Question 1

The average tax rate is the

Accepted Answer

A)  percentage of an additional dollar of income paid in tax. 
B)  percentage of income paid in tax. 
C)  total amount of taxes paid by an individual. 
D)  average of the rates at which income and taxes increase. 
E)  same as the marginal tax rate for a progressive tax. 
A)  percentage of an additional dollar of income paid in tax. 
B)  percentage of income paid in tax. 
C)  total amount of taxes paid by an individual. 
D)  average of the rates at which income and taxes increase. 
E)  same as the marginal tax rate for a progressive tax.

Question 2

Explain under what conditions a sales tax on a specific good would be paid entirely by buyers.

Accepted Answer

Buyers pay all of a tax when t

Question 3

Tax incidence is the

Accepted Answer

A)  burden buyers have to absorb from a tax on goods and services. 
B)  burden sellers have to absorb from a tax on goods and services. 
C)  lost revenue the government endures from goods and services that are not taxed. 
D)  division of the burden of a tax between the buyer and the seller. 
E)  deadweight loss created by a tax. 
A)  burden buyers have to absorb from a tax on goods and services. 
B)  burden sellers have to absorb from a tax on goods and services. 
C)  lost revenue the government endures from goods and services that are not taxed. 
D)  division of the burden of a tax between the buyer and the seller. 
E)  deadweight loss created by a tax.

Question 4

Vertical equity implies that
i.tax rates should be equal for all tax payers.
ii.people with higher income should pay more in taxes.
iii.people with higher incomes should pay a lower average tax rate.

Accepted Answer

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

Question 5

Because the supply of land is perfectly inelastic,a tax on land income

Accepted Answer

A)  is paid entirely by the suppliers. 
B)  is paid entirely by the demanders. 
C)  is shared equally between the suppliers and the demanders. 
D)  is shared, but not equally, between the suppliers and the demanders. 
E)  creates a deadweight loss. 
A)  is paid entirely by the suppliers. 
B)  is paid entirely by the demanders. 
C)  is shared equally between the suppliers and the demanders. 
D)  is shared, but not equally, between the suppliers and the demanders. 
E)  creates a deadweight loss.

Question 6

________ tax is progressive if the ________.

Accepted Answer

A)  An income; average tax rate is constant as income increases 
B)  An income; average tax rate increases with income 
C)  Any; average tax rate is constant as income increases 
D)  Any; average tax rate decreases as income increases 
E)  A Social Security; tax is imposed on employers rather than workers 
A)  An income; average tax rate is constant as income increases 
B)  An income; average tax rate increases with income 
C)  Any; average tax rate is constant as income increases 
D)  Any; average tax rate decreases as income increases 
E)  A Social Security; tax is imposed on employers rather than workers

Question 7

A tax on labor income ________ a deadweight loss for low-wage workers and ________ a deadweight loss for high-wage workers.

Accepted Answer

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

Question 8

The supply curve of sand is horizontal so the supply of sand is perfectly ________.A tax of 1 cent a pound increases the price by 1 cent a pound and the buyer pays ________ the tax.The tax is therefore ________.

Accepted Answer

A)  elastic; all; inefficient 
B)  elastic; none; inefficient 
C)  elastic; all, efficient 
D)  inelastic; all; inefficient 
E)  inelastic; none; efficient 
A)  elastic; all; inefficient 
B)  elastic; none; inefficient 
C)  elastic; all, efficient 
D)  inelastic; all; inefficient 
E)  inelastic; none; efficient

Question 9

Joan's income is $60,000 and she pays $6,000 in taxes.Juan's income is $40,000 and he pays $7,000 in taxes.This situation violates

Accepted Answer

A)  the benefits principle. 
B)  the big tradeoff. 
C)  vertical equity. 
D)  horizontal equity. 
E)  the fair-tax incidence principle. 
A)  the benefits principle. 
B)  the big tradeoff. 
C)  vertical equity. 
D)  horizontal equity. 
E)  the fair-tax incidence principle.

Question 10

Cigarettes are highly addictive and therefore have a very low elasticity of demand.A $2.00 increase in the national sales tax on cigarettes would likely cause the price paid by buyers of cigarettes to

Accepted Answer

A)  increase by more than $1.00 but less than $2.00. 
B)  increase by $2.00. 
C)  increase by more than $2.00. 
D)  increase by less than $1.00. 
E)  remain unchanged. 
A)  increase by more than $1.00 but less than $2.00. 
B)  increase by $2.00. 
C)  increase by more than $2.00. 
D)  increase by less than $1.00. 
E)  remain unchanged.

Question 11

Because the U.S.income tax is a progressive tax,taxing married couples as two single persons can violate

Accepted Answer

A)  the benefits principle. 
B)  the ability-to-pay imperative. 
C)  vertical equity. 
D)  horizontal equity. 
E)  the government's need for more revenue. 
A)  the benefits principle. 
B)  the ability-to-pay imperative. 
C)  vertical equity. 
D)  horizontal equity. 
E)  the government's need for more revenue.

Question 12

A sales tax creates a deadweight loss because

Accepted Answer

A)  there is some paper work opportunity cost of sellers paying the sales tax. 
B)  demand and supply both decrease. 
C)  less is produced and consumed. 
D)  citizens value government goods less than private goods. 
E)  the government spends the tax revenue it collects. 
A)  there is some paper work opportunity cost of sellers paying the sales tax. 
B)  demand and supply both decrease. 
C)  less is produced and consumed. 
D)  citizens value government goods less than private goods. 
E)  the government spends the tax revenue it collects.

Question 13

The proposition that people should pay taxes equal to the benefits they receive from public services is known as the

Accepted Answer

A)  ability-to-pay principle. 
B)  progressive tax principle. 
C)  fairness principle. 
D)  benefits principle. 
E)  "he or she who gets, pays" principle. 
A)  ability-to-pay principle. 
B)  progressive tax principle. 
C)  fairness principle. 
D)  benefits principle. 
E)  "he or she who gets, pays" principle.

Question 14

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 consumer surplus

Accepted Answer

A)  decreases by $17,500. 
B)  increases by $17,500. 
C)  decreases by $7,500. 
D)  increases by $7,500. 
E)  does not change. 
A)  decreases by $17,500. 
B)  increases by $17,500. 
C)  decreases by $7,500. 
D)  increases by $7,500. 
E)  does not change.

Question 15

Vertical equity is the idea that

Accepted Answer

A)  taxpayers with a greater ability to pay should bear a greater share of the taxes. 
B)  people should pay taxes equal to the benefits they receive from public benefits. 
C)  as income rises, taxes should be efficient, not equitable. 
D)  the marriage tax is equitable. 
E)  taxes must be fairest to people with the largest incomes. 
A)  taxpayers with a greater ability to pay should bear a greater share of the taxes. 
B)  people should pay taxes equal to the benefits they receive from public benefits. 
C)  as income rises, taxes should be efficient, not equitable. 
D)  the marriage tax is equitable. 
E)  taxes must be fairest to people with the largest incomes.

Question 16

Using fuel taxes to pay for maintaining public highways is an example of

Accepted Answer

A)  the benefits principle of fair taxation. 
B)  horizontal equity approach to taxation. 
C)  vertical equity approach to taxation. 
D)  the ability-to-pay principle of taxation. 
E)  the excess burden from taxes. 
A)  the benefits principle of fair taxation. 
B)  horizontal equity approach to taxation. 
C)  vertical equity approach to taxation. 
D)  the ability-to-pay principle of taxation. 
E)  the excess burden from taxes.

Question 17

Suppose that Anthony and Melissa both earn $30,000 and are otherwise the same.If they both pay 10 percent of their income as taxes,then

Accepted Answer

A)  the income tax is regressive. 
B)  the benefits principle of fairness has been achieved. 
C)  horizontal equity has been achieved. 
D)  proportional equity has been achieved. 
E)  vertical equity has been achieved. 
A)  the income tax is regressive. 
B)  the benefits principle of fairness has been achieved. 
C)  horizontal equity has been achieved. 
D)  proportional equity has been achieved. 
E)  vertical equity has been achieved.

Question 18

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,the tax ________ the price received (and kept)by the seller by ________ per MP3 player.

Accepted Answer

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

Question 19

When a tax is imposed on a good,at the after-tax equilibrium the marginal benefit of the last unit produced ________ the marginal cost.

Accepted Answer

A)  equals 
B)  is greater than 
C)  is less than 
D)  can be calculated but is not comparable to 
E)  The premise of the question is incorrect because after a tax is imposed, it becomes impossible to determine the marginal benefit and the marginal cost. 
A)  equals 
B)  is greater than 
C)  is less than 
D)  can be calculated but is not comparable to 
E)  The premise of the question is incorrect because after a tax is imposed, it becomes impossible to determine the marginal benefit and the marginal cost.

Question 20

-The figure above shows the market for tickets to the Super Bowl the day of the game.Suppose the government imposes an entertainment tax of $100 per ticket.
a.What is the equilibrium price of a Super Bowl ticket before the tax? What is the price paid by buyers after the tax? What is the price received by sellers after the tax?
b.What is the equilibrium quantity of tickets before the tax? What is the equilibrium quantity after the tax?
c.Do buyers or sellers bear most of the incidence of the tax?

Accepted Answer

a.The equilibrium price before the tax i

The average tax rate is the

Explain under what conditions a sales tax on a specific good would be paid entirely by buyers.

Tax incidence is the

Vertical equity implies that i.tax rates should be equal for all tax payers. ii.people with higher income should pay more in taxes. iii.people with higher incomes should pay a lower average tax rate.

Because the supply of land is perfectly inelastic,a tax on land income

tax is progressive if the .

A tax on labor income a deadweight loss for low-wage workers and a deadweight loss for high-wage workers.

The supply curve of sand is horizontal so the supply of sand is perfectly .A tax of 1 cent a pound increases the price by 1 cent a pound and the buyer pays the tax.The tax is therefore .

Joan's income is $60,000 and she pays $6,000 in taxes.Juan's income is $40,000 and he pays $7,000 in taxes.This situation violates

Cigarettes are highly addictive and therefore have a very low elasticity of demand.A $2.00 increase in the national sales tax on cigarettes would likely cause the price paid by buyers of cigarettes to

Because the U.S.income tax is a progressive tax,taxing married couples as two single persons can violate

A sales tax creates a deadweight loss because

The proposition that people should pay taxes equal to the benefits they receive from public services is known as the

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 consumer surplus

Vertical equity is the idea that

Using fuel taxes to pay for maintaining public highways is an example of

Suppose that Anthony and Melissa both earn $30,000 and are otherwise the same.If they both pay 10 percent of their income as taxes,then

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,the tax the price received (and kept)by the seller by per MP3 player.

When a tax is imposed on a good,at the after-tax equilibrium the marginal benefit of the last unit produced ________ the marginal cost.

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 average tax rate is the

Explain under what conditions a sales tax on a specific good would be paid entirely by buyers.

Tax incidence is the

Vertical equity implies that i.tax rates should be equal for all tax payers. ii.people with higher income should pay more in taxes. iii.people with higher incomes should pay a lower average tax rate.

Because the supply of land is perfectly inelastic,a tax on land income

________ tax is progressive if the ________.

A tax on labor income ________ a deadweight loss for low-wage workers and ________ a deadweight loss for high-wage workers.

The supply curve of sand is horizontal so the supply of sand is perfectly ________.A tax of 1 cent a pound increases the price by 1 cent a pound and the buyer pays ________ the tax.The tax is therefore ________.

Joan's income is $60,000 and she pays $6,000 in taxes.Juan's income is $40,000 and he pays $7,000 in taxes.This situation violates

Cigarettes are highly addictive and therefore have a very low elasticity of demand.A $2.00 increase in the national sales tax on cigarettes would likely cause the price paid by buyers of cigarettes to

Because the U.S.income tax is a progressive tax,taxing married couples as two single persons can violate

A sales tax creates a deadweight loss because

The proposition that people should pay taxes equal to the benefits they receive from public services is known as the

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 consumer surplus

Vertical equity is the idea that

Using fuel taxes to pay for maintaining public highways is an example of

Suppose that Anthony and Melissa both earn $30,000 and are otherwise the same.If they both pay 10 percent of their income as taxes,then

When a tax is imposed on a good,at the after-tax equilibrium the marginal benefit of the last unit produced ________ the marginal cost.

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

tax is progressive if the .

A tax on labor income a deadweight loss for low-wage workers and a deadweight loss for high-wage workers.

The supply curve of sand is horizontal so the supply of sand is perfectly .A tax of 1 cent a pound increases the price by 1 cent a pound and the buyer pays the tax.The tax is therefore .