Question 1

If taxes are collected on the basis of ability-to-pay and there are two taxpayers with the same income who also are identical in all other respects, which of the following is correct?

Accepted Answer

A) Vertical equity is impossible between these two taxpayers. 
B) Vertical equity exists. 
C) Horizontal equity exists. 
D) The tax must be proportional. 
E) The fair-incidence principle is potentially being violated. 
A) Vertical equity is impossible between these two taxpayers. 
B) Vertical equity exists. 
C) Horizontal equity exists. 
D) The tax must be proportional. 
E) The fair-incidence principle is potentially being violated.

Question 2

After the tax is imposed, the government collects tax revenue of ________ a week.

Accepted Answer

A) $20,000 
B) $10,000 
C) $50,000 
D) $60,000 
E) $40,000 
A) $20,000 
B) $10,000 
C) $50,000 
D) $60,000 
E) $40,000

Question 3

If the supply of land is perfectly inelastic, what is the deadweight loss from a tax on land?

Accepted Answer

If the supply of land is perfe

Question 4

-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 5

If neither the demand nor the supply for goods or labor is perfectly inelastic, then a sales tax on a good ________ a deadweight loss and an income tax ________ a deadweight loss.

Accepted Answer

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

Question 6

-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 7

-The above figure shows the supply curves in four different markets.If each of the markets has an identical downward sloping demand curve and the same tax is levied on suppliers, which market would produce the smallest amount of deadweight loss?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
E) A and D 
A) A 
B) B 
C) C 
D) D 
E) A and D

Question 8

The largest percentage of the government's tax revenue received comes from

Accepted Answer

A) personal income taxes. 
B) property taxes. 
C) Social Security taxes. 
D) sales taxes. 
E) excise taxes. 
A) personal income taxes. 
B) property taxes. 
C) Social Security taxes. 
D) sales taxes. 
E) excise taxes.

Question 9

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

Accepted Answer

A) lowers; $5 
B) raises; $5 
C) raises; $10 
D) lowers; $10 
E) lowers; $2.50 
A) lowers; $5 
B) raises; $5 
C) raises; $10 
D) lowers; $10 
E) lowers; $2.50

Question 10

-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, bec

Question 11

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 12

-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 total tax revenue is equal to

Accepted Answer

A) $400,000. 
B) $800,000. 
C) $500,000. 
D) $200,000. 
E) More information is needed to determine the total tax revenue. 
A) $400,000. 
B) $800,000. 
C) $500,000. 
D) $200,000. 
E) More information is needed to determine the total tax revenue.

Question 13

The 2010 health care reform that expanded public health care coverage for low income individuals by increasing taxes on high income earners.Taking more tax revenue from high income earners reflects

Accepted Answer

A) the benefits principle because high income earners can more easily bear the burden of taxes. 
B) the ability-to-pay principle because high income earners can more easily bear the burden of taxes. 
C) the ability-to-pay principle because high income earners use more public health care services. 
D) the benefits principle because high income earners use more public health care services. 
E) a regressive tax system since high income earners will pay a greater dollar amount in taxes. 
A) the benefits principle because high income earners can more easily bear the burden of taxes. 
B) the ability-to-pay principle because high income earners can more easily bear the burden of taxes. 
C) the ability-to-pay principle because high income earners use more public health care services. 
D) the benefits principle because high income earners use more public health care services. 
E) a regressive tax system since high income earners will pay a greater dollar amount in taxes.

Question 14

Which of the following is an example of a tax following the benefits principle?
I∙sales taxes on gasoline are used to fund road maintenance projects
Ii∙federal income tax used to fund food stamps for poorer households
Iii∙property taxes used to finance public education

Accepted Answer

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

Question 15

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 16

Which of the following is true?
I∙A tax on buyers has the same effect as the same sized tax on sellers.
Ii∙The more elastic the demand, the larger is the share of the tax paid by the buyers.
Iii∙The U.S.income tax is regressive.

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 17

The ability-to-pay principle of tax fairness is equivalent to which of the following?

Accepted Answer

A) collect taxes from those who benefit the most from provision of public services 
B) more taxes should be collected from people who can more easily bear the burden 
C) a regressive income tax structure 
D) a proportional income tax structure 
E) concern about only horizontal equity and no concern about vertical equity 
A) collect taxes from those who benefit the most from provision of public services 
B) more taxes should be collected from people who can more easily bear the burden 
C) a regressive income tax structure 
D) a proportional income tax structure 
E) concern about only horizontal equity and no concern about vertical equity

Question 18

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 19

Suppose the government increases the social security tax imposed on employers by 25 percent.This tax leads to

Accepted Answer

A) an increase in the supply of labor. 
B) a decrease in the supply of labor. 
C) a decrease in the demand for labor. 
D) no change in the demand for labor. 
E) a decrease in the supply of labor and an increase in the demand for labor. 
A) an increase in the supply of labor. 
B) a decrease in the supply of labor. 
C) a decrease in the demand for labor. 
D) no change in the demand for labor. 
E) a decrease in the supply of labor and an increase in the demand for labor.

Question 20

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

Accepted Answer

A) progressive. 
B) proportional. 
C) regressive. 
D) an excise tax. 
E) a decreasing marginal-rate tax. 
A) progressive. 
B) proportional. 
C) regressive. 
D) an excise tax. 
E) a decreasing marginal-rate tax.

If taxes are collected on the basis of ability-to-pay and there are two taxpayers with the same income who also are identical in all other respects, which of the following is correct?

After the tax is imposed, the government collects tax revenue of ________ a week.

If the supply of land is perfectly inelastic, what is the deadweight loss from a tax on land?

If neither the demand nor the supply for goods or labor is perfectly inelastic, then a sales tax on a good a deadweight loss and an income tax a deadweight loss.

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

-The above figure shows the supply curves in four different markets.If each of the markets has an identical downward sloping demand curve and the same tax is levied on suppliers, which market would produce the smallest amount of deadweight loss?

The largest percentage of the government's tax revenue received comes from

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

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

-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 total tax revenue is equal to

The 2010 health care reform that expanded public health care coverage for low income individuals by increasing taxes on high income earners.Taking more tax revenue from high income earners reflects

Which of the following is an example of a tax following the benefits principle? I∙sales taxes on gasoline are used to fund road maintenance projects Ii∙federal income tax used to fund food stamps for poorer households Iii∙property taxes used to finance public education

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

Which of the following is true? I∙A tax on buyers has the same effect as the same sized tax on sellers. Ii∙The more elastic the demand, the larger is the share of the tax paid by the buyers. Iii∙The U.S.income tax is regressive.

The ability-to-pay principle of tax fairness is equivalent to which of the following?

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?

Suppose the government increases the social security tax imposed on employers by 25 percent.This tax leads to

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

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 taxes are collected on the basis of ability-to-pay and there are two taxpayers with the same income who also are identical in all other respects, which of the following is correct?

After the tax is imposed, the government collects tax revenue of ________ a week.

If the supply of land is perfectly inelastic, what is the deadweight loss from a tax on land?

If neither the demand nor the supply for goods or labor is perfectly inelastic, then a sales tax on a good ________ a deadweight loss and an income tax ________ a deadweight loss.

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

-The above figure shows the supply curves in four different markets.If each of the markets has an identical downward sloping demand curve and the same tax is levied on suppliers, which market would produce the smallest amount of deadweight loss?

The largest percentage of the government's tax revenue received comes from

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

-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 total tax revenue is equal to

The 2010 health care reform that expanded public health care coverage for low income individuals by increasing taxes on high income earners.Taking more tax revenue from high income earners reflects

Which of the following is an example of a tax following the benefits principle? I∙sales taxes on gasoline are used to fund road maintenance projects Ii∙federal income tax used to fund food stamps for poorer households Iii∙property taxes used to finance public education

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

Which of the following is true? I∙A tax on buyers has the same effect as the same sized tax on sellers. Ii∙The more elastic the demand, the larger is the share of the tax paid by the buyers. Iii∙The U.S.income tax is regressive.

The ability-to-pay principle of tax fairness is equivalent to which of the following?

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?

Suppose the government increases the social security tax imposed on employers by 25 percent.This tax leads to

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

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 neither the demand nor the supply for goods or labor is perfectly inelastic, then a sales tax on a good a deadweight loss and an income tax a deadweight loss.