Question 1

Why are sales taxes,which require that everyone pay the same percentage tax,considered regressive taxes?

Accepted Answer

Suppose a city implements a 6 percent ta

Question 2

Neither the supply of nor demand for a good is perfectly elastic or perfectly inelastic.So,imposing a tax on the good results in a ________ in the price received and kept by sellers and a ________ in the price paid by buyers.

Accepted Answer

A)  rise; rise 
B)  rise; fall 
C)  fall; rise 
D)  fall; fall 
E)  no change; rise 
A)  rise; rise 
B)  rise; fall 
C)  fall; rise 
D)  fall; fall 
E)  no change; rise

Question 3

Which of the following taxes best illustrate the benefits principle of tax fairness?

Accepted Answer

A)  A property tax that is proportional to the value of a home is used to fund K-12 education. 
B)  The local library is funded through property taxes levied on all homeowners. 
C)  The WIC program provides food to low income mothers and is funded through the federal income tax. 
D)  A sales tax on food pays for local police and fire protection. 
E)  The local youth sports leagues are financed by fees collected from participants by the city. 
A)  A property tax that is proportional to the value of a home is used to fund K-12 education. 
B)  The local library is funded through property taxes levied on all homeowners. 
C)  The WIC program provides food to low income mothers and is funded through the federal income tax. 
D)  A sales tax on food pays for local police and fire protection. 
E)  The local youth sports leagues are financed by fees collected from participants by the city.

Question 4

If the average tax rate increases as income increases,the tax is a

Accepted Answer

A)  progressive tax. 
B)  regressive tax. 
C)  proportional tax. 
D)  marginal tax. 
E)  production-efficient tax. 
A)  progressive tax. 
B)  regressive tax. 
C)  proportional tax. 
D)  marginal tax. 
E)  production-efficient tax.

Question 5

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,the tax ________ the price received by the seller by ________ per MP3 player.

Accepted Answer

A)  raises; $5 
B)  lowers; $5 
C)  raises; $10 
D)  lowers; $10 
E)  lowers; $2.50 
A)  raises; $5 
B)  lowers; $5 
C)  raises; $10 
D)  lowers; $10 
E)  lowers; $2.50

Question 6

As a result of the tax on capital income,labor productivity

Accepted Answer

A)  increases. 
B)  decreases. 
C)  fluctuates. 
D)  does not change. 
E)  might change but whether it increases, decreases, or does not change depends on the magnitude of the tax. 
A)  increases. 
B)  decreases. 
C)  fluctuates. 
D)  does not change. 
E)  might change but whether it increases, decreases, or does not change depends on the magnitude of the tax.

Question 7

Assume that the government passes a tax so that every individual must pay $100.This tax is a

Accepted Answer

A)  progressive tax. 
B)  proportional tax. 
C)  regressive tax. 
D)  marginal tax. 
E)  type of tax that is impossible to determine without more information. 
A)  progressive tax. 
B)  proportional tax. 
C)  regressive tax. 
D)  marginal tax. 
E)  type of tax that is impossible to determine without more information.

Question 8

If a $1 sales tax is imposed on the sale of a CD,and neither the demand nor the supply is perfectly elastic or perfectly inelastic,then the price of a CD paid by consumers will

Accepted Answer

A)  increase by $1 and fewer CDs will be bought. 
B)  increase by less than $1 and fewer CDs will be bought. 
C)  not change and the same number of CDs will be bought. 
D)  increase by $1 and the same number of CDs will be bought. 
E)  increase by more than $1 and fewer CDs will be bought. 
A)  increase by $1 and fewer CDs will be bought. 
B)  increase by less than $1 and fewer CDs will be bought. 
C)  not change and the same number of CDs will be bought. 
D)  increase by $1 and the same number of CDs will be bought. 
E)  increase by more than $1 and fewer CDs will be bought.

Question 9

If the supply of capital is perfectly elastic,a tax on capital income results in

Accepted Answer

A)  a deadweight loss and lenders pay all of the tax. 
B)  a deadweight loss and borrowers (firms) pay all of the tax. 
C)  no deadweight loss and borrowers (firms) and lenders split the tax. 
D)  no deadweight loss and lenders pay all of the tax. 
E)  no deadweight loss and borrowers (firms) pay all of the tax. 
A)  a deadweight loss and lenders pay all of the tax. 
B)  a deadweight loss and borrowers (firms) pay all of the tax. 
C)  no deadweight loss and borrowers (firms) and lenders split the tax. 
D)  no deadweight loss and lenders pay all of the tax. 
E)  no deadweight loss and borrowers (firms) pay all of the tax.

Question 10

If neither the demand nor the supply for goods or labor is perfectly inelastic,then a sales tax on a good ________ a deadweight loss and an income tax ________ a deadweight loss.

Accepted Answer

A)  creates; creates 
B)  creates; does not create 
C)  does not create; create 
D)  does not create; does not create 
E)  might create; might create 
A)  creates; creates 
B)  creates; does not create 
C)  does not create; create 
D)  does not create; does not create 
E)  might create; might create

Question 11

Suppose that,after government imposed an income tax on labor income,the wages paid by employers rose $1.00 and the wages received by employees fell by $0.20.What does that reveal about the elasticities of supply and demand?

Accepted Answer

A)  Supply is more elastic than demand. 
B)  Demand is more elastic than supply. 
C)  Supply and demand are equally elastic. 
D)  Both the supply and demand are inelastic. 
E)  Nothing because more information is needed to learn about the elasticities. 
A)  Supply is more elastic than demand. 
B)  Demand is more elastic than supply. 
C)  Supply and demand are equally elastic. 
D)  Both the supply and demand are inelastic. 
E)  Nothing because more information is needed to learn about the elasticities.

Question 12

The loss to society resulting from a tax includes the

Accepted Answer

A)  deadweight loss. 
B)  consumer surplus paid to the government in the form of tax revenue. 
C)  producer surplus paid to the government in the form of tax revenue. 
D)  deadweight loss plus the consumer surplus and producer surplus paid to the government as tax revenue. 
E)  deadweight loss minus the tax revenue collected by the government. 
A)  deadweight loss. 
B)  consumer surplus paid to the government in the form of tax revenue. 
C)  producer surplus paid to the government in the form of tax revenue. 
D)  deadweight loss plus the consumer surplus and producer surplus paid to the government as tax revenue. 
E)  deadweight loss minus the tax revenue collected by the government.

Question 13

The 2010 health care reform that expanded public health care coverage for low income individuals by increasing taxes on high income earners.Taking more tax revenue from high income earners reflects

Accepted Answer

A)  the benefits principle because high income earners can more easily bear the burden of taxes. 
B)  the ability-to-pay principle because high income earners can more easily bear the burden of taxes. 
C)  the ability-to-pay principle because high income earners use more public health care services. 
D)  the benefits principle because high income earners use more public health care services. 
E)  a regressive tax system since high income earners will pay a greater dollar amount in taxes. 
A)  the benefits principle because high income earners can more easily bear the burden of taxes. 
B)  the ability-to-pay principle because high income earners can more easily bear the burden of taxes. 
C)  the ability-to-pay principle because high income earners use more public health care services. 
D)  the benefits principle because high income earners use more public health care services. 
E)  a regressive tax system since high income earners will pay a greater dollar amount in taxes.

Question 14

If the supply of capital is perfectly ________ end up paying the tax on capital income.

Accepted Answer

A)  elastic, lenders 
B)  elastic, firms that demand capital 
C)  inelastic, lenders 
D)  inelastic, firms that demand capital 
E)  unit elastic, firms that demand capital 
A)  elastic, lenders 
B)  elastic, firms that demand capital 
C)  inelastic, lenders 
D)  inelastic, firms that demand capital 
E)  unit elastic, firms that demand capital

Question 15

The incidence of an income tax on labor income is generally that the tax is

Accepted Answer

A)  paid by only workers. 
B)  paid by only employers. 
C)  shared equally between workers and employers. 
D)  shared but not necessarily equally between workers and employers. 
E)  funded by the deadweight loss. 
A)  paid by only workers. 
B)  paid by only employers. 
C)  shared equally between workers and employers. 
D)  shared but not necessarily equally between workers and employers. 
E)  funded by the deadweight loss.

Question 16

The demand curve for pizza is downward sloping and the supply curve is upward sloping.If the government imposes a $2 tax on a pizza,________ the tax.

Accepted Answer

A)  only consumers pay 
B)  only producers pay 
C)  both producers and consumers pay part of 
D)  neither producers nor consumers pay part of 
E)  the government pays 
A)  only consumers pay 
B)  only producers pay 
C)  both producers and consumers pay part of 
D)  neither producers nor consumers pay part of 
E)  the government pays

Question 17

If highly paid entertainers prefer to perform and would do so even if their pay were much lower,a tax of half of the entertainers' incomes would do which of the following?

Accepted Answer

A)  decrease the amount of entertaining done by moving along a given labor supply curve 
B)  decrease the entertainers' supply of performances 
C)  collect no taxes at all 
D)  not change the quantity supplied of performances 
E)  increase the entertainers' supply of performances as they work more to make up the income they lose in taxes 
A)  decrease the amount of entertaining done by moving along a given labor supply curve 
B)  decrease the entertainers' supply of performances 
C)  collect no taxes at all 
D)  not change the quantity supplied of performances 
E)  increase the entertainers' supply of performances as they work more to make up the income they lose in taxes

Question 18

Consider a Social Security tax on workers versus a Social Security tax on employers.In comparing the outcomes of each type of tax,we see that

Accepted Answer

A)  workers receive a higher take-home wage when the tax is imposed on employers than when the tax is imposed on workers. 
B)  workers receive the same take-home wage when the tax is imposed on workers and when the tax is imposed on employers. 
C)  employers pay a lower total wage when the tax is imposed on workers. 
D)  employment decreases by more when the tax is imposed on employers than when the tax is imposed on workers. 
E)  employment decreases by more when the tax is imposed on workers than when the tax is imposed on employers. 
A)  workers receive a higher take-home wage when the tax is imposed on employers than when the tax is imposed on workers. 
B)  workers receive the same take-home wage when the tax is imposed on workers and when the tax is imposed on employers. 
C)  employers pay a lower total wage when the tax is imposed on workers. 
D)  employment decreases by more when the tax is imposed on employers than when the tax is imposed on workers. 
E)  employment decreases by more when the tax is imposed on workers than when the tax is imposed on employers.

Question 19

If the government eliminates a tax on a good with a perfectly elastic supply,who benefits most?

Accepted Answer

A)  buyers 
B)  sellers 
C)  buyers if the demand is also perfectly elastic, otherwise sellers 
D)  buyers if the demand is unit elastic, otherwise sellers 
E)  Buyers and sellers benefit equally. 
A)  buyers 
B)  sellers 
C)  buyers if the demand is also perfectly elastic, otherwise sellers 
D)  buyers if the demand is unit elastic, otherwise sellers 
E)  Buyers and sellers benefit equally.

Question 20

-The figure above shows the labor supply and labor demand curves for personal trainers in the state of Florida.The initial equilibrium hourly wage is $10.Suppose the state of Florida institutes an income tax on labor income of $6 an hour in order to buy voting machines for the next election.With the tax in place,the labor supply curve will

Accepted Answer

A)  remain at LS. 
B)  shift to LS₁. 
C)  shift to LS₂. 
D)  change so that it becomes the same as LD. 
E)  None of the above answers is correct. 
A)  remain at LS. 
B)  shift to LS₁. 
C)  shift to LS₂. 
D)  change so that it becomes the same as LD. 
E)  None of the above answers is correct.

Why are sales taxes,which require that everyone pay the same percentage tax,considered regressive taxes?

Neither the supply of nor demand for a good is perfectly elastic or perfectly inelastic.So,imposing a tax on the good results in a in the price received and kept by sellers and a in the price paid by buyers.

Which of the following taxes best illustrate the benefits principle of tax fairness?

If the average tax rate increases as income increases,the tax is a

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,the tax the price received by the seller by per MP3 player.

As a result of the tax on capital income,labor productivity

Assume that the government passes a tax so that every individual must pay $100.This tax is a

If a $1 sales tax is imposed on the sale of a CD,and neither the demand nor the supply is perfectly elastic or perfectly inelastic,then the price of a CD paid by consumers will

If the supply of capital is perfectly elastic,a tax on capital income results in

If neither the demand nor the supply for goods or labor is perfectly inelastic,then a sales tax on a good a deadweight loss and an income tax a deadweight loss.

Suppose that,after government imposed an income tax on labor income,the wages paid by employers rose $1.00 and the wages received by employees fell by $0.20.What does that reveal about the elasticities of supply and demand?

The loss to society resulting from a tax includes the

The 2010 health care reform that expanded public health care coverage for low income individuals by increasing taxes on high income earners.Taking more tax revenue from high income earners reflects

If the supply of capital is perfectly ________ end up paying the tax on capital income.

The incidence of an income tax on labor income is generally that the tax is

The demand curve for pizza is downward sloping and the supply curve is upward sloping.If the government imposes a $2 tax on a pizza,________ the tax.

If highly paid entertainers prefer to perform and would do so even if their pay were much lower,a tax of half of the entertainers' incomes would do which of the following?

Consider a Social Security tax on workers versus a Social Security tax on employers.In comparing the outcomes of each type of tax,we see that

If the government eliminates a tax on a good with a perfectly elastic supply,who benefits most?

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

Why are sales taxes,which require that everyone pay the same percentage tax,considered regressive taxes?

Neither the supply of nor demand for a good is perfectly elastic or perfectly inelastic.So,imposing a tax on the good results in a ________ in the price received and kept by sellers and a ________ in the price paid by buyers.

Which of the following taxes best illustrate the benefits principle of tax fairness?

If the average tax rate increases as income increases,the tax is a

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,the tax ________ the price received by the seller by ________ per MP3 player.

As a result of the tax on capital income,labor productivity

Assume that the government passes a tax so that every individual must pay $100.This tax is a

If a $1 sales tax is imposed on the sale of a CD,and neither the demand nor the supply is perfectly elastic or perfectly inelastic,then the price of a CD paid by consumers will

If the supply of capital is perfectly elastic,a tax on capital income results in

If neither the demand nor the supply for goods or labor is perfectly inelastic,then a sales tax on a good ________ a deadweight loss and an income tax ________ a deadweight loss.

Suppose that,after government imposed an income tax on labor income,the wages paid by employers rose $1.00 and the wages received by employees fell by $0.20.What does that reveal about the elasticities of supply and demand?

The loss to society resulting from a tax includes the

The 2010 health care reform that expanded public health care coverage for low income individuals by increasing taxes on high income earners.Taking more tax revenue from high income earners reflects

If the supply of capital is perfectly ________ end up paying the tax on capital income.

The incidence of an income tax on labor income is generally that the tax is

The demand curve for pizza is downward sloping and the supply curve is upward sloping.If the government imposes a $2 tax on a pizza,________ the tax.

If highly paid entertainers prefer to perform and would do so even if their pay were much lower,a tax of half of the entertainers' incomes would do which of the following?

Consider a Social Security tax on workers versus a Social Security tax on employers.In comparing the outcomes of each type of tax,we see that

If the government eliminates a tax on a good with a perfectly elastic supply,who benefits most?

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

Neither the supply of nor demand for a good is perfectly elastic or perfectly inelastic.So,imposing a tax on the good results in a in the price received and kept by sellers and a in the price paid by buyers.

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,the tax the price received by the seller by per MP3 player.

If neither the demand nor the supply for goods or labor is perfectly inelastic,then a sales tax on a good a deadweight loss and an income tax a deadweight loss.