Question 1

-The figure above shows the impact of an income tax.The deadweight loss created by the income tax equals area

Accepted Answer

A)  bce. 
B)  fed. 
C)  acf. 
D)  feba. 
E)  The question errs because an income tax does not create a deadweight loss. 
A)  bce. 
B)  fed. 
C)  acf. 
D)  feba. 
E)  The question errs because an income tax does not create a deadweight loss.

Question 2

The assertion that people with the same ability to pay taxes should pay the same amount in taxes best represents the idea of

Accepted Answer

A)  horizontal equity. 
B)  vertical equity. 
C)  the benefits principle of tax fairness. 
D)  fairness principle of taxation. 
E)  benefits paid principle of taxation. 
A)  horizontal equity. 
B)  vertical equity. 
C)  the benefits principle of tax fairness. 
D)  fairness principle of taxation. 
E)  benefits paid principle of taxation.

Question 3

If Sam pays $2,000 in taxes on an income of $20,000 and $2,800 in taxes on an income of $30,000,the tax rate is

Accepted Answer

A)  regressive. 
B)  proportional. 
C)  progressive. 
D)  vertically fair 
E)  not enough information is given to determine the answer. 
A)  regressive. 
B)  proportional. 
C)  progressive. 
D)  vertically fair 
E)  not enough information is given to determine the answer.

Question 4

$$\begin{array} { c c } 
\hline \begin{array} { c } 
\text { Taxable income } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Total tax } \
\text { (dollars) }
\end{array} \
\hline 10,000 & 0 \
15,000 & 450 \
20,000 & 1,000 \
25,000 & 1,500 \
30,000 & 2,000 \
\hline
\end{array}$$
-The table above gives the taxable income and the amount of tax paid.
a.Is this income tax progressive,regressive,or proportional?
b.If the taxable income is $25,000,what is the average tax rate?
c.If taxable income increases from $25,000 to $30,000,what is the marginal tax rate?

Accepted Answer

a.The income tax is progressiv

Question 5

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

Accepted Answer

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

Question 6

The figure above shows the market for MP3 players, where S is the supply curve and D is the demand curve before any tax is imposed. The government imposes a $10 per unit tax on sellers of MP3 players.
-Based on the figure above,after the tax is imposed,the government collects tax revenue of ________ a week.

Accepted Answer

A)  $20,000 
B)  $10,000 
C)  $50,000 
D)  $60,000 
E)  $40,000 
A)  $20,000 
B)  $10,000 
C)  $50,000 
D)  $60,000 
E)  $40,000

Question 7

Suppose that the elasticity of demand for insulin is 0.1,the elasticity of demand for oranges is 1.2,and the elasticity of supply for insulin and oranges is 0.4.If the government imposes a 10 percent tax on both insulin and oranges,the decrease in the quantity of oranges is ________ the decrease in the quantity of insulin.

Accepted Answer

A)  larger than 
B)  smaller than 
C)  equals to 
D)  not comparable to 
E)  More information is needed to determine how the decrease in the quantity of oranges compares to the decrease in the quantity of insulin. 
A)  larger than 
B)  smaller than 
C)  equals to 
D)  not comparable to 
E)  More information is needed to determine how the decrease in the quantity of oranges compares to the decrease in the quantity of insulin.

Question 8

What are the similarities and differences between horizontal and vertical equity?

Accepted Answer

Both horizontal and vertical equity invo

Question 9

The figure above shows the market for MP3 players, where S is the supply curve and D is the demand curve before any tax. The government imposes a $10 per unit tax on buyers of MP3 players.
-Based on the figure above,after the tax is imposed,the government collects tax revenue of ________ a week.

Accepted Answer

A)  $20,000 
B)  $10,000 
C)  $50,000 
D)  $60,000 
E)  $40,000 
A)  $20,000 
B)  $10,000 
C)  $50,000 
D)  $60,000 
E)  $40,000

Question 10

If the demand curve for hamburgers is downward sloping and the supply curve for hamburgers is upward sloping,then a tax imposed on hamburgers ________ the price paid by buyers and ________ the price received by sellers.

Accepted Answer

A)  raises; raises 
B)  raises; lowers 
C)  lowers; raises 
D)  lowers; lowers 
E)  does not change; does not change 
A)  raises; raises 
B)  raises; lowers 
C)  lowers; raises 
D)  lowers; lowers 
E)  does not change; does not change

Question 11

A sales tax imposed on tires ________ consumer surplus and ________ producer surplus.

Accepted Answer

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

Question 12

If a $2.00 tax per dose of insulin raises the price paid by the buyers by $2.00,then the demand for insulin is perfectly ________ and the buyers pay ________ the tax.

Accepted Answer

A)  inelastic; all 
B)  inelastic; some of 
C)  inelastic; none of 
D)  elastic; all 
E)  elastic; none of 
A)  inelastic; all 
B)  inelastic; some of 
C)  inelastic; none of 
D)  elastic; all 
E)  elastic; none of

Question 13

Which of the following taxes best illustrate the ability-to-pay principle of tax fairness?

Accepted Answer

A)  Tuition at public universities is lower for in-state residents than for out-of-state residents. 
B)  The library is funded through a flat $10 tax levied on all homeowners. 
C)  A property tax that is proportional to the value of a home is used to fund K-12 education. 
D)  Free cholesterol check clinics are funded through a $0.20 tax on all prescriptions. 
E)  A sales tax on food pays for local police and fire protection. 
A)  Tuition at public universities is lower for in-state residents than for out-of-state residents. 
B)  The library is funded through a flat $10 tax levied on all homeowners. 
C)  A property tax that is proportional to the value of a home is used to fund K-12 education. 
D)  Free cholesterol check clinics are funded through a $0.20 tax on all prescriptions. 
E)  A sales tax on food pays for local police and fire protection.

Question 14

Suppose the elasticity of demand for a product is 0 and elasticity of supply is 1.If the government imposes a tax on the product,then

Accepted Answer

A)  buyers and sellers pay exactly the same share of the tax. 
B)  buyers pay all of the tax. 
C)  sellers pay all of the tax. 
D)  buyers pay a smaller share of the tax than do sellers, but both buyers and sellers pay some of the tax. 
E)  because the elasticity of demand is zero, the government collects no revenue from this tax. 
A)  buyers and sellers pay exactly the same share of the tax. 
B)  buyers pay all of the tax. 
C)  sellers pay all of the tax. 
D)  buyers pay a smaller share of the tax than do sellers, but both buyers and sellers pay some of the tax. 
E)  because the elasticity of demand is zero, the government collects no revenue from this tax.

Question 15

Describe the effects of an increase in the tax on labor income.

Accepted Answer

An increase in the income tax imposed on

Question 16

A sales tax on cigarettes would likely decrease the quantity demanded by a smaller amount

Accepted Answer

A)  for smokers who view cigarettes as a necessity. 
B)  for smokers who are not addicted. 
C)  for smokers with smaller incomes. 
D)  the longer the time elapsed. 
E)  for smokers who view cigarettes as a luxury. 
A)  for smokers who view cigarettes as a necessity. 
B)  for smokers who are not addicted. 
C)  for smokers with smaller incomes. 
D)  the longer the time elapsed. 
E)  for smokers who view cigarettes as a luxury.

Question 17

To calculate the revenue government receives when a tax is imposed on a good,multiply the

Accepted Answer

A)  pre-tax equilibrium price by the pre-tax quantity. 
B)  after-tax equilibrium price by the after-tax quantity. 
C)  tax by the pre-tax quantity. 
D)  tax by the after-tax quantity. 
E)  after-tax equilibrium price by the after-tax quantity and then subtract the pre-tax equilibrium price multiplied by the pre-tax quantity. 
A)  pre-tax equilibrium price by the pre-tax quantity. 
B)  after-tax equilibrium price by the after-tax quantity. 
C)  tax by the pre-tax quantity. 
D)  tax by the after-tax quantity. 
E)  after-tax equilibrium price by the after-tax quantity and then subtract the pre-tax equilibrium price multiplied by the pre-tax quantity.

Question 18

If the average tax rate increases as income increases,then the

Accepted Answer

A)  tax is regressive tax. 
B)  tax is a progressive tax. 
C)  tax is a proportional tax. 
D)  income is tax exempt so that no tax needs to be paid on it. 
E)  marginal tax rate must be falling as income increases. 
A)  tax is regressive tax. 
B)  tax is a progressive tax. 
C)  tax is a proportional tax. 
D)  income is tax exempt so that no tax needs to be paid on it. 
E)  marginal tax rate must be falling as income increases.

Question 19

If buyers pay more of a tax than do the sellers,

Accepted Answer

A)  demand is more elastic than supply. 
B)  the amount of tax revenue collected by the government is almost zero. 
C)  supply is more elastic than demand. 
D)  the equilibrium price paid by buyers rises by less than half the amount of the tax. 
E)  None of the above answers is correct. 
A)  demand is more elastic than supply. 
B)  the amount of tax revenue collected by the government is almost zero. 
C)  supply is more elastic than demand. 
D)  the equilibrium price paid by buyers rises by less than half the amount of the tax. 
E)  None of the above answers is correct.

Question 20

Because the supply of capital is highly elastic,taxing the income from capital results in
i.firms that demand capital paying the greater share of the tax.
ii.a decrease in the equilibrium quantity of capital.
iii.a deadweight loss.

Accepted Answer

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

-The figure above shows the impact of an income tax.The deadweight loss created by the income tax equals area

The assertion that people with the same ability to pay taxes should pay the same amount in taxes best represents the idea of

If Sam pays $2,000 in taxes on an income of $20,000 and $2,800 in taxes on an income of $30,000,the tax rate is

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

What are the similarities and differences between horizontal and vertical equity?

The figure above shows the market for MP3 players, where S is the supply curve and D is the demand curve before any tax. The government imposes a $10 per unit tax on buyers of MP3 players. -Based on the figure above,after the tax is imposed,the government collects tax revenue of ________ a week.

If the demand curve for hamburgers is downward sloping and the supply curve for hamburgers is upward sloping,then a tax imposed on hamburgers the price paid by buyers and the price received by sellers.

A sales tax imposed on tires consumer surplus and producer surplus.

If a $2.00 tax per dose of insulin raises the price paid by the buyers by $2.00,then the demand for insulin is perfectly and the buyers pay the tax.

Which of the following taxes best illustrate the ability-to-pay principle of tax fairness?

Suppose the elasticity of demand for a product is 0 and elasticity of supply is 1.If the government imposes a tax on the product,then

Describe the effects of an increase in the tax on labor income.

A sales tax on cigarettes would likely decrease the quantity demanded by a smaller amount

To calculate the revenue government receives when a tax is imposed on a good,multiply the

If the average tax rate increases as income increases,then the

If buyers pay more of a tax than do the sellers,

Because the supply of capital is highly elastic,taxing the income from capital results in i.firms that demand capital paying the greater share of the tax. ii.a decrease in the equilibrium quantity of capital. iii.a 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

-The figure above shows the impact of an income tax.The deadweight loss created by the income tax equals area

The assertion that people with the same ability to pay taxes should pay the same amount in taxes best represents the idea of

If Sam pays $2,000 in taxes on an income of $20,000 and $2,800 in taxes on an income of $30,000,the tax rate is

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

What are the similarities and differences between horizontal and vertical equity?

The figure above shows the market for MP3 players, where S is the supply curve and D is the demand curve before any tax. The government imposes a $10 per unit tax on buyers of MP3 players. -Based on the figure above,after the tax is imposed,the government collects tax revenue of ________ a week.

If the demand curve for hamburgers is downward sloping and the supply curve for hamburgers is upward sloping,then a tax imposed on hamburgers ________ the price paid by buyers and ________ the price received by sellers.

A sales tax imposed on tires ________ consumer surplus and ________ producer surplus.

If a $2.00 tax per dose of insulin raises the price paid by the buyers by $2.00,then the demand for insulin is perfectly ________ and the buyers pay ________ the tax.

Which of the following taxes best illustrate the ability-to-pay principle of tax fairness?

Suppose the elasticity of demand for a product is 0 and elasticity of supply is 1.If the government imposes a tax on the product,then

Describe the effects of an increase in the tax on labor income.

A sales tax on cigarettes would likely decrease the quantity demanded by a smaller amount

To calculate the revenue government receives when a tax is imposed on a good,multiply the

If the average tax rate increases as income increases,then the

If buyers pay more of a tax than do the sellers,

Because the supply of capital is highly elastic,taxing the income from capital results in i.firms that demand capital paying the greater share of the tax. ii.a decrease in the equilibrium quantity of capital. iii.a 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

If the demand curve for hamburgers is downward sloping and the supply curve for hamburgers is upward sloping,then a tax imposed on hamburgers the price paid by buyers and the price received by sellers.

A sales tax imposed on tires consumer surplus and producer surplus.

If a $2.00 tax per dose of insulin raises the price paid by the buyers by $2.00,then the demand for insulin is perfectly and the buyers pay the tax.