Question 1

If buyers pay more of a tax than do the sellers,

Accepted Answer

A)  demand is more elastic than supply. 
B)  the amount of tax revenue collected by the government is almost zero. 
C)  supply is more elastic than demand. 
D)  the equilibrium price paid by buyers rises by less than half the amount of the tax. 
E)  None of the above answers is correct. 
A)  demand is more elastic than supply. 
B)  the amount of tax revenue collected by the government is almost zero. 
C)  supply is more elastic than demand. 
D)  the equilibrium price paid by buyers rises by less than half the amount of the tax. 
E)  None of the above answers is correct.

Question 2

-The figure above shows the market for tires.According to the figure,the government collects ________ per month in total tax revenue

Accepted Answer

A)  $600 million 
B)  $1,200 million 
C)  $2,000 million 
D)  $900 million 
E)  None of the above answers is correct. 
A)  $600 million 
B)  $1,200 million 
C)  $2,000 million 
D)  $900 million 
E)  None of the above answers is correct.

Question 3

Which of the following taxes best illustrates the ability to pay principle?

Accepted Answer

A)  sales tax 
B)  state property tax 
C)  federal income tax 
D)  cigarette tax 
E)  marriage tax 
A)  sales tax 
B)  state property tax 
C)  federal income tax 
D)  cigarette tax 
E)  marriage tax

Question 4

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

Accepted Answer

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

Question 5

-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 largest 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 6

For a given elasticity of demand,the less elastic the supply,the

Accepted Answer

A)  larger the deadweight loss from a tax. 
B)  larger the share of a tax paid by the sellers. 
C)  greater the burden on the government from a tax. 
D)  greater is the excess burden from a tax. 
E)  larger the share of a tax paid by the buyers. 
A)  larger the deadweight loss from a tax. 
B)  larger the share of a tax paid by the sellers. 
C)  greater the burden on the government from a tax. 
D)  greater is the excess burden from a tax. 
E)  larger the share of a tax paid by the buyers.

Question 7

"The only fair tax is a progressive tax." Comment on this assertion.

Accepted Answer

There are many more sides to fairness be

Question 8

The benefits principle of tax fairness argues that

Accepted Answer

A)  everyone receives equal benefits from public services so taxes should be the same for all. 
B)  highly paid people should pay lower taxes because they work harder. 
C)  taxes should be related to the amount of income earned. 
D)  people should pay taxes equal to the benefits from public services received. 
E)  the benefits people get from the government should not be related to their taxes. 
A)  everyone receives equal benefits from public services so taxes should be the same for all. 
B)  highly paid people should pay lower taxes because they work harder. 
C)  taxes should be related to the amount of income earned. 
D)  people should pay taxes equal to the benefits from public services received. 
E)  the benefits people get from the government should not be related to their taxes.

Question 9

The argument that those who use the highways the most should pay most of the cost of providing them,is an example of

Accepted Answer

A)  the benefits principle of fair taxes. 
B)  the ability-to-pay principle of fair taxes. 
C)  a progressive tax system. 
D)  a proportional tax system. 
E)  the "fairest incidence of tax benefits" principle. 
A)  the benefits principle of fair taxes. 
B)  the ability-to-pay principle of fair taxes. 
C)  a progressive tax system. 
D)  a proportional tax system. 
E)  the "fairest incidence of tax benefits" principle.

Question 10

The phrase "tax incidence" refers to

Accepted Answer

A)  how easy it is to evade the tax. 
B)  how taxes redistribute income. 
C)  the degree of progressiveness or regressiveness of the tax. 
D)  who actually bears the burden of paying the tax. 
E)  how much the government collects in revenue from a tax. 
A)  how easy it is to evade the tax. 
B)  how taxes redistribute income. 
C)  the degree of progressiveness or regressiveness of the tax. 
D)  who actually bears the burden of paying the tax. 
E)  how much the government collects in revenue from a tax.

Question 11

-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 12

A sales tax creates a deadweight loss because

Accepted Answer

A)  there is some paperwork 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 paperwork 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

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

Question 14

If a good has a tax levied on it,sellers respond to the price that excludes the tax and not the price with the tax because

Accepted Answer

A)  the tax is handed over to the state directly by buyers. 
B)  sellers do not get to keep the tax revenue. 
C)  the demand for the good has decreased. 
D)  the quantity supplied of the good increases. 
E)  demanders pay none of the tax. 
A)  the tax is handed over to the state directly by buyers. 
B)  sellers do not get to keep the tax revenue. 
C)  the demand for the good has decreased. 
D)  the quantity supplied of the good increases. 
E)  demanders pay none of the tax.

Question 15

When a social security tax is imposed on workers,employment ________ and when a social security tax is is imposed on employers,employment ________.

Accepted Answer

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

Question 16

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 17

If the elasticity of demand for a product equals 3 and the supply is perfectly elastic,then if a tax is imposed on this product,

Accepted Answer

A)  the buyer pays all the tax. 
B)  the seller pays all the tax. 
C)  the buyer pays 3/4 of the tax. 
D)  the seller pays 3/4 of the tax. 
E)  the buyer pays 4/3 of the tax. 
A)  the buyer pays all the tax. 
B)  the seller pays all the tax. 
C)  the buyer pays 3/4 of the tax. 
D)  the seller pays 3/4 of the tax. 
E)  the buyer pays 4/3 of the tax.

Question 18

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 19

When a tax is imposed on a good or service,the

Accepted Answer

A)  revenue gained by the government is the excess burden. 
B)  deadweight loss that arises from a tax is the excess burden. 
C)  share of the tax paid by the buyer is the excess burden. 
D)  share of the tax paid by the seller is the excess burden. 
E)  amount the government collects as tax revenue is the deadweight loss from the tax. 
A)  revenue gained by the government is the excess burden. 
B)  deadweight loss that arises from a tax is the excess burden. 
C)  share of the tax paid by the buyer is the excess burden. 
D)  share of the tax paid by the seller is the excess burden. 
E)  amount the government collects as tax revenue is the deadweight loss from the tax.

Question 20

The percentage of an additional dollar of income that is paid in tax is the

Accepted Answer

A)  sales tax. 
B)  capital tax. 
C)  marginal tax rate. 
D)  personal income tax. 
E)  regressive tax. 
A)  sales tax. 
B)  capital tax. 
C)  marginal tax rate. 
D)  personal income tax. 
E)  regressive tax.

If buyers pay more of a tax than do the sellers,

-The figure above shows the market for tires.According to the figure,the government collects ________ per month in total tax revenue

Which of the following taxes best illustrates the ability to pay principle?

-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 largest amount of deadweight loss?

For a given elasticity of demand,the less elastic the supply,the

"The only fair tax is a progressive tax." Comment on this assertion.

The benefits principle of tax fairness argues that

The argument that those who use the highways the most should pay most of the cost of providing them,is an example of

The phrase "tax incidence" refers to

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

A sales tax creates a deadweight loss because

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

If a good has a tax levied on it,sellers respond to the price that excludes the tax and not the price with the tax because

When a social security tax is imposed on workers,employment and when a social security tax is is imposed on employers,employment .

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

If the elasticity of demand for a product equals 3 and the supply is perfectly elastic,then if a tax is imposed on this product,

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?

When a tax is imposed on a good or service,the

The percentage of an additional dollar of income that is paid in tax is the

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

If buyers pay more of a tax than do the sellers,

-The figure above shows the market for tires.According to the figure,the government collects ________ per month in total tax revenue

Which of the following taxes best illustrates the ability to pay principle?

-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 largest amount of deadweight loss?

For a given elasticity of demand,the less elastic the supply,the

"The only fair tax is a progressive tax." Comment on this assertion.

The benefits principle of tax fairness argues that

The argument that those who use the highways the most should pay most of the cost of providing them,is an example of

The phrase "tax incidence" refers to

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

A sales tax creates a deadweight loss because

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

If a good has a tax levied on it,sellers respond to the price that excludes the tax and not the price with the tax because

When a social security tax is imposed on workers,employment ________ and when a social security tax is is imposed on employers,employment ________.

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

If the elasticity of demand for a product equals 3 and the supply is perfectly elastic,then if a tax is imposed on this product,

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?

When a tax is imposed on a good or service,the

The percentage of an additional dollar of income that is paid in tax is the

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

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

When a social security tax is imposed on workers,employment and when a social security tax is is imposed on employers,employment .