Question 1

The inefficiency of a sales tax on a good is ultimately the result of the

Accepted Answer

A) low tax revenue earned by the government relative to the cost of collection. 
B) wedge between what buyers pay for the good and what sellers receive for the good. 
C) buyers being unable to avoid paying the tax. 
D) sellers being unable to avoid paying the tax. 
E) increase in the consumer surplus that is more than offset by the decrease in the producer surplus. 
A) low tax revenue earned by the government relative to the cost of collection. 
B) wedge between what buyers pay for the good and what sellers receive for the good. 
C) buyers being unable to avoid paying the tax. 
D) sellers being unable to avoid paying the tax. 
E) increase in the consumer surplus that is more than offset by the decrease in the producer surplus.

Question 2

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 3

Neither the demand nor the supply of automobiles is perfectly elastic or inelastic.If the government imposes a $1,000 tax on automobiles, then the price of an automobile buyers pay

Accepted Answer

A) increases by $1,000. 
B) increases by less than $1,000. 
C) increases by more than $1,000. 
D) decreases by $1,000. 
E) does not change. 
A) increases by $1,000. 
B) increases by less than $1,000. 
C) increases by more than $1,000. 
D) decreases by $1,000. 
E) does not change.

Question 4

-The figure above shows the capital market.
a∙Before the government takes any action, what is the interest rate and quantity of capital?
b∙Suppose the government imposes a tax of 25 percent on the income from capital.After the tax, what is the equilibrium interest rate and quantity of capital? What is the after-tax interest rate?
c∙In the figure, darken the area that equals the deadweight loss from the tax.

Accepted Answer

@#IMG-DLM& 
a∙The interest rate before the tax is

Question 5

If the social security tax imposed on employers increases, then

Accepted Answer

A) firms' demand for labor increases. 
B) workers' supply of labor increases. 
C) firms' demand for labor decreases. 
D) firms' demand for labor does not change. 
E) the equilibrium quantity of employment increases. 
A) firms' demand for labor increases. 
B) workers' supply of labor increases. 
C) firms' demand for labor decreases. 
D) firms' demand for labor does not change. 
E) the equilibrium quantity of employment increases.

Question 6

Assume that the government passes a tax so that every individual must pay $100.This tax is a

Accepted Answer

A) progressive tax. 
B) proportional tax. 
C) regressive tax. 
D) marginal tax. 
E) type of tax that is impossible to determine without more information. 
A) progressive tax. 
B) proportional tax. 
C) regressive tax. 
D) marginal tax. 
E) type of tax that is impossible to determine without more information.

Question 7

We can see the inefficiencies created by a sales tax because

Accepted Answer

A) a deadweight loss occurs. 
B) the tax creates an excess burden. 
C) at the quantity produced, marginal benefit equals marginal cost. 
D) Both answers A and B are correct. 
E) Both answers B and C are correct. 
A) a deadweight loss occurs. 
B) the tax creates an excess burden. 
C) at the quantity produced, marginal benefit equals marginal cost. 
D) Both answers A and B are correct. 
E) Both answers B and C are correct.

Question 8

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 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. The government imposes a $10 per unit tax on buyers of MP3 players.
-After the tax is imposed, the price received by the seller is ________ per MP3 player.

Accepted Answer

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

Question 10

Describe the effects of an increase in the tax on labor income.

Accepted Answer

An increase in the income tax imposed on

Question 11

A tax on labor income

Accepted Answer

A) increases the quantity employed because the demand for labor increases. 
B) decreases the quantity employed because the supply of labor decreases. 
C) increases the quantity employed because the supply of labor increases. 
D) decreases the quantity employed because the demand for labor increases. 
E) does not change the quantity employed because people must have jobs in order to earn any income. 
A) increases the quantity employed because the demand for labor increases. 
B) decreases the quantity employed because the supply of labor decreases. 
C) increases the quantity employed because the supply of labor increases. 
D) decreases the quantity employed because the demand for labor increases. 
E) does not change the quantity employed because people must have jobs in order to earn any income.

Question 12

Suppose the demand for saline solution is perfectly inelastic for contact lens wearers.If the government imposes a tax on saline solution, what occurs? Be sure to tell what happens to the price paid by the buyers and discuss the incidence of the tax.

Accepted Answer

If demand is perfectly inelastic, then n

Question 13

If Sam pays $2,000 in taxes on an income of $20,000 and $2,800 in taxes on an income of $30,000, the tax rate is

Accepted Answer

A) regressive. 
B) proportional. 
C) progressive. 
D) vertically fair 
E) not enough information is given to determine the answer. 
A) regressive. 
B) proportional. 
C) progressive. 
D) vertically fair 
E) not enough information is given to determine the answer.

Question 14

The idea that taxpayers with the same ability to pay a tax should pay the same taxes is called

Accepted Answer

A) progressive taxes. 
B) regressive taxes. 
C) horizontal equity. 
D) vertical equity. 
E) fair-incidence principle. 
A) progressive taxes. 
B) regressive taxes. 
C) horizontal equity. 
D) vertical equity. 
E) fair-incidence principle.

Question 15

What is the marginal tax rate? Average tax rate? Can these rates ever differ?

Accepted Answer

The marginal tax rate is the percentage

Question 16

"In the United States, more tax revenue is collected through Social Security taxes than through property taxes." Is the previous statement correct or incorrect?

Accepted Answer

The statement is correct.Socia

Question 17

The 2010 health care reform included a 10 percent tax on indoor tanning services.This tax would reflect _______ if indoor tanning leads to higher usage of government paid health care services from skin cancer.

Accepted Answer

A) the benefits principle of taxation 
B) the ability-to-pay principle of taxation 
C) horizontal equity 
D) vertical equity 
E) a regressive tax 
A) the benefits principle of taxation 
B) the ability-to-pay principle of taxation 
C) horizontal equity 
D) vertical equity 
E) a regressive tax

Question 18

-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 19

When it comes to taxes, horizontal equity means that

Accepted Answer

A) people with lower incomes bear a smaller tax burden. 
B) people with the same incomes pay the same amount of taxes. 
C) progressive taxes must be imposed. 
D) regressive taxes must be imposed. 
E) only proportional taxes are fair. 
A) people with lower incomes bear a smaller tax burden. 
B) people with the same incomes pay the same amount of taxes. 
C) progressive taxes must be imposed. 
D) regressive taxes must be imposed. 
E) only proportional taxes are fair.

Question 20

The assertion that people with the same ability to pay taxes should pay the same amount in taxes best represents the idea of

Accepted Answer

A) horizontal equity. 
B) vertical equity. 
C) the benefits principle of tax fairness. 
D) fairness principle of taxation. 
E) benefits paid principle of taxation. 
A) horizontal equity. 
B) vertical equity. 
C) the benefits principle of tax fairness. 
D) fairness principle of taxation. 
E) benefits paid principle of taxation.

The inefficiency of a sales tax on a good is ultimately the result of the

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

Neither the demand nor the supply of automobiles is perfectly elastic or inelastic.If the government imposes a $1,000 tax on automobiles, then the price of an automobile buyers pay

If the social security tax imposed on employers increases, then

Assume that the government passes a tax so that every individual must pay $100.This tax is a

We can see the inefficiencies created by a sales tax because

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 figure above shows the market for MP3 players, where S is the supply curve and D is the demand curve before any tax. The government imposes a $10 per unit tax on buyers of MP3 players. -After the tax is imposed, the price received by the seller is ________ per MP3 player.

Describe the effects of an increase in the tax on labor income.

A tax on labor income

Suppose the demand for saline solution is perfectly inelastic for contact lens wearers.If the government imposes a tax on saline solution, what occurs? Be sure to tell what happens to the price paid by the buyers and discuss the incidence of the tax.

If Sam pays $2,000 in taxes on an income of $20,000 and $2,800 in taxes on an income of $30,000, the tax rate is

The idea that taxpayers with the same ability to pay a tax should pay the same taxes is called

What is the marginal tax rate? Average tax rate? Can these rates ever differ?

"In the United States, more tax revenue is collected through Social Security taxes than through property taxes." Is the previous statement correct or incorrect?

The 2010 health care reform included a 10 percent tax on indoor tanning services.This tax would reflect _______ if indoor tanning leads to higher usage of government paid health care services from skin cancer.

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

When it comes to taxes, horizontal equity means that

The assertion that people with the same ability to pay taxes should pay the same amount in taxes best represents the idea of

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

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Economic Inequality

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Exam 8: Taxes

The inefficiency of a sales tax on a good is ultimately the result of the

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

Neither the demand nor the supply of automobiles is perfectly elastic or inelastic.If the government imposes a $1,000 tax on automobiles, then the price of an automobile buyers pay

If the social security tax imposed on employers increases, then

Assume that the government passes a tax so that every individual must pay $100.This tax is a

We can see the inefficiencies created by a sales tax because

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 figure above shows the market for MP3 players, where S is the supply curve and D is the demand curve before any tax. The government imposes a $10 per unit tax on buyers of MP3 players. -After the tax is imposed, the price received by the seller is ________ per MP3 player.

Describe the effects of an increase in the tax on labor income.

A tax on labor income

Suppose the demand for saline solution is perfectly inelastic for contact lens wearers.If the government imposes a tax on saline solution, what occurs? Be sure to tell what happens to the price paid by the buyers and discuss the incidence of the tax.

If Sam pays $2,000 in taxes on an income of $20,000 and $2,800 in taxes on an income of $30,000, the tax rate is

The idea that taxpayers with the same ability to pay a tax should pay the same taxes is called

What is the marginal tax rate? Average tax rate? Can these rates ever differ?

"In the United States, more tax revenue is collected through Social Security taxes than through property taxes." Is the previous statement correct or incorrect?

The 2010 health care reform included a 10 percent tax on indoor tanning services.This tax would reflect _______ if indoor tanning leads to higher usage of government paid health care services from skin cancer.

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

When it comes to taxes, horizontal equity means that

The assertion that people with the same ability to pay taxes should pay the same amount in taxes best represents the idea of

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