Question 1

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 2

Which of the following taxes best illustrate the benefits principle of tax fairness?

Accepted Answer

A)  Roads and highways are built and maintained through a tax on gasoline. 
B)  The local library is funded through property taxes levied on all homeowners. 
C)  The WIC program provides food to low income mothers and is funded through the federal income tax. 
D)  A sales tax on food pays for local police and fire protection. 
E)  City parks are maintained through local excise taxes. 
A)  Roads and highways are built and maintained through a tax on gasoline. 
B)  The local library is funded through property taxes levied on all homeowners. 
C)  The WIC program provides food to low income mothers and is funded through the federal income tax. 
D)  A sales tax on food pays for local police and fire protection. 
E)  City parks are maintained through local excise taxes.

Question 3

How does the elasticity of demand affect the incidence of a tax?

Accepted Answer

For a given elasticity of supp

Question 4

-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 tax incidence is

Accepted Answer

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

Question 5

If income tax rates on labor income are decreased,what is the effect on the labor supply and the labor supply curve? What is the effect on the equilibrium quantity of labor hired?

Accepted Answer

The decrease in the income tax

Question 6

Neither the demand for gasoline nor the supply of gasoline is perfectly elastic or inelastic.If the federal government eliminated the 18.4 cents per gallon gasoline tax,the price paid by buyers would

Accepted Answer

A)  decrease by less than 18.4 cents. 
B)  decrease by 18.4 cents. 
C)  decrease by more than 18.4 cents. 
D)  stay the same. 
E)  increase by 18.4 cents. 
A)  decrease by less than 18.4 cents. 
B)  decrease by 18.4 cents. 
C)  decrease by more than 18.4 cents. 
D)  stay the same. 
E)  increase by 18.4 cents.

Question 7

If there is an income tax levied on labor income,the labor demand curve ________ and the labor supply curve ________.

Accepted Answer

A)  shifts rightward; does not shift 
B)  shifts leftward; does not shift 
C)  does not shift; shifts rightward 
D)  does not shift; shifts leftward 
E)  shifts leftward; shifts leftward 
A)  shifts rightward; does not shift 
B)  shifts leftward; does not shift 
C)  does not shift; shifts rightward 
D)  does not shift; shifts leftward 
E)  shifts leftward; shifts leftward

Question 8

Suppose the demand for Georgia peaches is perfectly elastic.If the supply curve is upward sloping and a tax is imposed on Georgia peaches,then

Accepted Answer

A)  peach sellers pay all of the tax. 
B)  peach buyers pay all of the tax. 
C)  peach buyers and sellers evenly split the tax. 
D)  the government does not collect any revenue from the tax. 
E)  the tax does not change the equilibrium quantity of peaches. 
A)  peach sellers pay all of the tax. 
B)  peach buyers pay all of the tax. 
C)  peach buyers and sellers evenly split the tax. 
D)  the government does not collect any revenue from the tax. 
E)  the tax does not change the equilibrium quantity of peaches.

Question 9

Tax incidence refers to

Accepted Answer

A)  how government taxes are spent by the government. 
B)  the incidences of tax revolts by the taxpayers. 
C)  the amount of a tax minus its burden. 
D)  the division of the burden of a tax between the buyer and the seller. 
E)  tax revenue minus excess burden. 
A)  how government taxes are spent by the government. 
B)  the incidences of tax revolts by the taxpayers. 
C)  the amount of a tax minus its burden. 
D)  the division of the burden of a tax between the buyer and the seller. 
E)  tax revenue minus excess burden.

Question 10

A tax on the income from land or other resource with a perfectly inelastic supply

Accepted Answer

A)  is efficient because it does not decrease the equilibrium quantity. 
B)  has no deadweight loss. 
C)  is paid entirely by the owner. 
D)  Only answers A and B are correct. 
E)  Answers A, B, and C are correct. 
A)  is efficient because it does not decrease the equilibrium quantity. 
B)  has no deadweight loss. 
C)  is paid entirely by the owner. 
D)  Only answers A and B are correct. 
E)  Answers A, B, and C are correct.

Question 11

Which of the following taxes guarantees vertical equity?
i.income tax
ii.social security tax on workers
iii.social security tax on employers

Accepted Answer

A)  i only 
B)  i and ii 
C)  ii and iii 
D)  iii only 
E)  None of the above taxes guarantees vertical equity. 
A)  i only 
B)  i and ii 
C)  ii and iii 
D)  iii only 
E)  None of the above taxes guarantees vertical equity.

Question 12

Trying to achieve vertical equity by using a progressive income tax structure can create problems with which of the following?

Accepted Answer

A)  horizontal equity 
B)  vertical equity 
C)  benefits received 
D)  tax incidence 
E)  regressive equality 
A)  horizontal equity 
B)  vertical equity 
C)  benefits received 
D)  tax incidence 
E)  regressive equality

Question 13

What happens to the acceptable wage rate at each level of employment once an income tax is levied on labor income?

Accepted Answer

A)  Nothing, it remains the same. 
B)  It increases by the amount of the tax that must be paid. 
C)  Workers and employers split the tax, so the acceptable wage increases by half the tax. 
D)  Because workers have to work more to make up for the tax, the acceptable wage rate falls by some amount that cannot be determined. 
E)  Because workers have to work more to make up for the tax, the acceptable wage rate falls by the precise amount of the tax that must be paid. 
A)  Nothing, it remains the same. 
B)  It increases by the amount of the tax that must be paid. 
C)  Workers and employers split the tax, so the acceptable wage increases by half the tax. 
D)  Because workers have to work more to make up for the tax, the acceptable wage rate falls by some amount that cannot be determined. 
E)  Because workers have to work more to make up for the tax, the acceptable wage rate falls by the precise amount of the tax that must be paid.

Question 14

Giving in to the demand of protestors,suppose the French government reduces the tax on gasoline by 15 percent.Neither the demand for gasoline nor the supply of gasoline is perfectly elastic or inelastic.As a result of the tax cut,the price for a gallon of gasoline paid by buyers

Accepted Answer

A)  falls by 15 percent. 
B)  rises by 15 percent. 
C)  falls by less than 15 percent. 
D)  rises by less than 15 percent. 
E)  falls by more than 15 percent. 
A)  falls by 15 percent. 
B)  rises by 15 percent. 
C)  falls by less than 15 percent. 
D)  rises by less than 15 percent. 
E)  falls by more than 15 percent.

Question 15

-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

Question 16

If the average tax rate ________ as income increases,then the tax is a ________ tax.

Accepted Answer

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

Question 17

The sales tax in Dutchess County,New York,is 7.5 percent.This sales tax is

Accepted Answer

A)  fair because everyone pays the same tax. 
B)  proportional. 
C)  regressive. 
D)  progressive. 
E)  an example of the benefit principle of taxation. 
A)  fair because everyone pays the same tax. 
B)  proportional. 
C)  regressive. 
D)  progressive. 
E)  an example of the benefit principle of taxation.

Question 18

-The table above gives the taxable income and the amount of tax paid.
a.Is this income tax progressive,regressive,or proportional?
b.If the taxable income is $25,000,what is the average tax rate?
c.If taxable income increases from $25,000 to $30,000,what is the marginal tax rate?

Accepted Answer

a.The income tax is progressiv

Question 19

Neither the demand nor the supply of sugar is perfectly elastic or inelastic.If the government imposes a 5 percent tax on sugar,the

Accepted Answer

A)  price of sugar buyers pay falls by 5 percent. 
B)  price of sugar buyers pay increases by less then 5 percent. 
C)  price of sugar buyers pay does not change. 
D)  quantity of sugar increases. 
E)  price of sugar buyers pay rises by 5 percent. 
A)  price of sugar buyers pay falls by 5 percent. 
B)  price of sugar buyers pay increases by less then 5 percent. 
C)  price of sugar buyers pay does not change. 
D)  quantity of sugar increases. 
E)  price of sugar buyers pay rises by 5 percent.

Question 20

-The above figure shows the labor market for land surveyors.The deadweight loss from the tax is equal to

Accepted Answer

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

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

Which of the following taxes best illustrate the benefits principle of tax fairness?

How does the elasticity of demand affect the incidence of a tax?

-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 tax incidence is

If income tax rates on labor income are decreased,what is the effect on the labor supply and the labor supply curve? What is the effect on the equilibrium quantity of labor hired?

Neither the demand for gasoline nor the supply of gasoline is perfectly elastic or inelastic.If the federal government eliminated the 18.4 cents per gallon gasoline tax,the price paid by buyers would

If there is an income tax levied on labor income,the labor demand curve and the labor supply curve .

Suppose the demand for Georgia peaches is perfectly elastic.If the supply curve is upward sloping and a tax is imposed on Georgia peaches,then

Tax incidence refers to

A tax on the income from land or other resource with a perfectly inelastic supply

Which of the following taxes guarantees vertical equity? i.income tax ii.social security tax on workers iii.social security tax on employers

Trying to achieve vertical equity by using a progressive income tax structure can create problems with which of the following?

What happens to the acceptable wage rate at each level of employment once an income tax is levied on labor income?

Giving in to the demand of protestors,suppose the French government reduces the tax on gasoline by 15 percent.Neither the demand for gasoline nor the supply of gasoline is perfectly elastic or inelastic.As a result of the tax cut,the price for a gallon of gasoline paid by buyers

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

The sales tax in Dutchess County,New York,is 7.5 percent.This sales tax is

-The table above gives the taxable income and the amount of tax paid. a.Is this income tax progressive,regressive,or proportional? b.If the taxable income is $25,000,what is the average tax rate? c.If taxable income increases from $25,000 to $30,000,what is the marginal tax rate?

Neither the demand nor the supply of sugar is perfectly elastic or inelastic.If the government imposes a 5 percent tax on sugar,the

-The above figure shows the labor market for land surveyors.The deadweight loss from the tax is equal to

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

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

Which of the following taxes best illustrate the benefits principle of tax fairness?

How does the elasticity of demand affect the incidence of a tax?

-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 tax incidence is

If income tax rates on labor income are decreased,what is the effect on the labor supply and the labor supply curve? What is the effect on the equilibrium quantity of labor hired?

Neither the demand for gasoline nor the supply of gasoline is perfectly elastic or inelastic.If the federal government eliminated the 18.4 cents per gallon gasoline tax,the price paid by buyers would

If there is an income tax levied on labor income,the labor demand curve ________ and the labor supply curve ________.

Suppose the demand for Georgia peaches is perfectly elastic.If the supply curve is upward sloping and a tax is imposed on Georgia peaches,then

Tax incidence refers to

A tax on the income from land or other resource with a perfectly inelastic supply

Which of the following taxes guarantees vertical equity? i.income tax ii.social security tax on workers iii.social security tax on employers

Trying to achieve vertical equity by using a progressive income tax structure can create problems with which of the following?

What happens to the acceptable wage rate at each level of employment once an income tax is levied on labor income?

Giving in to the demand of protestors,suppose the French government reduces the tax on gasoline by 15 percent.Neither the demand for gasoline nor the supply of gasoline is perfectly elastic or inelastic.As a result of the tax cut,the price for a gallon of gasoline paid by buyers

If the average tax rate ________ as income increases,then the tax is a ________ tax.

The sales tax in Dutchess County,New York,is 7.5 percent.This sales tax is

-The table above gives the taxable income and the amount of tax paid. a.Is this income tax progressive,regressive,or proportional? b.If the taxable income is $25,000,what is the average tax rate? c.If taxable income increases from $25,000 to $30,000,what is the marginal tax rate?

Neither the demand nor the supply of sugar is perfectly elastic or inelastic.If the government imposes a 5 percent tax on sugar,the

-The above figure shows the labor market for land surveyors.The deadweight loss from the tax is equal to

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 there is an income tax levied on labor income,the labor demand curve and the labor supply curve .

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