Question 1

Trying to achieve vertical equity by using a progressive income tax structure can create problems with which of the following?

Accepted Answer

A)  horizontal equity 
B)  vertical equity 
C)  benefits received 
D)  tax incidence 
E)  regressive equality 
A)  horizontal equity 
B)  vertical equity 
C)  benefits received 
D)  tax incidence 
E)  regressive equality

Question 2

Suppose the demand for saline solution is perfectly inelastic for contact lens wearers.If the government imposes a tax on saline solution,what occurs? Be sure to tell what happens to the price paid by the buyers and discuss the incidence of the tax.

Accepted Answer

If demand is perfectly inelastic,then no

Question 3

Neither the demand for gasoline nor the supply of gasoline is perfectly elastic or inelastic.If the federal government eliminated the 18.4 cents per gallon gasoline tax,the price paid by buyers would

Accepted Answer

A)  decrease by less than 18.4 cents. 
B)  decrease by 18.4 cents. 
C)  decrease by more than 18.4 cents. 
D)  stay the same. 
E)  increase by 18.4 cents. 
A)  decrease by less than 18.4 cents. 
B)  decrease by 18.4 cents. 
C)  decrease by more than 18.4 cents. 
D)  stay the same. 
E)  increase by 18.4 cents.

Question 4

Suppose the demand for barley is perfectly elastic.The supply curve of barley is upward sloping.If a tax is imposed on barley,

Accepted Answer

A)  barley sellers pay the entire tax. 
B)  barley buyers pay the entire tax. 
C)  the government pays the entire tax. 
D)  the tax is split evenly between barley buyers and sellers. 
E)  who pays the tax depends on whether the government imposes the tax on barley sellers or on barley buyers. 
A)  barley sellers pay the entire tax. 
B)  barley buyers pay the entire tax. 
C)  the government pays the entire tax. 
D)  the tax is split evenly between barley buyers and sellers. 
E)  who pays the tax depends on whether the government imposes the tax on barley sellers or on barley buyers.

Question 5

The excess burden of a tax refers to the fact that

Accepted Answer

A)  the benefits from a tax exceed the tax revenue. 
B)  the deadweight loss from a tax exceeds the remaining consumer surplus. 
C)  marginal cost is greater than marginal benefit after the tax. 
D)  a tax creates a deadweight loss. 
E)  taxes are split between buyers and sellers. 
A)  the benefits from a tax exceed the tax revenue. 
B)  the deadweight loss from a tax exceeds the remaining consumer surplus. 
C)  marginal cost is greater than marginal benefit after the tax. 
D)  a tax creates a deadweight loss. 
E)  taxes are split between buyers and sellers.

Question 6

Taxes on labor income ________ a deadweight loss and ________ the supply of labor.

Accepted Answer

A)  create; decrease 
B)  do not create; increase 
C)  create; increase 
D)  do not create; decrease 
E)  create; do not change 
A)  create; decrease 
B)  do not create; increase 
C)  create; increase 
D)  do not create; decrease 
E)  create; do not change

Question 7

If the supply of land is perfectly inelastic,what is the deadweight loss from a tax on land?

Accepted Answer

If the supply of land is perfe

Question 8

Suppose the elasticity of demand for Mexican food is 3.00 and the elasticity of supply is 1.20.If the government imposes a sales tax on Mexican food,which of the following occurs?
i.Less Mexican food is purchased by buyers.
ii.Less Mexican food is produced by sellers.
iii.The government receives the excess burden as revenue.
iv.Both the consumer surplus and the producer surplus decrease.

Accepted Answer

A)  i and ii 
B)  iii only 
C)  i, ii, and iv 
D)  iv only 
E)  i, ii, iii, and iv 
A)  i and ii 
B)  iii only 
C)  i, ii, and iv 
D)  iv only 
E)  i, ii, iii, and iv

Question 9

The deadweight loss of a tax

Accepted Answer

A)  is the transfer of income from households to the government. 
B)  determines the incidence of a tax. 
C)  is part of the total burden of a tax. 
D)  is greater than the total burden of a tax. 
E)  equals the tax revenue collected by the government. 
A)  is the transfer of income from households to the government. 
B)  determines the incidence of a tax. 
C)  is part of the total burden of a tax. 
D)  is greater than the total burden of a tax. 
E)  equals the tax revenue collected by the government.

Question 10

A tax

Accepted Answer

A)  places a wedge between the price paid by the buyers and the price received by the sellers. 
B)  reduces consumer surplus and producer surplus. 
C)  decreases government spending. 
D)  Both answers A and B are correct. 
E)  None of the above answers is correct. 
A)  places a wedge between the price paid by the buyers and the price received by the sellers. 
B)  reduces consumer surplus and producer surplus. 
C)  decreases government spending. 
D)  Both answers A and B are correct. 
E)  None of the above answers is correct.

Question 11

The supply of sand is perfectly inelastic and the demand curve for sand is downward sloping.Hence,if a tax on sand is imposed,

Accepted Answer

A)  sand buyers pay the entire tax. 
B)  sand sellers pay the entire tax. 
C)  the tax is split evenly between the buyers and sellers. 
D)  the government pays the entire tax. 
E)  the government collects no tax revenue because the supply is perfectly inelastic. 
A)  sand buyers pay the entire tax. 
B)  sand sellers pay the entire tax. 
C)  the tax is split evenly between the buyers and sellers. 
D)  the government pays the entire tax. 
E)  the government collects no tax revenue because the supply is perfectly inelastic.

Question 12

The average tax rate equals

Accepted Answer

A)  (total tax ÷ change in income) × 100. 
B)  (change in tax ÷ total income) × 100. 
C)  (total tax ÷ total income) × 100. 
D)  (change in tax ÷ change in income) × 100. 
E)  (marginal tax are × total income) × 100. 
A)  (total tax ÷ change in income) × 100. 
B)  (change in tax ÷ total income) × 100. 
C)  (total tax ÷ total income) × 100. 
D)  (change in tax ÷ change in income) × 100. 
E)  (marginal tax are × total income) × 100.

Question 13

A tax on labor income

Accepted Answer

A)  increases the quantity employed because the demand for labor increases. 
B)  decreases the quantity employed because the supply of labor decreases. 
C)  increases the quantity employed because the supply of labor increases. 
D)  decreases the quantity employed because the demand for labor increases. 
E)  does not change the quantity employed because people must have jobs in order to earn any income. 
A)  increases the quantity employed because the demand for labor increases. 
B)  decreases the quantity employed because the supply of labor decreases. 
C)  increases the quantity employed because the supply of labor increases. 
D)  decreases the quantity employed because the demand for labor increases. 
E)  does not change the quantity employed because people must have jobs in order to earn any income.

Question 14

If the average tax rate is constant as income increases,then the tax is called

Accepted Answer

A)  regressive. 
B)  progressive. 
C)  proportional. 
D)  an average tax. 
E)  efficient. 
A)  regressive. 
B)  progressive. 
C)  proportional. 
D)  an average tax. 
E)  efficient.

Question 15

If Congress wanted to change the Social Security tax so that firms paid most of the tax,they would need to

Accepted Answer

A)  change the tax laws so that all of the Social Security tax was imposed on firms. 
B)  change the tax laws so that all of the Social Security tax was imposed on workers. 
C)  change the tax laws so that more than 50 percent of the Social Security tax was imposed on firms. 
D)  change the tax laws so that more than 50 percent of the Social Security tax was imposed on workers. 
E)  None of the above because the incidence of the Social Security tax does not depend on the tax laws but instead depends on the elasticities of the demand for labor and the supply of labor. 
A)  change the tax laws so that all of the Social Security tax was imposed on firms. 
B)  change the tax laws so that all of the Social Security tax was imposed on workers. 
C)  change the tax laws so that more than 50 percent of the Social Security tax was imposed on firms. 
D)  change the tax laws so that more than 50 percent of the Social Security tax was imposed on workers. 
E)  None of the above because the incidence of the Social Security tax does not depend on the tax laws but instead depends on the elasticities of the demand for labor and the supply of labor.

Question 16

The deadweight loss from a tax is called the

Accepted Answer

A)  marginal benefit of the tax. 
B)  marginal cost of the tax. 
C)  excess burden of the tax. 
D)  net gain from taxation. 
E)  net loss from taxation. 
A)  marginal benefit of the tax. 
B)  marginal cost of the tax. 
C)  excess burden of the tax. 
D)  net gain from taxation. 
E)  net loss from taxation.

Question 17

A tax on labor income ________ the wage rate paid by employers,________ the wage rate received by employees,and ________ a deadweight loss.

Accepted Answer

A)  rise; fall; creates 
B)  rise; rise; creates 
C)  rise; rise; does not create 
D)  fall; fall; does not create 
E)  fall; fall; creates 
A)  rise; fall; creates 
B)  rise; rise; creates 
C)  rise; rise; does not create 
D)  fall; fall; does not create 
E)  fall; fall; creates

Question 18

-At harvest time the supply of wheat is perfectly inelastic.If the government taxes wheat at $1 a bushel,then

Accepted Answer

A)  the seller pays the entire tax. 
B)  the buyer pays the entire tax. 
C)  the seller and the buyer split the tax evenly. 
D)  the seller and the buyer split the tax but the seller pays more. 
E)  no one pays the tax because the wheat must be harvested or it will go to waste. 
A)  the seller pays the entire tax. 
B)  the buyer pays the entire tax. 
C)  the seller and the buyer split the tax evenly. 
D)  the seller and the buyer split the tax but the seller pays more. 
E)  no one pays the tax because the wheat must be harvested or it will go to waste.

Question 19

When a Social Security tax is imposed on workers,employment ________ and when a Social Security tax is imposed on employers,employment ________.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
E)  decreases; does not change 
A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
E)  decreases; does not change

Question 20

-The above figure shows the supply curves in four different markets.If each of the markets has an identical downward sloping demand curve and the same tax is levied on suppliers,which market would produce the smallest amount of deadweight loss?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
E)  A and D 
A)  A 
B)  B 
C)  C 
D)  D 
E)  A and D

Trying to achieve vertical equity by using a progressive income tax structure can create problems with which of the following?

Suppose the demand for saline solution is perfectly inelastic for contact lens wearers.If the government imposes a tax on saline solution,what occurs? Be sure to tell what happens to the price paid by the buyers and discuss the incidence of the tax.

Neither the demand for gasoline nor the supply of gasoline is perfectly elastic or inelastic.If the federal government eliminated the 18.4 cents per gallon gasoline tax,the price paid by buyers would

Suppose the demand for barley is perfectly elastic.The supply curve of barley is upward sloping.If a tax is imposed on barley,

The excess burden of a tax refers to the fact that

Taxes on labor income a deadweight loss and the supply of labor.

If the supply of land is perfectly inelastic,what is the deadweight loss from a tax on land?

The deadweight loss of a tax

A tax

The supply of sand is perfectly inelastic and the demand curve for sand is downward sloping.Hence,if a tax on sand is imposed,

The average tax rate equals

A tax on labor income

If the average tax rate is constant as income increases,then the tax is called

If Congress wanted to change the Social Security tax so that firms paid most of the tax,they would need to

The deadweight loss from a tax is called the

A tax on labor income the wage rate paid by employers, the wage rate received by employees,and a deadweight loss.

-At harvest time the supply of wheat is perfectly inelastic.If the government taxes wheat at $1 a bushel,then

When a Social Security tax is imposed on workers,employment and when a Social Security tax is imposed on employers,employment .

-The above figure shows the supply curves in four different markets.If each of the markets has an identical downward sloping demand curve and the same tax is levied on suppliers,which market would produce the smallest amount of deadweight loss?

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets with Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 8: Taxes

Trying to achieve vertical equity by using a progressive income tax structure can create problems with which of the following?

Suppose the demand for saline solution is perfectly inelastic for contact lens wearers.If the government imposes a tax on saline solution,what occurs? Be sure to tell what happens to the price paid by the buyers and discuss the incidence of the tax.

Neither the demand for gasoline nor the supply of gasoline is perfectly elastic or inelastic.If the federal government eliminated the 18.4 cents per gallon gasoline tax,the price paid by buyers would

Suppose the demand for barley is perfectly elastic.The supply curve of barley is upward sloping.If a tax is imposed on barley,

The excess burden of a tax refers to the fact that

Taxes on labor income ________ a deadweight loss and ________ the supply of labor.

If the supply of land is perfectly inelastic,what is the deadweight loss from a tax on land?

The deadweight loss of a tax

A tax

The supply of sand is perfectly inelastic and the demand curve for sand is downward sloping.Hence,if a tax on sand is imposed,

The average tax rate equals

A tax on labor income

If the average tax rate is constant as income increases,then the tax is called

If Congress wanted to change the Social Security tax so that firms paid most of the tax,they would need to

The deadweight loss from a tax is called the

A tax on labor income ________ the wage rate paid by employers,________ the wage rate received by employees,and ________ a deadweight loss.

-At harvest time the supply of wheat is perfectly inelastic.If the government taxes wheat at $1 a bushel,then

When a Social Security tax is imposed on workers,employment ________ and when a Social Security tax is imposed on employers,employment ________.

-The above figure shows the supply curves in four different markets.If each of the markets has an identical downward sloping demand curve and the same tax is levied on suppliers,which market would produce the smallest amount of deadweight loss?

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets with Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Taxes on labor income a deadweight loss and the supply of labor.

A tax on labor income the wage rate paid by employers, the wage rate received by employees,and a deadweight loss.

When a Social Security tax is imposed on workers,employment and when a Social Security tax is imposed on employers,employment .