Question 1

Which of the following taxes best illustrates the ability to pay principle?

Accepted Answer

A) sales tax 
B) state property tax 
C) federal income tax 
D) cigarette tax 
E) marriage tax 
A) sales tax 
B) state property tax 
C) federal income tax 
D) cigarette tax 
E) marriage tax

Question 2

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 3

________ tax is progressive if the ________.

Accepted Answer

A) An income; average tax rate is constant as income increases 
B) An income; average tax rate increases with income 
C) Any; average tax rate is constant as income increases 
D) Any; average tax rate decreases as income increases 
E) A social security; tax is imposed on employers rather than workers 
A) An income; average tax rate is constant as income increases 
B) An income; average tax rate increases with income 
C) Any; average tax rate is constant as income increases 
D) Any; average tax rate decreases as income increases 
E) A social security; tax is imposed on employers rather than workers

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

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

Accepted Answer

A) progressive tax. 
B) regressive tax. 
C) proportional tax. 
D) marginal tax. 
E) production-efficient tax. 
A) progressive tax. 
B) regressive tax. 
C) proportional tax. 
D) marginal tax. 
E) production-efficient tax.

Question 6

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 7

The figure above shows the demand (D)and supply (S)curves for insulin before any tax is imposed. The government imposes a $0.20 a dose tax on sellers of insulin.
-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 8

The average tax rate

Accepted Answer

A) can be calculated by summing all the marginal tax rates up to the level of income for which the average is being calculated. 
B) is the marginal tax rate divided by the total tax. 
C) is the percentage of income paid as taxes. 
D) equals income divided by amount of taxes paid. 
E) equals the marginal tax rate multiplied by total taxable income. 
A) can be calculated by summing all the marginal tax rates up to the level of income for which the average is being calculated. 
B) is the marginal tax rate divided by the total tax. 
C) is the percentage of income paid as taxes. 
D) equals income divided by amount of taxes paid. 
E) equals the marginal tax rate multiplied by total taxable income.

Question 9

If a tax is placed on suppliers of a good, then the incidence of the tax

Accepted Answer

A) falls more on the sellers if demand is elastic. 
B) falls more on the sellers if demand is inelastic. 
C) is usually split equally between the buyers and the sellers. 
D) usually falls more on the sellers than the buyers. 
E) usually falls more on the buyers than the sellers. 
A) falls more on the sellers if demand is elastic. 
B) falls more on the sellers if demand is inelastic. 
C) is usually split equally between the buyers and the sellers. 
D) usually falls more on the sellers than the buyers. 
E) usually falls more on the buyers than the sellers.

Question 10

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 11

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 12

The assertion that Bill Gates and Paris Hilton should pay more taxes than Average Joe 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.

Question 13

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 14

Imposing a sales tax on sellers of a product has an effect that is similar to which of the following?

Accepted Answer

A) a decrease in consumers' preferences for the good 
B) an increase in the costs of production 
C) an increase in demand for the good 
D) a decrease in people's willingness to work 
E) anything that decreases the demand and shifts the demand curve leftward2 
A) a decrease in consumers' preferences for the good 
B) an increase in the costs of production 
C) an increase in demand for the good 
D) a decrease in people's willingness to work 
E) anything that decreases the demand and shifts the demand curve leftward2

Question 15

Which resource has the least elastic supply?

Accepted Answer

A) labor 
B) capital 
C) land 
D) money 
E) taxes 
A) labor 
B) capital 
C) land 
D) money 
E) taxes

Question 16

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 17

The supply of sand is perfectly inelastic and the demand curve for sand is downward sloping.Hence, if a tax on sand is imposed,

Accepted Answer

A) sand buyers pay the entire tax. 
B) sand sellers pay the entire tax. 
C) the tax is split evenly between the buyers and sellers. 
D) the government pays the entire tax. 
E) the government collects no tax revenue because the supply is perfectly inelastic. 
A) sand buyers pay the entire tax. 
B) sand sellers pay the entire tax. 
C) the tax is split evenly between the buyers and sellers. 
D) the government pays the entire tax. 
E) the government collects no tax revenue because the supply is perfectly inelastic.

Question 18

Neither the demand nor the supply of gasoline is perfectly elastic or inelastic.When the government increases the federal tax on gasoline, the effect on buyers is that the price they pay

Accepted Answer

A) rises. 
B) falls. 
C) does not change. 
D) rises if the demand is inelastic and falls if the demand is elastic. 
E) rises if the supply is inelastic and falls if the supply is elastic. 
A) rises. 
B) falls. 
C) does not change. 
D) rises if the demand is inelastic and falls if the demand is elastic. 
E) rises if the supply is inelastic and falls if the supply is elastic.

Question 19

The buyer will pay the entire tax levied on a good when the demand for the good is ________ or when the supply of the good is ________.

Accepted Answer

A) perfectly elastic; perfectly inelastic 
B) perfectly elastic; perfectly elastic 
C) perfectly inelastic; perfectly inelastic 
D) perfectly inelastic; perfectly elastic 
E) unit elastic; unit elastic 
A) perfectly elastic; perfectly inelastic 
B) perfectly elastic; perfectly elastic 
C) perfectly inelastic; perfectly inelastic 
D) perfectly inelastic; perfectly elastic 
E) unit elastic; unit elastic

Question 20

The demand for insulin is quite inelastic.The demand for Pepsi is quite elastic.Suppose the elasticity of supply for insulin is the same as the elasticity of supply for Pepsi.If a $0.20 tax was imposed on each of these goods (holding everything else constant), which consumers would pay more of the tax?

Accepted Answer

A) the Pepsi consumers 
B) the insulin consumers 
C) There would be no difference in the amount of tax paid by the consumers. 
D) More information is needed to determine which consumers pay more of the tax. 
E) The premise of the question is wrong because the elasticity of demand and the incidence of a tax are not related. 
A) the Pepsi consumers 
B) the insulin consumers 
C) There would be no difference in the amount of tax paid by the consumers. 
D) More information is needed to determine which consumers pay more of the tax. 
E) The premise of the question is wrong because the elasticity of demand and the incidence of a tax are not related.

Which of the following taxes best illustrates the ability to pay principle?

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

tax is progressive if the .

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

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

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.

The figure above shows the demand (D)and supply (S)curves for insulin before any tax is imposed. The government imposes a $0.20 a dose tax on sellers of insulin. -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

If a tax is placed on suppliers of a good, then the incidence of the tax

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.

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

The assertion that Bill Gates and Paris Hilton should pay more taxes than Average Joe best represents the idea of

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

Imposing a sales tax on sellers of a product has an effect that is similar to which of the following?

Which resource has the least elastic supply?

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

The supply of sand is perfectly inelastic and the demand curve for sand is downward sloping.Hence, if a tax on sand is imposed,

Neither the demand nor the supply of gasoline is perfectly elastic or inelastic.When the government increases the federal tax on gasoline, the effect on buyers is that the price they pay

The buyer will pay the entire tax levied on a good when the demand for the good is or when the supply of the good 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

Which of the following taxes best illustrates the ability to pay principle?

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

________ tax is progressive if the ________.

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

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

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.

The average tax rate

If a tax is placed on suppliers of a good, then the incidence of the tax

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.

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

The assertion that Bill Gates and Paris Hilton should pay more taxes than Average Joe best represents the idea of

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

Imposing a sales tax on sellers of a product has an effect that is similar to which of the following?

Which resource has the least elastic supply?

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

The supply of sand is perfectly inelastic and the demand curve for sand is downward sloping.Hence, if a tax on sand is imposed,

Neither the demand nor the supply of gasoline is perfectly elastic or inelastic.When the government increases the federal tax on gasoline, the effect on buyers is that the price they pay

The buyer will pay the entire tax levied on a good when the demand for the good is ________ or when the supply of the good 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

tax is progressive if the .

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

The buyer will pay the entire tax levied on a good when the demand for the good is or when the supply of the good is .