Question 1

Which would be a better source of tax revenue for the government,a good with elastic or a good with an inelastic demand? Explain your reasoning.

Accepted Answer

Inelastic goods are better sources of ta

Question 2

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 3

The average tax rate

Accepted Answer

A)  can be calculated by summing all the marginal tax rates up to the level of income for which the average is being calculated. 
B)  is the marginal tax rate divided by the total tax. 
C)  is the percentage of income paid as taxes. 
D)  equals income divided by amount of taxes paid. 
E)  equals the marginal tax rate multiplied by total taxable income. 
A)  can be calculated by summing all the marginal tax rates up to the level of income for which the average is being calculated. 
B)  is the marginal tax rate divided by the total tax. 
C)  is the percentage of income paid as taxes. 
D)  equals income divided by amount of taxes paid. 
E)  equals the marginal tax rate multiplied by total taxable income.

Question 4

When a tax is imposed on a good,the resulting rise in the equilibrium price is usually less than the amount of the tax itself.Why doesn't the equilibrium price rise by the full amount of the tax?

Accepted Answer

Because firms collect taxes from consume

Question 5

When it comes to taxes,horizontal equity means that

Accepted Answer

A)  people with lower incomes bear a smaller tax burden. 
B)  people with the same incomes pay the same amount of taxes. 
C)  progressive taxes must be imposed. 
D)  regressive taxes must be imposed. 
E)  only proportional taxes are fair. 
A)  people with lower incomes bear a smaller tax burden. 
B)  people with the same incomes pay the same amount of taxes. 
C)  progressive taxes must be imposed. 
D)  regressive taxes must be imposed. 
E)  only proportional taxes are fair.

Question 6

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 7

"In the United States,more tax revenue is collected through Social Security taxes than through property taxes." Is the previous statement correct or incorrect?

Accepted Answer

The statement is correct.Socia

Question 8

-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 largest 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

Question 9

-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.The deadweight loss from this tax equals the region

Accepted Answer

A)  abe. 
B)  bce. 
C)  cef. 
D)  efg. 
E)  cdf. 
A)  abe. 
B)  bce. 
C)  cef. 
D)  efg. 
E)  cdf.

Question 10

Suppose the government imposes a $1 per gallon per gallon tax on sellers of gasoline.As a result,the

Accepted Answer

A)  supply curve shifts leftward. 
B)  supply curve shifts rightward. 
C)  demand curve shifts leftward. 
D)  demand curve shifts rightward. 
E)  demand and supply curves both shift leftward. 
A)  supply curve shifts leftward. 
B)  supply curve shifts rightward. 
C)  demand curve shifts leftward. 
D)  demand curve shifts rightward. 
E)  demand and supply curves both shift leftward.

Question 11

If the social security tax imposed on employers increases,then

Accepted Answer

A)  firms' demand for labor increases. 
B)  workers' supply of labor increases. 
C)  firms' demand for labor decreases. 
D)  firms' demand for labor does not change. 
E)  the equilibrium quantity of employment increases. 
A)  firms' demand for labor increases. 
B)  workers' supply of labor increases. 
C)  firms' demand for labor decreases. 
D)  firms' demand for labor does not change. 
E)  the equilibrium quantity of employment increases.

Question 12

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 13

If neither the demand nor supply of a good is perfectly elastic or inelastic,a tax on the good ________ consumer surplus and ________ producer surplus.

Accepted Answer

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

Question 14

Suppose the government increases the social security tax imposed on employers by 25 percent.This tax leads to

Accepted Answer

A)  an increase in the supply of labor. 
B)  a decrease in the supply of labor. 
C)  a decrease in the demand for labor. 
D)  no change in the demand for labor. 
E)  a decrease in the supply of labor and an increase in the demand for labor. 
A)  an increase in the supply of labor. 
B)  a decrease in the supply of labor. 
C)  a decrease in the demand for labor. 
D)  no change in the demand for labor. 
E)  a decrease in the supply of labor and an increase in the demand for labor.

Question 15

-The above figure shows the market for buckets of golf balls at the driving range.A new leisure time tax is placed on suppliers in this market,shifting the supply curve from S₀ to S₁.The tax incidence is

Accepted Answer

A)  split equally between buyers and sellers, each paying $1 per bucket. 
B)  split equally between buyers and sellers, each paying $2 per bucket. 
C)  such that buyers pay $2 per bucket and sellers pay $1 per bucket. 
D)  such that buyers pay $1 per bucket and sellers pay $2 per bucket. 
E)  such that sellers pay all of the tax. 
A)  split equally between buyers and sellers, each paying $1 per bucket. 
B)  split equally between buyers and sellers, each paying $2 per bucket. 
C)  such that buyers pay $2 per bucket and sellers pay $1 per bucket. 
D)  such that buyers pay $1 per bucket and sellers pay $2 per bucket. 
E)  such that sellers pay all of the tax.

Question 16

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.
-After the tax is imposed,the price received by the seller is ________ per MP3 player.

Accepted Answer

A)  $105 
B)  $100 
C)  $95 
D)  $110 
E)  $90 
A)  $105 
B)  $100 
C)  $95 
D)  $110 
E)  $90

Question 17

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.
-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 18

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 19

The figure above shows the demand (D) and supply (S) curves for insulin before any tax is imposed. The government imposes a $0.20 a dose tax on sellers of insulin.
-After the tax is imposed,the price paid by the buyer is ________,and the price received (and kept)by the seller is ________.

Accepted Answer

A)  $2.20; $2.00 
B)  $2.00; $2.20 
C)  $2.00; $2.00 
D)  $2.20; $2.20 
E)  $2.00; $1.80 
A)  $2.20; $2.00 
B)  $2.00; $2.20 
C)  $2.00; $2.00 
D)  $2.20; $2.20 
E)  $2.00; $1.80

Question 20

In 2010,Social Security taxes of over 11 percent were imposed on all income up to $104,000.For income that exceeded $104,000,no Social Security tax was imposed.Hence the Social Security tax is a

Accepted Answer

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

Which would be a better source of tax revenue for the government,a good with elastic or a good with an inelastic demand? Explain your reasoning.

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

The average tax rate

When a tax is imposed on a good,the resulting rise in the equilibrium price is usually less than the amount of the tax itself.Why doesn't the equilibrium price rise by the full amount of the tax?

When it comes to taxes,horizontal equity means that

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

"In the United States,more tax revenue is collected through Social Security taxes than through property taxes." Is the previous statement correct or incorrect?

-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 largest amount of deadweight loss?

Suppose the government imposes a $1 per gallon per gallon tax on sellers of gasoline.As a result,the

If the social security tax imposed on employers increases,then

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

If neither the demand nor supply of a good is perfectly elastic or inelastic,a tax on the good consumer surplus and producer surplus.

Suppose the government increases the social security tax imposed on employers by 25 percent.This tax leads to

-The above figure shows the market for buckets of golf balls at the driving range.A new leisure time tax is placed on suppliers in this market,shifting the supply curve from S₀ to S₁.The tax incidence is

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. -After the tax is imposed,the price received by the seller is ________ per MP3 player.

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. -The tax the price received by the seller by per MP3 player.

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

The figure above shows the demand (D) and supply (S) curves for insulin before any tax is imposed. The government imposes a $0.20 a dose tax on sellers of insulin. -After the tax is imposed,the price paid by the buyer is ,and the price received (and kept)by the seller is .

In 2010,Social Security taxes of over 11 percent were imposed on all income up to $104,000.For income that exceeded $104,000,no Social Security tax was imposed.Hence the Social Security tax is a

Getting Started

The Usand 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

Which would be a better source of tax revenue for the government,a good with elastic or a good with an inelastic demand? Explain your reasoning.

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

The average tax rate

When a tax is imposed on a good,the resulting rise in the equilibrium price is usually less than the amount of the tax itself.Why doesn't the equilibrium price rise by the full amount of the tax?

When it comes to taxes,horizontal equity means that

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

"In the United States,more tax revenue is collected through Social Security taxes than through property taxes." Is the previous statement correct or incorrect?

-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 largest amount of deadweight loss?

Suppose the government imposes a $1 per gallon per gallon tax on sellers of gasoline.As a result,the

If the social security tax imposed on employers increases,then

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

If neither the demand nor supply of a good is perfectly elastic or inelastic,a tax on the good ________ consumer surplus and ________ producer surplus.

Suppose the government increases the social security tax imposed on employers by 25 percent.This tax leads to

-The above figure shows the market for buckets of golf balls at the driving range.A new leisure time tax is placed on suppliers in this market,shifting the supply curve from S₀ to S₁.The tax incidence is

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. -After the tax is imposed,the price received by the seller is ________ per MP3 player.

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. -The tax ________ the price received by the seller by ________ per MP3 player.

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

The figure above shows the demand (D) and supply (S) curves for insulin before any tax is imposed. The government imposes a $0.20 a dose tax on sellers of insulin. -After the tax is imposed,the price paid by the buyer is ________,and the price received (and kept)by the seller is ________.

In 2010,Social Security taxes of over 11 percent were imposed on all income up to $104,000.For income that exceeded $104,000,no Social Security tax was imposed.Hence the Social Security tax is a

Getting Started

The Usand 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 neither the demand nor supply of a good is perfectly elastic or inelastic,a tax on the good consumer surplus and producer surplus.

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. -The tax the price received by the seller by per MP3 player.

The figure above shows the demand (D) and supply (S) curves for insulin before any tax is imposed. The government imposes a $0.20 a dose tax on sellers of insulin. -After the tax is imposed,the price paid by the buyer is ,and the price received (and kept)by the seller is .