Question 1

Based on the figure above,at the market equilibrium with the tax,marginal benefit ________ marginal cost,and the quantity of insulin sold is ________.

Accepted Answer

A)  equals; efficient 
B)  exceeds; inefficient 
C)  is below; inefficient 
D)  is below; efficient 
E)  exceeds; efficient 
A)  equals; efficient 
B)  exceeds; inefficient 
C)  is below; inefficient 
D)  is below; efficient 
E)  exceeds; efficient

Question 2

The average tax rate equals

Accepted Answer

A)  (total tax ÷ change in income) × 100. 
B)  (change in tax ÷ total income) × 100. 
C)  (total tax ÷ total income) × 100. 
D)  (change in tax ÷ change in income) × 100. 
E)  (marginal tax are × total income) × 100. 
A)  (total tax ÷ change in income) × 100. 
B)  (change in tax ÷ total income) × 100. 
C)  (total tax ÷ total income) × 100. 
D)  (change in tax ÷ change in income) × 100. 
E)  (marginal tax are × total income) × 100.

Question 3

The marriage tax problem in the U.S.tax code is a problem involving which of the following?

Accepted Answer

A)  benefits received principle 
B)  the ability-to-pay principle 
C)  a conflict between horizontal and vertical equity 
D)  vertical equity 
E)  incidence of fairness principle 
A)  benefits received principle 
B)  the ability-to-pay principle 
C)  a conflict between horizontal and vertical equity 
D)  vertical equity 
E)  incidence of fairness principle

Question 4

Ann pays $3,850 in taxes on an income of $38,500.Therefore her

Accepted Answer

A)  marginal tax rate must be 10 percent. 
B)  taxes must be progressive in nature. 
C)  average tax rate must be 10 percent. 
D)  personal exemption is 10 percent. 
E)  proportional tax rate is undefined. 
A)  marginal tax rate must be 10 percent. 
B)  taxes must be progressive in nature. 
C)  average tax rate must be 10 percent. 
D)  personal exemption is 10 percent. 
E)  proportional tax rate is undefined.

Question 5

Why do sellers pay all of a tax when supply is perfectly inelastic?

Accepted Answer

A)  because a perfectly inelastic supply means that the demand is elastic 
B)  because the government requires firms to collect the tax 
C)  because a perfectly inelastic supply means that the quantity supplied is quite sensitive to a change in price 
D)  because a perfectly inelastic supply means that suppliers will produce the same amount regardless of the price 
E)  because in this case the price of the good that suppliers receive and keep does not change 
A)  because a perfectly inelastic supply means that the demand is elastic 
B)  because the government requires firms to collect the tax 
C)  because a perfectly inelastic supply means that the quantity supplied is quite sensitive to a change in price 
D)  because a perfectly inelastic supply means that suppliers will produce the same amount regardless of the price 
E)  because in this case the price of the good that suppliers receive and keep does not change

Question 6

Sellers bear the entire incidence of a tax on a good.This outcome can occur if

Accepted Answer

A)  supply is perfectly inelastic. 
B)  the good is an inferior good. 
C)  demand is perfectly inelastic. 
D)  the demand curve is downward sloping and the supply curve is upward sloping. 
E)  supply is perfectly elastic. 
A)  supply is perfectly inelastic. 
B)  the good is an inferior good. 
C)  demand is perfectly inelastic. 
D)  the demand curve is downward sloping and the supply curve is upward sloping. 
E)  supply is perfectly elastic.

Question 7

-The above figure shows the labor market for land surveyors.Dave is a land surveyor.If there was no income tax,Dave would work ________ hours per year and the wage rate would be ________ per hour.

Accepted Answer

A)  2000; $28 
B)  1500; $28 
C)  1500; $27 
D)  2000; $30 
E)  1500; $30 
A)  2000; $28 
B)  1500; $28 
C)  1500; $27 
D)  2000; $30 
E)  1500; $30

Question 8

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,the burden of the tax

Accepted Answer

A)  is split equally between the buyer and the seller. 
B)  falls mostly on buyers. 
C)  falls mostly on sellers. 
D)  falls entirely on buyers. 
E)  falls entirely on sellers. 
A)  is split equally between the buyer and the seller. 
B)  falls mostly on buyers. 
C)  falls mostly on sellers. 
D)  falls entirely on buyers. 
E)  falls entirely on sellers.

Question 9

Tax incidence is the

Accepted Answer

A)  burden buyers have to absorb from a tax on goods and services. 
B)  burden sellers have to absorb from a tax on goods and services. 
C)  lost revenue the government endures from goods and services that are not taxed. 
D)  division of the burden of a tax between the buyer and the seller. 
E)  deadweight loss created by a tax. 
A)  burden buyers have to absorb from a tax on goods and services. 
B)  burden sellers have to absorb from a tax on goods and services. 
C)  lost revenue the government endures from goods and services that are not taxed. 
D)  division of the burden of a tax between the buyer and the seller. 
E)  deadweight loss created by a tax.

Question 10

-The above figure shows the labor market for land surveyors.Dave is a land surveyor.With the income tax,Dave works ________ hours per year and his after-tax wage rate is ________ per hour.

Accepted Answer

A)  2000; $28 
B)  1500; $28 
C)  2000; $30 
D)  1500; $30 
E)  1500; $27 
A)  2000; $28 
B)  1500; $28 
C)  2000; $30 
D)  1500; $30 
E)  1500; $27

Question 11

Which of the following is true?
i.If demand is perfectly elastic,the tax creates no deadweight loss.
ii.The more elastic the supply of a factor of production,the greater is the deadweight loss from an income tax.
iii.A tax is regressive if the average tax rate rises with income.

Accepted Answer

A)  Only i 
B)  Only ii 
C)  Only iii 
D)  ii and iii 
E)  i and ii 
A)  Only i 
B)  Only ii 
C)  Only iii 
D)  ii and iii 
E)  i and ii

Question 12

Why are sales taxes,which require that everyone pay the same percentage tax,considered regressive taxes?

Accepted Answer

Suppose a city implements a 6 percent ta

Question 13

Suppose the demand for specialty car license plates is perfectly inelastic and the supply curve for specialty license plates is upward sloping.A tax is imposed on specialty license plates.Which of the following is true?

Accepted Answer

A)  Drivers pay the smallest share of the tax. 
B)  Drivers pay none of the tax. 
C)  Drivers pay all of the tax. 
D)  The government pays all of the tax. 
E)  The government collects nothing in tax revenues. 
A)  Drivers pay the smallest share of the tax. 
B)  Drivers pay none of the tax. 
C)  Drivers pay all of the tax. 
D)  The government pays all of the tax. 
E)  The government collects nothing in tax revenues.

Question 14

The benefits principle of fairness of taxes is the proposition that

Accepted Answer

A)  taxes should only be used to correct market failures. 
B)  people should pay taxes according to how easily they can bear the burden. 
C)  tax systems can only be fair if all people agree on them. 
D)  people should pay taxes equal to their benefit from public services. 
E)  the incidence of taxes should be equal across households. 
A)  taxes should only be used to correct market failures. 
B)  people should pay taxes according to how easily they can bear the burden. 
C)  tax systems can only be fair if all people agree on them. 
D)  people should pay taxes equal to their benefit from public services. 
E)  the incidence of taxes should be equal across households.

Question 15

The elasticity of demand for a good is 1 and the elasticity of supply is 0.8.Thus,imposing a tax on the good ________ the price kept by sellers and ________ the price paid by buyers.

Accepted Answer

A)  raises; raises 
B)  raises; lowers 
C)  lowers; raises 
D)  lowers; lowers 
E)  does not change; raises 
A)  raises; raises 
B)  raises; lowers 
C)  lowers; raises 
D)  lowers; lowers 
E)  does not change; raises

Question 16

If a $10 sales tax is imposed on a good and the equilibrium price increases by $10,the tax is

Accepted Answer

A)  split between buyers and sellers but not evenly. 
B)  paid fully by sellers. 
C)  paid fully by buyers. 
D)  split evenly between buyers and sellers. 
E)  perhaps split between buyers and sellers but it is impossible to determine the incidence without further information. 
A)  split between buyers and sellers but not evenly. 
B)  paid fully by sellers. 
C)  paid fully by buyers. 
D)  split evenly between buyers and sellers. 
E)  perhaps split between buyers and sellers but it is impossible to determine the incidence without further information.

Question 17

What are the two conflicting principles of fairness that apply to a tax system? Briefly explain each.

Accepted Answer

The two principles are: the benefits pri

Question 18

The average tax rate is the

Accepted Answer

A)  percentage of an additional dollar of income paid in tax. 
B)  percentage of income paid in tax. 
C)  total amount of taxes paid by an individual. 
D)  average of the rates at which income and taxes increase. 
E)  same as the marginal tax rate for a progressive tax. 
A)  percentage of an additional dollar of income paid in tax. 
B)  percentage of income paid in tax. 
C)  total amount of taxes paid by an individual. 
D)  average of the rates at which income and taxes increase. 
E)  same as the marginal tax rate for a progressive tax.

Question 19

If the demand curve for a good is horizontal,a tax is levied on this product is

Accepted Answer

A)  split between the buyers and the sellers but not evenly so that either the buyer or the seller pays more. 
B)  split evenly between the buyers and the sellers. 
C)  paid entirely by buyers. 
D)  paid entirely by sellers. 
E)  not paid by either the buyers or the sellers. 
A)  split between the buyers and the sellers but not evenly so that either the buyer or the seller pays more. 
B)  split evenly between the buyers and the sellers. 
C)  paid entirely by buyers. 
D)  paid entirely by sellers. 
E)  not paid by either the buyers or the sellers.

Question 20

The excess burden of a tax refers to the fact that

Accepted Answer

A)  the benefits from a tax exceed the tax revenue. 
B)  the deadweight loss from a tax exceeds the remaining consumer surplus. 
C)  marginal cost is greater than marginal benefit after the tax. 
D)  a tax creates a deadweight loss. 
E)  taxes are split between buyers and sellers. 
A)  the benefits from a tax exceed the tax revenue. 
B)  the deadweight loss from a tax exceeds the remaining consumer surplus. 
C)  marginal cost is greater than marginal benefit after the tax. 
D)  a tax creates a deadweight loss. 
E)  taxes are split between buyers and sellers.

Based on the figure above,at the market equilibrium with the tax,marginal benefit marginal cost,and the quantity of insulin sold is .

The average tax rate equals

The marriage tax problem in the U.S.tax code is a problem involving which of the following?

Ann pays $3,850 in taxes on an income of $38,500.Therefore her

Why do sellers pay all of a tax when supply is perfectly inelastic?

Sellers bear the entire incidence of a tax on a good.This outcome can occur if

-The above figure shows the labor market for land surveyors.Dave is a land surveyor.If there was no income tax,Dave would work hours per year and the wage rate would be per hour.

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,the burden of the tax

Tax incidence is the

-The above figure shows the labor market for land surveyors.Dave is a land surveyor.With the income tax,Dave works hours per year and his after-tax wage rate is per hour.

Which of the following is true? i.If demand is perfectly elastic,the tax creates no deadweight loss. ii.The more elastic the supply of a factor of production,the greater is the deadweight loss from an income tax. iii.A tax is regressive if the average tax rate rises with income.

Why are sales taxes,which require that everyone pay the same percentage tax,considered regressive taxes?

Suppose the demand for specialty car license plates is perfectly inelastic and the supply curve for specialty license plates is upward sloping.A tax is imposed on specialty license plates.Which of the following is true?

The benefits principle of fairness of taxes is the proposition that

The elasticity of demand for a good is 1 and the elasticity of supply is 0.8.Thus,imposing a tax on the good the price kept by sellers and the price paid by buyers.

If a $10 sales tax is imposed on a good and the equilibrium price increases by $10,the tax is

What are the two conflicting principles of fairness that apply to a tax system? Briefly explain each.

The average tax rate is the

If the demand curve for a good is horizontal,a tax is levied on this product is

The excess burden of a tax refers to the fact that

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

Based on the figure above,at the market equilibrium with the tax,marginal benefit ________ marginal cost,and the quantity of insulin sold is ________.

The average tax rate equals

The marriage tax problem in the U.S.tax code is a problem involving which of the following?

Ann pays $3,850 in taxes on an income of $38,500.Therefore her

Why do sellers pay all of a tax when supply is perfectly inelastic?

Sellers bear the entire incidence of a tax on a good.This outcome can occur if

-The above figure shows the labor market for land surveyors.Dave is a land surveyor.If there was no income tax,Dave would work ________ hours per year and the wage rate would be ________ per hour.

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,the burden of the tax

Tax incidence is the

-The above figure shows the labor market for land surveyors.Dave is a land surveyor.With the income tax,Dave works ________ hours per year and his after-tax wage rate is ________ per hour.

Which of the following is true? i.If demand is perfectly elastic,the tax creates no deadweight loss. ii.The more elastic the supply of a factor of production,the greater is the deadweight loss from an income tax. iii.A tax is regressive if the average tax rate rises with income.

Why are sales taxes,which require that everyone pay the same percentage tax,considered regressive taxes?

Suppose the demand for specialty car license plates is perfectly inelastic and the supply curve for specialty license plates is upward sloping.A tax is imposed on specialty license plates.Which of the following is true?

The benefits principle of fairness of taxes is the proposition that

The elasticity of demand for a good is 1 and the elasticity of supply is 0.8.Thus,imposing a tax on the good ________ the price kept by sellers and ________ the price paid by buyers.

If a $10 sales tax is imposed on a good and the equilibrium price increases by $10,the tax is

What are the two conflicting principles of fairness that apply to a tax system? Briefly explain each.

The average tax rate is the

If the demand curve for a good is horizontal,a tax is levied on this product is

The excess burden of a tax refers to the fact that

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

Based on the figure above,at the market equilibrium with the tax,marginal benefit marginal cost,and the quantity of insulin sold is .

-The above figure shows the labor market for land surveyors.Dave is a land surveyor.If there was no income tax,Dave would work hours per year and the wage rate would be per hour.

-The above figure shows the labor market for land surveyors.Dave is a land surveyor.With the income tax,Dave works hours per year and his after-tax wage rate is per hour.

The elasticity of demand for a good is 1 and the elasticity of supply is 0.8.Thus,imposing a tax on the good the price kept by sellers and the price paid by buyers.