Question 1

Suppose Governor Meridias initiates a payroll tax of 10% on all income up to $50,000. Any income above $50,000 is not taxed. This payroll tax will be:

Accepted Answer

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

Question 2

A tax is progressive if the tax payment is:

Accepted Answer

A)  a fixed percentage of income. 
B)  a lower percentage of income as income rises. 
C)  a higher percentage of income as income rises. 
D)  a higher percentage of income as income falls. 
A)  a fixed percentage of income. 
B)  a lower percentage of income as income rises. 
C)  a higher percentage of income as income rises. 
D)  a higher percentage of income as income falls.

Question 3

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 consumer surplus due to the tax?

Accepted Answer

A)  c 
B)  b + c 
C)  b 
D)  a + b + c 
A)  c 
B)  b + c 
C)  b 
D)  a + b + c

Question 4

Tax incidence analysis seeks to determine:

Accepted Answer

A)  who sends the tax payment to the government. 
B)  who actually pays the tax. 
C)  who ultimately gets the tax revenue. 
D)  whether a tax is in the benefits-received category or the ability-to-pay category. 
A)  who sends the tax payment to the government. 
B)  who actually pays the tax. 
C)  who ultimately gets the tax revenue. 
D)  whether a tax is in the benefits-received category or the ability-to-pay category.

Question 5

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 is the deadweight loss?

Accepted Answer

A)  $1,000 
B)  $500 
C)  $250 
D)  $1,250 
A)  $1,000 
B)  $500 
C)  $250 
D)  $1,250

Question 6

The demand for food is very inelastic compared to the supply of food, so if a tax is imposed on the consumers of food, the tax incidence:

Accepted Answer

A)  is typically on consumers more than producers. 
B)  is typically on producers more than consumers. 
C)  is typically split equally between consumers and producers. 
D)  cannot be determined without more information. 
A)  is typically on consumers more than producers. 
B)  is typically on producers more than consumers. 
C)  is typically split equally between consumers and producers. 
D)  cannot be determined without more information.

Question 7

Assume the same upward supply curve for each of the following goods. Considering demand only, a tax on _____ would result in the largest deadweight loss.

Accepted Answer

A)  gasoline 
B)  medicine 
C)  restaurant meals 
D)  tobacco 
A)  gasoline 
B)  medicine 
C)  restaurant meals 
D)  tobacco

Question 8

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

Accepted Answer

A)  higher; proportional 
B)  lower; an ability tax 
C)  higher; progressive 
D)  lower; a marginal tax 
A)  higher; proportional 
B)  lower; an ability tax 
C)  higher; progressive 
D)  lower; a marginal tax

Question 9

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

Accepted Answer

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

Question 10

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 hamburger, producer surplus will be reduced by:

Accepted Answer

A)  $175. 
B)  $240. 
C)  $105. 
D)  $90. 
A)  $175. 
B)  $240. 
C)  $105. 
D)  $90.

Question 11

If personal income up to and including $30,000 is not taxed, income of $30,001 to $60,000 is taxed at 10%, and income over $60,000 is taxed at 25%, then a family earning an income of $100,000 will pay _____ in personal taxes.

Accepted Answer

A)  $6,000 
B)  $10,000 
C)  $13,000 
D)  $25,000 
A)  $6,000 
B)  $10,000 
C)  $13,000 
D)  $25,000

Question 12

If the demand curve is downward-sloping and supply is perfectly elastic, then the burden of an excise tax is:

Accepted Answer

A)  borne entirely by consumers. 
B)  borne entirely by producers. 
C)  shared by consumers and producers, with the burden falling mainly on consumers. 
D)  shared by consumers and producers, with the burden falling mainly on producers. 
A)  borne entirely by consumers. 
B)  borne entirely by producers. 
C)  shared by consumers and producers, with the burden falling mainly on consumers. 
D)  shared by consumers and producers, with the burden falling mainly on producers.

Question 13

Given any downward-sloping demand curve for a good, the more price-elastic the supply 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 14

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 deadweight loss associated with the tax will be equal to:

Accepted Answer

A)  $1.00. 
B)  $20.00. 
C)  $0.50. 
D)  $0.60. 
A)  $1.00. 
B)  $20.00. 
C)  $0.50. 
D)  $0.60.

Question 15

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 deadweight loss?

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 16

The ability-to-pay principle regarding taxes suggests that:

Accepted Answer

A)  the efficiency of a tax is the key feature in designing it. 
B)  those who can afford it should bear the greater burden of the tax. 
C)  those who benefit most from the tax should bear the greater burden of the tax. 
D)  higher-income individuals should pay the same amount as lower-income individuals. 
A)  the efficiency of a tax is the key feature in designing it. 
B)  those who can afford it should bear the greater burden of the tax. 
C)  those who benefit most from the tax should bear the greater burden of the tax. 
D)  higher-income individuals should pay the same amount as lower-income individuals.

Question 17

Use the following to answer questions:  
-(Table: Three Tax Structure Proposals) Look at the table Three Tax Structure Proposals. Policy makers interested in implementing a progressive tax structure would suggest using:

Accepted Answer

A)  proposal 1. 
B)  proposal 2. 
C)  proposal 3. 
D)  all of the proposals, since all are progressive. 
A)  proposal 1. 
B)  proposal 2. 
C)  proposal 3. 
D)  all of the proposals, since all are progressive.

Question 18

The deadweight loss from an excise tax comes about because:

Accepted Answer

A)  the number of transactions in the market is smaller than the no-tax equilibrium. 
B)  some mutually beneficial transactions do not take place. 
C)  a quota rent exists. 
D)  the number of transactions in the market is reduced and some mutually beneficial transactions do not take place. 
A)  the number of transactions in the market is smaller than the no-tax equilibrium. 
B)  some mutually beneficial transactions do not take place. 
C)  a quota rent exists. 
D)  the number of transactions in the market is reduced and some mutually beneficial transactions do not take place.

Question 19

Use the following to answer questions:  
-(Table: The Market for Fried Twinkies) Look at the table The Market for Fried Twinkies. The government decides to tax fried Twinkies at a rate of $0.30 per Twinkie and collect that tax from the producers. After paying the tax, producers will receive _____ per Twinkie, and they will sell _____ Twinkies after the tax.

Accepted Answer

A)  $1.10; 3,000 
B)  $1.20; 5,000 
C)  $1.30; 7,000 
D)  $1.50; 5,000 
A)  $1.10; 3,000 
B)  $1.20; 5,000 
C)  $1.30; 7,000 
D)  $1.50; 5,000

Question 20

A tax:

Accepted Answer

A)  generates tax revenue and causes deadweight loss. 
B)  increases consumer and producer surplus. 
C)  produces revenue for the government and increases total surplus. 
D)  is always efficient. 
A)  generates tax revenue and causes deadweight loss. 
B)  increases consumer and producer surplus. 
C)  produces revenue for the government and increases total surplus. 
D)  is always efficient.

Suppose Governor Meridias initiates a payroll tax of 10% on all income up to $50,000. Any income above $50,000 is not taxed. This payroll tax will be:

A tax is progressive if the tax payment is:

Tax incidence analysis seeks to determine:

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 is the deadweight loss?

The demand for food is very inelastic compared to the supply of food, so if a tax is imposed on the consumers of food, the tax incidence:

Assume the same upward supply curve for each of the following goods. Considering demand only, a tax on _____ would result in the largest deadweight loss.

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

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

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 hamburger, producer surplus will be reduced by:

If personal income up to and including $30,000 is not taxed, income of $30,001 to $60,000 is taxed at 10%, and income over $60,000 is taxed at 25%, then a family earning an income of $100,000 will pay _____ in personal taxes.

If the demand curve is downward-sloping and supply is perfectly elastic, then the burden of an excise tax is:

Given any downward-sloping demand curve for a good, the more price-elastic the supply curve, the _ equilibrium output will fall and the _ will be the deadweight loss when the government imposes an excise tax.

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 deadweight loss?

The ability-to-pay principle regarding taxes suggests that:

Use the following to answer questions: -(Table: Three Tax Structure Proposals) Look at the table Three Tax Structure Proposals. Policy makers interested in implementing a progressive tax structure would suggest using:

The deadweight loss from an excise tax comes about because:

A tax:

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

Suppose Governor Meridias initiates a payroll tax of 10% on all income up to $50,000. Any income above $50,000 is not taxed. This payroll tax will be:

A tax is progressive if the tax payment is:

Tax incidence analysis seeks to determine:

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 is the deadweight loss?

The demand for food is very inelastic compared to the supply of food, so if a tax is imposed on the consumers of food, the tax incidence:

Assume the same upward supply curve for each of the following goods. Considering demand only, a tax on _____ would result in the largest deadweight loss.

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

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

If personal income up to and including $30,000 is not taxed, income of $30,001 to $60,000 is taxed at 10%, and income over $60,000 is taxed at 25%, then a family earning an income of $100,000 will pay _____ in personal taxes.

If the demand curve is downward-sloping and supply is perfectly elastic, then the burden of an excise tax is:

Given any downward-sloping demand curve for a good, the more price-elastic the supply curve, the _____ equilibrium output will fall and the _____ will be the deadweight loss when the government imposes an excise tax.

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 deadweight loss?

The ability-to-pay principle regarding taxes suggests that:

Use the following to answer questions: -(Table: Three Tax Structure Proposals) Look at the table Three Tax Structure Proposals. Policy makers interested in implementing a progressive tax structure would suggest using:

The deadweight loss from an excise tax comes about because:

A tax:

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

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

Given any downward-sloping demand curve for a good, the more price-elastic the supply curve, the _ equilibrium output will fall and the _ will be the deadweight loss when the government imposes an excise tax.