Question 1

Suppose the supply of apartments in Minneapolis is perfectly elastic.The effect of a $100 per month tax on all apartments is that

Accepted Answer

A)  landlords pay none of the tax and there is a surplus of apartments. 
B)  landlords pay all of the tax and suffer all of the deadweight loss. 
C)  landlords pay all of the tax and no changes take place in the quantity of apartments supplied. 
D)  renters pay all of the tax. 
E)  the government collects no tax revenue because the supply is perfectly elastic. 
A)  landlords pay none of the tax and there is a surplus of apartments. 
B)  landlords pay all of the tax and suffer all of the deadweight loss. 
C)  landlords pay all of the tax and no changes take place in the quantity of apartments supplied. 
D)  renters pay all of the tax. 
E)  the government collects no tax revenue because the supply is perfectly elastic.

Question 2

We can see the inefficiencies created by a sales tax because

Accepted Answer

A)  a deadweight loss occurs. 
B)  the tax creates an excess burden. 
C)  at the quantity produced, marginal benefit equals marginal cost. 
D)  Both answers A and B are correct. 
E)  Both answers B and C are correct. 
A)  a deadweight loss occurs. 
B)  the tax creates an excess burden. 
C)  at the quantity produced, marginal benefit equals marginal cost. 
D)  Both answers A and B are correct. 
E)  Both answers B and C are correct.

Question 3

A $2.00 increase in the size of a tax on a good will only cause the price for buyers to increase by $2.00 if

Accepted Answer

A)  demand is perfectly inelastic. 
B)  demand is perfectly elastic. 
C)  demand is unit elastic. 
D)  demand is inelastic, but not perfectly inelastic. 
E)  demand is elastic, but not perfectly elastic. 
A)  demand is perfectly inelastic. 
B)  demand is perfectly elastic. 
C)  demand is unit elastic. 
D)  demand is inelastic, but not perfectly inelastic. 
E)  demand is elastic, but not perfectly elastic.

Question 4

When a tax is imposed on a good or a service,the marginal benefit of the last unit bought ________ the marginal cost of the last unit.

Accepted Answer

A)  is equal to 
B)  is greater than 
C)  is less than 
D)  None of the above answers is correct because there is no consistent relationship between the marginal benefit of the last unit and its marginal cost. 
E)  is not able to be compared to 
A)  is equal to 
B)  is greater than 
C)  is less than 
D)  None of the above answers is correct because there is no consistent relationship between the marginal benefit of the last unit and its marginal cost. 
E)  is not able to be compared to

Question 5

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 6

Which of the following taxes best illustrates the benefits principle of taxation?

Accepted Answer

A)  sales tax on clothing used to fund food stamps 
B)  state income tax used to fund state universities 
C)  medicare tax imposed on all workers used to fund medical care for the elderly 
D)  gasoline tax used to fund road repairs 
E)  federal income tax used to fund NASA spending 
A)  sales tax on clothing used to fund food stamps 
B)  state income tax used to fund state universities 
C)  medicare tax imposed on all workers used to fund medical care for the elderly 
D)  gasoline tax used to fund road repairs 
E)  federal income tax used to fund NASA spending

Question 7

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 paid by buyers and ________ in the equilibrium quantity.

Accepted Answer

A)  rise; an increase 
B)  rise; a decrease 
C)  fall; an increase 
D)  fall; a decrease 
E)  a rise; no change 
A)  rise; an increase 
B)  rise; a decrease 
C)  fall; an increase 
D)  fall; a decrease 
E)  a rise; no change

Question 8

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

Accepted Answer

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

Question 9

-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 amount of this tax is ________ per bucket of golf balls.

Accepted Answer

A)  $4 
B)  $2 
C)  $2.50 
D)  $1 
E)  $3 
A)  $4 
B)  $2 
C)  $2.50 
D)  $1 
E)  $3

Question 10

-In the figure above,suppose that the government imposes a tax of $4 per pizza.Then,the

Accepted Answer

A)  buyers and sellers equally share the incidence of the tax. 
B)  shaded area is the deadweight loss from the tax. 
C)  shaded area is the tax revenue from the tax. 
D)  Both answers A and B are correct. 
E)  Both answers A and C are correct. 
A)  buyers and sellers equally share the incidence of the tax. 
B)  shaded area is the deadweight loss from the tax. 
C)  shaded area is the tax revenue from the tax. 
D)  Both answers A and B are correct. 
E)  Both answers A and C are correct.

Question 11

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 12

-The figure above shows the market for tires.The figure shows that the government has imposed a tax of ________ per tire and that ________ pay most of the tax.

Accepted Answer

A)  $30; buyers 
B)  $40; buyers 
C)  $30; sellers 
D)  $60; sellers 
E)  $60; buyers 
A)  $30; buyers 
B)  $40; buyers 
C)  $30; sellers 
D)  $60; sellers 
E)  $60; buyers

Question 13

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 14

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 15

Is the deadweight loss from a sales tax on a product larger the more inelastic the demand for the good?

Accepted Answer

No,the deadweight lo

Question 16

-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.How much of the tax is paid by employees?

Accepted Answer

A)  $0 
B)  $2 
C)  $4 
D)  $6 
E)  $600 
A)  $0 
B)  $2 
C)  $4 
D)  $6 
E)  $600

Question 17

-The graph shows the market for cell phones.The government imposes a sales tax on cell phones at $10 a cell phone.The excess burden of the sales tax on cell phones is ________.

Accepted Answer

A)  $20,000 
B)  $15,000 
C)  $35,000 
D)  $7,500 
E)  $30,000 
A)  $20,000 
B)  $15,000 
C)  $35,000 
D)  $7,500 
E)  $30,000

Question 18

If a tax is placed on tires,then
i.the equilibrium quantity of tires will decrease.
ii.a deadweight loss will be created.
iii.the producer surplus will decrease.

Accepted Answer

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

Question 19

-To determine who bears the greater share of a tax,we compare the

Accepted Answer

A)  number of buyers to the number of sellers. 
B)  elasticity of supply to the elasticity of demand. 
C)  size of the tax to the price of the good. 
D)  government tax revenue to the revenue collected by the suppliers. 
E)  pre-tax quantity to the post-tax quantity. 
A)  number of buyers to the number of sellers. 
B)  elasticity of supply to the elasticity of demand. 
C)  size of the tax to the price of the good. 
D)  government tax revenue to the revenue collected by the suppliers. 
E)  pre-tax quantity to the post-tax quantity.

Question 20

Ali earns $20,000 and pays $2,000 in taxes; Maria earns $40,000 and pays $4,000 in taxes.Is this tax progressive,regressive,or proportional?

Accepted Answer

The tax is proportio

Suppose the supply of apartments in Minneapolis is perfectly elastic.The effect of a $100 per month tax on all apartments is that

We can see the inefficiencies created by a sales tax because

A $2.00 increase in the size of a tax on a good will only cause the price for buyers to increase by $2.00 if

When a tax is imposed on a good or a service,the marginal benefit of the last unit bought ________ the marginal cost of the last unit.

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

Which of the following taxes best illustrates the benefits principle of taxation?

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 paid by buyers and in the equilibrium quantity.

-The above figure shows the market for capital.With the tax on capital income,the total tax paid is equal 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 amount of this tax is ________ per bucket of golf balls.

-In the figure above,suppose that the government imposes a tax of $4 per pizza.Then,the

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

-The figure above shows the market for tires.The figure shows that the government has imposed a tax of per tire and that pay most of the tax.

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

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

Is the deadweight loss from a sales tax on a product larger the more inelastic the demand for the good?

-The graph shows the market for cell phones.The government imposes a sales tax on cell phones at $10 a cell phone.The excess burden of the sales tax on cell phones is ________.

If a tax is placed on tires,then i.the equilibrium quantity of tires will decrease. ii.a deadweight loss will be created. iii.the producer surplus will decrease.

-To determine who bears the greater share of a tax,we compare the

Ali earns $20,000 and pays $2,000 in taxes; Maria earns $40,000 and pays $4,000 in taxes.Is this tax progressive,regressive,or proportional?

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

Suppose the supply of apartments in Minneapolis is perfectly elastic.The effect of a $100 per month tax on all apartments is that

We can see the inefficiencies created by a sales tax because

A $2.00 increase in the size of a tax on a good will only cause the price for buyers to increase by $2.00 if

When a tax is imposed on a good or a service,the marginal benefit of the last unit bought ________ the marginal cost of the last unit.

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

Which of the following taxes best illustrates the benefits principle of taxation?

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 paid by buyers and ________ in the equilibrium quantity.

-The above figure shows the market for capital.With the tax on capital income,the total tax paid is equal 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 amount of this tax is ________ per bucket of golf balls.

-In the figure above,suppose that the government imposes a tax of $4 per pizza.Then,the

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

-The figure above shows the market for tires.The figure shows that the government has imposed a tax of ________ per tire and that ________ pay most of the tax.

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

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

Is the deadweight loss from a sales tax on a product larger the more inelastic the demand for the good?

-The graph shows the market for cell phones.The government imposes a sales tax on cell phones at $10 a cell phone.The excess burden of the sales tax on cell phones is ________.

If a tax is placed on tires,then i.the equilibrium quantity of tires will decrease. ii.a deadweight loss will be created. iii.the producer surplus will decrease.

-To determine who bears the greater share of a tax,we compare the

Ali earns $20,000 and pays $2,000 in taxes; Maria earns $40,000 and pays $4,000 in taxes.Is this tax progressive,regressive,or proportional?

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

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 paid by buyers and in the equilibrium quantity.

-The figure above shows the market for tires.The figure shows that the government has imposed a tax of per tire and that pay most of the tax.