Question 1

-The above figure shows the market for capital.Without a tax on capital income,the interest rate is ________ and firms use ________ million of capital.

Accepted Answer

A)  4 percent; $1,000 
B)  3 percent; $2,000 
C)  4 percent; $2,000 
D)  2 percent; $1,000 
E)  2 percent; $2,000 
A)  4 percent; $1,000 
B)  3 percent; $2,000 
C)  4 percent; $2,000 
D)  2 percent; $1,000 
E)  2 percent; $2,000

Question 2

-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 smallest 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 3

-The above figure shows the market for capital.With the tax on capital income,the deadweight loss is equal to

Accepted Answer

A)  area A + area B + area C. 
B)  area C + area D + area G. 
C)  area C. 
D)  area B + area F. 
E)  area D. 
A)  area A + area B + area C. 
B)  area C + area D + area G. 
C)  area C. 
D)  area B + area F. 
E)  area D.

Question 4

For a given supply elasticity,the more inelastic the demand for a good,the larger the share of the tax paid by the

Accepted Answer

A)  buyers. 
B)  sellers. 
C)  participants other than the buyers and sellers. 
D)  government. 
E)  None of the above answers is correct. 
A)  buyers. 
B)  sellers. 
C)  participants other than the buyers and sellers. 
D)  government. 
E)  None of the above answers is correct.

Question 5

If taxes are collected on the basis of ability-to-pay and there are two taxpayers with the same income who also are identical in all other respects,which of the following is correct?

Accepted Answer

A)  Vertical equity is impossible between these two taxpayers. 
B)  Vertical equity exists. 
C)  Horizontal equity exists. 
D)  The tax must be proportional. 
E)  The fair-incidence principle is potentially being violated. 
A)  Vertical equity is impossible between these two taxpayers. 
B)  Vertical equity exists. 
C)  Horizontal equity exists. 
D)  The tax must be proportional. 
E)  The fair-incidence principle is potentially being violated.

Question 6

The imposition of ________ shifts the labor demand curve downward.

Accepted Answer

A)  a sales tax 
B)  an income tax 
C)  a Social Security tax on workers 
D)  a Social Security tax on employers 
E)  Both answers C and D are correct. 
A)  a sales tax 
B)  an income tax 
C)  a Social Security tax on workers 
D)  a Social Security tax on employers 
E)  Both answers C and D are correct.

Question 7

Which of the following is an example of a tax following the benefits principle?
i.sales taxes on gasoline used to fund road maintenance projects
ii.federal income tax used to fund food stamps for poorer households
iii.property taxes used to finance public education

Accepted Answer

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

Question 8

Suppose the elasticity of supply of land is 0 and elasticity of demand is 2.If the government imposes a 10 percent tax on land,then

Accepted Answer

A)  buyers and sellers each pay 5 percent of the tax. 
B)  buyers pay all of the tax. 
C)  sellers pay all of the tax. 
D)  sellers pay a smaller share of the tax than do buyers but both buyers and sellers pay some of the tax. 
E)  buyers pay 1/2 of the tax. 
A)  buyers and sellers each pay 5 percent of the tax. 
B)  buyers pay all of the tax. 
C)  sellers pay all of the tax. 
D)  sellers pay a smaller share of the tax than do buyers but both buyers and sellers pay some of the tax. 
E)  buyers pay 1/2 of the tax.

Question 9

Why do sellers pay all of a tax when supply is perfectly inelastic?

Accepted Answer

A)  because a perfectly inelastic supply means that the demand is elastic 
B)  because the government requires firms to collect the tax 
C)  because a perfectly inelastic supply means that the quantity supplied is quite sensitive to a change in price 
D)  because a perfectly inelastic supply means that suppliers will produce the same amount regardless of the price 
E)  because in this case the price of the good that suppliers receive and keep does not change 
A)  because a perfectly inelastic supply means that the demand is elastic 
B)  because the government requires firms to collect the tax 
C)  because a perfectly inelastic supply means that the quantity supplied is quite sensitive to a change in price 
D)  because a perfectly inelastic supply means that suppliers will produce the same amount regardless of the price 
E)  because in this case the price of the good that suppliers receive and keep does not change

Question 10

Because the supply of land is perfectly inelastic,when governments tax land,the tax

Accepted Answer

A)  creates a deadweight loss because the supply is fixed. 
B)  decreases both the demand for and the supply of land. 
C)  creates no deadweight loss because the equilibrium quantity is the same as without the tax. 
D)  increases the supply of land because the landlord pays all of the tax. 
E)  decreases the supply of land because the landlord pays all of the tax. 
A)  creates a deadweight loss because the supply is fixed. 
B)  decreases both the demand for and the supply of land. 
C)  creates no deadweight loss because the equilibrium quantity is the same as without the tax. 
D)  increases the supply of land because the landlord pays all of the tax. 
E)  decreases the supply of land because the landlord pays all of the tax.

Question 11

The government once imposed a luxury tax on very expensive jewelry.This tax followed the ________ principle.

Accepted Answer

A)  benefits 
B)  ability-to-pay 
C)  vertical equity 
D)  horizontal equity 
E)  fair-tax incidence 
A)  benefits 
B)  ability-to-pay 
C)  vertical equity 
D)  horizontal equity 
E)  fair-tax incidence

Question 12

Ann pays $3,850 in taxes on an income of $38,500.Therefore her

Accepted Answer

A)  marginal tax rate must be 10 percent. 
B)  taxes must be progressive in nature. 
C)  average tax rate must be 10 percent. 
D)  personal exemption is 10 percent. 
E)  proportional tax rate is undefined. 
A)  marginal tax rate must be 10 percent. 
B)  taxes must be progressive in nature. 
C)  average tax rate must be 10 percent. 
D)  personal exemption is 10 percent. 
E)  proportional tax rate is undefined.

Question 13

If a $10 sales tax is imposed on a good and the equilibrium price increases by $10,the tax is

Accepted Answer

A)  split between buyers and sellers but not evenly. 
B)  paid fully by sellers. 
C)  paid fully by buyers. 
D)  split evenly between buyers and sellers. 
E)  perhaps split between buyers and sellers but it is impossible to determine the incidence without further information. 
A)  split between buyers and sellers but not evenly. 
B)  paid fully by sellers. 
C)  paid fully by buyers. 
D)  split evenly between buyers and sellers. 
E)  perhaps split between buyers and sellers but it is impossible to determine the incidence without further information.

Question 14

The demand for insulin is quite inelastic.The demand for Pepsi is quite elastic.Suppose the elasticity of supply for insulin is the same as the elasticity of supply for Pepsi.If a $0.20 tax was imposed on each of these goods (holding everything else constant),which consumers would pay more of the tax?

Accepted Answer

A)  the Pepsi consumers 
B)  the insulin consumers 
C)  There would be no difference in the amount of tax paid by the consumers. 
D)  More information is needed to determine which consumers pay more of the tax. 
E)  The premise of the question is wrong because the elasticity of demand and the incidence of a tax are not related. 
A)  the Pepsi consumers 
B)  the insulin consumers 
C)  There would be no difference in the amount of tax paid by the consumers. 
D)  More information is needed to determine which consumers pay more of the tax. 
E)  The premise of the question is wrong because the elasticity of demand and the incidence of a tax are not related.

Question 15

For 2011,the federal government reduced the Social Security tax on workers by 2 percentage points.This will likely cause

Accepted Answer

A)  an increase in the quantity of workers employed and a decrease in deadweight loss. 
B)  an increase in the quantity of workers employed and an increase in deadweight loss. 
C)  a decrease in the quantity of workers employed and a decrease in deadweight loss. 
D)  a decrease in the quantity of workers employed and an increase in deadweight loss. 
E)  no change in the quantity of workers employed since the demand for labor is more elastic than the supply of labor. 
A)  an increase in the quantity of workers employed and a decrease in deadweight loss. 
B)  an increase in the quantity of workers employed and an increase in deadweight loss. 
C)  a decrease in the quantity of workers employed and a decrease in deadweight loss. 
D)  a decrease in the quantity of workers employed and an increase in deadweight loss. 
E)  no change in the quantity of workers employed since the demand for labor is more elastic than the supply of labor.

Question 16

"For the U.S.personal income tax,the average tax rate is greater than the marginal tax rate." Is the previous statement correct or incorrect?

Accepted Answer

The statement is incorrect.The U.S.perso

Question 17

The elasticity of supply of capital is larger than the elasticity of supply of land,so a tax on capital income has ________ deadweight loss and a ________ effect on the equilibrium quantity than does an equal tax on land.

Accepted Answer

A)  a larger; larger 
B)  a larger; smaller 
C)  a smaller; larger 
D)  a smaller; smaller 
E)  no; smaller 
A)  a larger; larger 
B)  a larger; smaller 
C)  a smaller; larger 
D)  a smaller; smaller 
E)  no; smaller

Question 18

Tax incidence is the

Accepted Answer

A)  dollar amount of a tax, expressed as a percentage of the purchase price. 
B)  dollar amount of a tax per unit sold. 
C)  division of a tax burden between the buyer and seller. 
D)  amount of revenue collected by government on a specific good. 
E)  deadweight loss from the tax. 
A)  dollar amount of a tax, expressed as a percentage of the purchase price. 
B)  dollar amount of a tax per unit sold. 
C)  division of a tax burden between the buyer and seller. 
D)  amount of revenue collected by government on a specific good. 
E)  deadweight loss from the tax.

Question 19

The deadweight loss from a tax

Accepted Answer

A)  is the tax revenue the government collects when people die. 
B)  is the split of a tax between the amount paid and the amount collected. 
C)  equals the amount collected as revenue from the tax. 
D)  is called the excess burden of the tax. 
E)  equals the amount collected as revenue from the tax plus the excess burden of the tax. 
A)  is the tax revenue the government collects when people die. 
B)  is the split of a tax between the amount paid and the amount collected. 
C)  equals the amount collected as revenue from the tax. 
D)  is called the excess burden of the tax. 
E)  equals the amount collected as revenue from the tax plus the excess burden of the tax.

Question 20

Tax incidence refers to

Accepted Answer

A)  how government taxes are spent by the government. 
B)  the incidences of tax revolts by the taxpayers. 
C)  the amount of a tax minus its burden. 
D)  the division of the burden of a tax between the buyer and the seller. 
E)  tax revenue minus excess burden. 
A)  how government taxes are spent by the government. 
B)  the incidences of tax revolts by the taxpayers. 
C)  the amount of a tax minus its burden. 
D)  the division of the burden of a tax between the buyer and the seller. 
E)  tax revenue minus excess burden.

-The above figure shows the market for capital.Without a tax on capital income,the interest rate is and firms use million of capital.

-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 smallest amount of deadweight loss?

-The above figure shows the market for capital.With the tax on capital income,the deadweight loss is equal to

For a given supply elasticity,the more inelastic the demand for a good,the larger the share of the tax paid by the

If taxes are collected on the basis of ability-to-pay and there are two taxpayers with the same income who also are identical in all other respects,which of the following is correct?

The imposition of ________ shifts the labor demand curve downward.

Which of the following is an example of a tax following the benefits principle? i.sales taxes on gasoline used to fund road maintenance projects ii.federal income tax used to fund food stamps for poorer households iii.property taxes used to finance public education

Suppose the elasticity of supply of land is 0 and elasticity of demand is 2.If the government imposes a 10 percent tax on land,then

Why do sellers pay all of a tax when supply is perfectly inelastic?

Because the supply of land is perfectly inelastic,when governments tax land,the tax

The government once imposed a luxury tax on very expensive jewelry.This tax followed the ________ principle.

Ann pays $3,850 in taxes on an income of $38,500.Therefore her

If a $10 sales tax is imposed on a good and the equilibrium price increases by $10,the tax is

For 2011,the federal government reduced the Social Security tax on workers by 2 percentage points.This will likely cause

"For the U.S.personal income tax,the average tax rate is greater than the marginal tax rate." Is the previous statement correct or incorrect?

The elasticity of supply of capital is larger than the elasticity of supply of land,so a tax on capital income has deadweight loss and a effect on the equilibrium quantity than does an equal tax on land.

Tax incidence is the

The deadweight loss from a tax

Tax incidence refers to

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 above figure shows the market for capital.Without a tax on capital income,the interest rate is ________ and firms use ________ million of capital.

-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 smallest amount of deadweight loss?

-The above figure shows the market for capital.With the tax on capital income,the deadweight loss is equal to

For a given supply elasticity,the more inelastic the demand for a good,the larger the share of the tax paid by the

If taxes are collected on the basis of ability-to-pay and there are two taxpayers with the same income who also are identical in all other respects,which of the following is correct?

The imposition of ________ shifts the labor demand curve downward.

Which of the following is an example of a tax following the benefits principle? i.sales taxes on gasoline used to fund road maintenance projects ii.federal income tax used to fund food stamps for poorer households iii.property taxes used to finance public education

Suppose the elasticity of supply of land is 0 and elasticity of demand is 2.If the government imposes a 10 percent tax on land,then

Why do sellers pay all of a tax when supply is perfectly inelastic?

Because the supply of land is perfectly inelastic,when governments tax land,the tax

The government once imposed a luxury tax on very expensive jewelry.This tax followed the ________ principle.

Ann pays $3,850 in taxes on an income of $38,500.Therefore her

If a $10 sales tax is imposed on a good and the equilibrium price increases by $10,the tax is

For 2011,the federal government reduced the Social Security tax on workers by 2 percentage points.This will likely cause

"For the U.S.personal income tax,the average tax rate is greater than the marginal tax rate." Is the previous statement correct or incorrect?

The elasticity of supply of capital is larger than the elasticity of supply of land,so a tax on capital income has ________ deadweight loss and a ________ effect on the equilibrium quantity than does an equal tax on land.

Tax incidence is the

The deadweight loss from a tax

Tax incidence refers to

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

-The above figure shows the market for capital.Without a tax on capital income,the interest rate is and firms use million of capital.

The elasticity of supply of capital is larger than the elasticity of supply of land,so a tax on capital income has deadweight loss and a effect on the equilibrium quantity than does an equal tax on land.