Exam 7: Taxes

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 tax revenue collected by government from a $1 per unit tax will be:

Use the following to answer questions: -(Table: The Market for Fried Twinkies) Look at the table The Market for Fried Twinkies. Of the $0.30 tax per fried Twinkie, consumers actually pay _____, while producers actually pay _____.

Use the following to answer questions: Figure: Tax Incidence -(Figure: Tax Incidence) Look at the figure Tax Incidence. Based on the figure, the deadweight loss of an excise tax is likely to be greater in panel _____ than in panel _____.

Suppose price elasticity of demand is relatively inelastic for good X. If the price elasticity of supply for good X is elastic and an excise tax is imposed on good X, who will bear the greater burden of the tax?

The percentage of an INCREASE in a taxpayer's income that is taxed away is the _____ tax rate.

Taxation according to the ability-to-pay principle is best illustrated in the United States by _____ taxes.

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. Before the tax is imposed, consumer surplus is equal to the areas:

Recently the government considered adding an excise tax on CDs that can be used to record music and CD players that can record discs. If this tax were enacted, the most likely effect would be:

Demand for Gala apples is relatively elastic compared to the supply of Gala apples, so if a tax is imposed on the consumers of Gala apples, the tax incidence:

What is the difference between a tax rate and a tax revenue?

Tax structure refers to what a tax is levied on (e.g., income, property, profits), and tax base refers to the base (or lowest) rate of taxation on a particular tax structure.

If an excise tax is imposed on wine and collected from the consumers, the _____ curve will shift _____ by the amount of the tax.

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 supply, as shown in panel _____, a greater share of the burden of an excise tax is borne by _____.

Use the following to answer questions: Figure: The Market for Lattes -(Figure: The Market for Lattes) Look at the figure The Market for Lattes. If the government assesses a tax of $0.75 on each latte, the price the consumer pays for a latte after the tax will:

If the United States removed all excise taxes on cigarettes, which of the following would NOT occur?

An excise tax causes a loss in efficiency because taxes distort incentives.

According to the benefits principle, which of the following is the BEST example of taxation?

Paying a fee every time you use the municipal golf course is an example of the _____ principle.

When workers earn income, they and their employer pay equal portions of FICA (the Federal Insurance Contributions Act). Which of the following statements is TRUE?

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. Before the tax, producer surplus is equal to the areas: