels:

_____ taxes are paid on the purchase of most consumption goods.