Question 1

Suppose the supply of labor is more inelastic than the demand for labor.Then,a social security tax imposed on employers

Accepted Answer

A)  shifts the demand curve for labor leftward. 
B)  lowers the wage rate received by workers. 
C)  leads to the workers paying more of the tax than the employers. 
D)  Only answers B and C are correct. 
E)  Answers A, B, and C are correct. 
A)  shifts the demand curve for labor leftward. 
B)  lowers the wage rate received by workers. 
C)  leads to the workers paying more of the tax than the employers. 
D)  Only answers B and C are correct. 
E)  Answers A, B, and C are correct.

Question 2

Consider a social security tax on workers versus a social security tax on employers.In comparing the outcomes of each type of tax,we see that

Accepted Answer

A)  workers receive a higher take-home wage when the tax is imposed on employers than when the tax is imposed on workers. 
B)  workers receive the same take-home wage when the tax is imposed on workers and when the tax is imposed on employers. 
C)  employers pay a lower total wage when the tax is imposed on workers. 
D)  employment decreases by more when the tax is imposed on employers than when the tax is imposed on workers. 
E)  employment decreases by more when the tax is imposed on workers than when the tax is imposed on employers. 
A)  workers receive a higher take-home wage when the tax is imposed on employers than when the tax is imposed on workers. 
B)  workers receive the same take-home wage when the tax is imposed on workers and when the tax is imposed on employers. 
C)  employers pay a lower total wage when the tax is imposed on workers. 
D)  employment decreases by more when the tax is imposed on employers than when the tax is imposed on workers. 
E)  employment decreases by more when the tax is imposed on workers than when the tax is imposed on employers.

Question 3

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 4

The incidence of an income tax on labor income is generally that the tax is

Accepted Answer

A)  paid by only workers. 
B)  paid by only employers. 
C)  shared equally between workers and employers. 
D)  shared but not necessarily equally between workers and employers. 
E)  funded by the deadweight loss. 
A)  paid by only workers. 
B)  paid by only employers. 
C)  shared equally between workers and employers. 
D)  shared but not necessarily equally between workers and employers. 
E)  funded by the deadweight loss.

Question 5

-Adam,Aaron,and Fatima earn,respectively,$30,000,$50,000 and $100,000 per year.The amount of state income taxes they pay on their income depends on which state they choose to live in.The table above shows how much they would pay in taxes in each state.
a.Is the tax in State A progressive,regressive or proportional?
b.Is the tax in State B progressive,regressive or proportional?
c.Is the tax in State C progressive,regressive or proportional?

Accepted Answer

a.Taxes in State A are proportional,beca

Question 6

Suppose the demand for barley is perfectly elastic.The supply curve of barley is upward sloping.If a tax is imposed on barley,

Accepted Answer

A)  barley sellers pay the entire tax. 
B)  barley buyers pay the entire tax. 
C)  the government pays the entire tax. 
D)  the tax is split evenly between barley buyers and sellers. 
E)  who pays the tax depends on whether the government imposes the tax on barley sellers or on barley buyers. 
A)  barley sellers pay the entire tax. 
B)  barley buyers pay the entire tax. 
C)  the government pays the entire tax. 
D)  the tax is split evenly between barley buyers and sellers. 
E)  who pays the tax depends on whether the government imposes the tax on barley sellers or on barley buyers.

Question 7

-The above figure shows the labor market for land surveyors.Dave is a land surveyor.What is the total income tax Dave pays each year?

Accepted Answer

A)  $1,500 
B)  $4,500 
C)  $3,000 
D)  $40,500 
E)  $45,000 
A)  $1,500 
B)  $4,500 
C)  $3,000 
D)  $40,500 
E)  $45,000

Question 8

-The above figure shows the market for gourmet ice cream.In effort to reduce obesity,government places a $2 tax per gallon on suppliers in this market,shifting the supply curve from S₀ to S₁.The quantity of ice cream consumed before the tax is ________ gallons and the quantity consumed after the tax is ________ gallons.

Accepted Answer

A)  300,000; 200,000 
B)  200,000; 250,000 
C)  250,000; 200,000 
D)  200,000; 300,000 
E)  200,000; 200,000 
A)  300,000; 200,000 
B)  200,000; 250,000 
C)  250,000; 200,000 
D)  200,000; 300,000 
E)  200,000; 200,000

Question 9

Progressive taxes can be justified as fair based on which of the following?

Accepted Answer

A)  horizontal equity 
B)  vertical equity 
C)  benefits received 
D)  index of fairness principle 
E)  None of the above answers is correct. 
A)  horizontal equity 
B)  vertical equity 
C)  benefits received 
D)  index of fairness principle 
E)  None of the above answers is correct.

Question 10

The imposition of ________ shifts the labor demand curve downward.

Accepted Answer

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

Question 11

When a product is taxed,

Accepted Answer

A)  part of the initial consumer surplus goes to the government as revenue. 
B)  part of the initial consumer surplus becomes a deadweight loss. 
C)  the producer surplus never changes because consumers pay taxes, not producers. 
D)  Both answers A and B are correct. 
E)  Both answers B and C are correct. 
A)  part of the initial consumer surplus goes to the government as revenue. 
B)  part of the initial consumer surplus becomes a deadweight loss. 
C)  the producer surplus never changes because consumers pay taxes, not producers. 
D)  Both answers A and B are correct. 
E)  Both answers B and C are correct.

Question 12

-The graph shows the market for textbooks.If the government introduces a tax of $20 a textbook,then the price paid by buyers ________.

Accepted Answer

A)  increases by $20 
B)  increases to $80 a textbook 
C)  decreases to $60 a textbook 
D)  is $70 a textbook 
E)  does not change because the demand for textbooks is perfectly elastic 
A)  increases by $20 
B)  increases to $80 a textbook 
C)  decreases to $60 a textbook 
D)  is $70 a textbook 
E)  does not change because the demand for textbooks is perfectly elastic

Question 13

-Suppose we acquire the technology necessary to colonize the moon and 3 billion acres are made available to the general population.The figure above represents the supply and demand for land on the moon.
a.Suppose the government imposes a $1,000 dollar per acre tax on land income.What is the before-tax rent and what is the after-tax rent?
b.How much is the deadweight loss associated with this tax?

Accepted Answer

a.The before-tax rent is $3,000 per acre

Question 14

-The figure above shows the market for tires.The government has imposed a tax on tires,and the sellers pay ________ of the tax.

Accepted Answer

A)  $10 
B)  $20 
C)  $50 
D)  $60 
E)  $30 
A)  $10 
B)  $20 
C)  $50 
D)  $60 
E)  $30

Question 15

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 16

-The figure above shows the market for tires.According to the figure,the price elasticity of demand is ________ the price elasticity of supply.

Accepted Answer

A)  greater than 
B)  equal to 
C)  less than 
D)  not comparable to 
E)  More information is needed to determine if the price elasticity of demand is greater than, equal to, less than, or comparable to the price elasticity of supply. 
A)  greater than 
B)  equal to 
C)  less than 
D)  not comparable to 
E)  More information is needed to determine if the price elasticity of demand is greater than, equal to, less than, or comparable to the price elasticity of supply.

Question 17

-The above figure shows the market for capital.With the tax on capital income,the interest rate is ________ and firms use ________ million of capital.

Accepted Answer

A)  2 percent; $2,000 
B)  3 percent; $2000 
C)  6 percent; $1,000 
D)  4 percent; $1,000 
E)  2 percent; $1,000 
A)  2 percent; $2,000 
B)  3 percent; $2000 
C)  6 percent; $1,000 
D)  4 percent; $1,000 
E)  2 percent; $1,000

Question 18

The marginal tax rate equals 100 ×

Accepted Answer

A)  (total tax ÷ change in income). 
B)  (change in tax ÷ total income). 
C)  (total tax ÷ total income). 
D)  (change in tax ÷ change in income). 
E)  (average tax rate × total income) 
A)  (total tax ÷ change in income). 
B)  (change in tax ÷ total income). 
C)  (total tax ÷ total income). 
D)  (change in tax ÷ change in income). 
E)  (average tax rate × total income)

Question 19

A sales tax imposed on sellers of a good

Accepted Answer

A)  decreases the demand and shifts the demand curve rightward. 
B)  decreases the supply and shifts the supply curve leftward. 
C)  decreases both the demand and the supply and shifts both the demand and supply curves leftward. 
D)  decreases the supply and shifts the supply curve rightward. 
E)  has no effect on either the demand or the supply. 
A)  decreases the demand and shifts the demand curve rightward. 
B)  decreases the supply and shifts the supply curve leftward. 
C)  decreases both the demand and the supply and shifts both the demand and supply curves leftward. 
D)  decreases the supply and shifts the supply curve rightward. 
E)  has no effect on either the demand or the supply.

Question 20

Suppose that the elasticity of demand for insulin is 0.1,the elasticity of demand for oranges is 1.2,and the elasticity of supply for insulin and oranges is 0.4.If the government imposes a 10 percent tax on both insulin and oranges,the decrease in the quantity of oranges is ________ the decrease in the quantity of insulin.

Accepted Answer

A)  larger than 
B)  smaller than 
C)  equals to 
D)  not comparable to 
E)  More information is needed to determine how the decrease in the quantity of oranges compares to the decrease in the quantity of insulin. 
A)  larger than 
B)  smaller than 
C)  equals to 
D)  not comparable to 
E)  More information is needed to determine how the decrease in the quantity of oranges compares to the decrease in the quantity of insulin.

Suppose the supply of labor is more inelastic than the demand for labor.Then,a social security tax imposed on employers

Consider a social security tax on workers versus a social security tax on employers.In comparing the outcomes of each type of tax,we see that

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.

The incidence of an income tax on labor income is generally that the tax is

Suppose the demand for barley is perfectly elastic.The supply curve of barley is upward sloping.If a tax is imposed on barley,

-The above figure shows the labor market for land surveyors.Dave is a land surveyor.What is the total income tax Dave pays each year?

Progressive taxes can be justified as fair based on which of the following?

The imposition of ________ shifts the labor demand curve downward.

When a product is taxed,

-The graph shows the market for textbooks.If the government introduces a tax of $20 a textbook,then the price paid by buyers ________.

-The figure above shows the market for tires.The government has imposed a tax on tires,and the sellers pay ________ of the tax.

The deadweight loss from a tax

-The figure above shows the market for tires.According to the figure,the price elasticity of demand is ________ the price elasticity of supply.

-The above figure shows the market for capital.With the tax on capital income,the interest rate is and firms use million of capital.

The marginal tax rate equals 100 ×

A sales tax imposed on sellers of a good

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 labor is more inelastic than the demand for labor.Then,a social security tax imposed on employers

Consider a social security tax on workers versus a social security tax on employers.In comparing the outcomes of each type of tax,we see that

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.

The incidence of an income tax on labor income is generally that the tax is

Suppose the demand for barley is perfectly elastic.The supply curve of barley is upward sloping.If a tax is imposed on barley,

-The above figure shows the labor market for land surveyors.Dave is a land surveyor.What is the total income tax Dave pays each year?

Progressive taxes can be justified as fair based on which of the following?

The imposition of ________ shifts the labor demand curve downward.

When a product is taxed,

-The graph shows the market for textbooks.If the government introduces a tax of $20 a textbook,then the price paid by buyers ________.

-The figure above shows the market for tires.The government has imposed a tax on tires,and the sellers pay ________ of the tax.

The deadweight loss from a tax

-The figure above shows the market for tires.According to the figure,the price elasticity of demand is ________ the price elasticity of supply.

-The above figure shows the market for capital.With the tax on capital income,the interest rate is ________ and firms use ________ million of capital.

The marginal tax rate equals 100 ×

A sales tax imposed on sellers of a good

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

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.

-The above figure shows the market for capital.With the tax on capital income,the interest rate is and firms use million of capital.