Question 1

Suppose a tax is imposed on cameras. The deadweight loss of the tax is:

Accepted Answer

A)  those consumers who still choose to buy cameras, but pay a higher price that reflects the tax 
B)  those consumers who choose to not buy the camera after the tax raises the price 
C)  all citizens who are able to use services provided by government 
D)  those consumers who are unable to avoid paying the tax on cameras 
A)  those consumers who still choose to buy cameras, but pay a higher price that reflects the tax 
B)  those consumers who choose to not buy the camera after the tax raises the price 
C)  all citizens who are able to use services provided by government 
D)  those consumers who are unable to avoid paying the tax on cameras

Question 2

Large deadweight losses and large administrative burdens are characteristic of a tax system that is best defined as:

Accepted Answer

A)  equitable 
B)  bureaucratic 
C)  revenue-maximising 
D)  inefficient 
A)  equitable 
B)  bureaucratic 
C)  revenue-maximising 
D)  inefficient

Question 3

Part of the deadweight loss from taxing labour earnings is that people will work more.

Accepted Answer

A) True 
 B)False

Question 4

Jim and Celia receive great satisfaction from their consumption of micro-brewed beer. Celia would be willing to purchase only one 12-litre bottle and would pay up to $6 for it. Jim would be willing to pay $9 for his first 12-litre bottle, $7 for his second bottle, and $3 for his third bottle. The current market price is $3 per bottle.
-According to the information provided, if a tax of $4 is levied on each bottle of micro-brewed beer, how much tax revenue will be generated from sales to Jim and Celia?

Accepted Answer

A)  zero 
B)  $4 
C)  $8 
D)  $12 
A)  zero 
B)  $4 
C)  $8 
D)  $12

Question 5

The administrative burden of any tax system is a part of the inefficiency it creates.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements is most correct?

Accepted Answer

A)  a general sales tax on food is regressive when low-income taxpayers spend a larger proportion of their income on food than high-income taxpayers 
B)  a general sales tax on food is regressive when middle-income taxpayers spend a smaller proportion of their income on food than high-income taxpayers 
C)  a general sales tax on food is regressive when high-income taxpayers spend a larger proportion of their income on food than middle-income taxpayers 
D)  a general sales tax on food is regressive when high-income taxpayers spend a larger proportion of their income on food than low-income taxpayers 
A)  a general sales tax on food is regressive when low-income taxpayers spend a larger proportion of their income on food than high-income taxpayers 
B)  a general sales tax on food is regressive when middle-income taxpayers spend a smaller proportion of their income on food than high-income taxpayers 
C)  a general sales tax on food is regressive when high-income taxpayers spend a larger proportion of their income on food than middle-income taxpayers 
D)  a general sales tax on food is regressive when high-income taxpayers spend a larger proportion of their income on food than low-income taxpayers

Question 7

The extra tax that is paid by a taxpayer on their next additional dollar of income is called:

Accepted Answer

A)  a deadweight loss 
B)  the marginal tax rate 
C)  a consumption tax 
D)  the average tax rate 
A)  a deadweight loss 
B)  the marginal tax rate 
C)  a consumption tax 
D)  the average tax rate

Question 8

One of the benefits from switching taxation away from income towards consumption is that:

Accepted Answer

A)  it will necessarily increase tax revenues 
B)  it is always administratively simpler 
C)  it distorts incentives to earn income 
D)  it eliminates disincentives to save 
A)  it will necessarily increase tax revenues 
B)  it is always administratively simpler 
C)  it distorts incentives to earn income 
D)  it eliminates disincentives to save

Question 9

The indirect effects from taxation would include:

Accepted Answer

A)  the effect of the tax on equilibrium prices 
B)  the flypaper effect 
C)  the inability of buyers to change their buying habits in order to escape from paying a tax 
D)  all of the above 
A)  the effect of the tax on equilibrium prices 
B)  the flypaper effect 
C)  the inability of buyers to change their buying habits in order to escape from paying a tax 
D)  all of the above

Question 10

Tax schemes that satisfy the benefits principle are always considered to be the most equitable.

Accepted Answer

A) True 
 B)False

Question 11

The person who bears the burden of a tax is:

Accepted Answer

A)  the person who gets the tax bill from the government 
B)  the person legally responsible to pay the tax to the government 
C)  always the consumer 
D)  none of the above 
A)  the person who gets the tax bill from the government 
B)  the person legally responsible to pay the tax to the government 
C)  always the consumer 
D)  none of the above

Question 12

One tax system is less efficient than another if it:

Accepted Answer

A)  places a lower tax burden on lower income families than on higher income families 
B)  places a higher tax burden on lower income families than on higher income families 
C)  raises the same amount of revenue at a higher cost to taxpayers 
D)  raises the same amount of revenue at a lower cost to taxpayers 
A)  places a lower tax burden on lower income families than on higher income families 
B)  places a higher tax burden on lower income families than on higher income families 
C)  raises the same amount of revenue at a higher cost to taxpayers 
D)  raises the same amount of revenue at a lower cost to taxpayers

Question 13

The largest source of revenue for the federal government is the:

Accepted Answer

A)  property tax 
B)  individual income tax 
C)  company income tax 
D)  import and export tax 
A)  property tax 
B)  individual income tax 
C)  company income tax 
D)  import and export tax

Question 14

Harry's average tax rate on his November income is 15 per cent. The marginal tax rate on his December income of $10 000 exceeds his average tax rate. The tax liability on his December income:

Accepted Answer

A)  will be less than $1500 
B)  will exactly equal $1500 
C)  will exceed $1500 
D)  from the information provided, any of the answers above could be correct 
A)  will be less than $1500 
B)  will exactly equal $1500 
C)  will exceed $1500 
D)  from the information provided, any of the answers above could be correct

Exam 12: The Design of the Tax System

Suppose a tax is imposed on cameras. The deadweight loss of the tax is:

Large deadweight losses and large administrative burdens are characteristic of a tax system that is best defined as:

Part of the deadweight loss from taxing labour earnings is that people will work more.

The administrative burden of any tax system is a part of the inefficiency it creates.

Which of the following statements is most correct?

The extra tax that is paid by a taxpayer on their next additional dollar of income is called:

One of the benefits from switching taxation away from income towards consumption is that:

The indirect effects from taxation would include:

Tax schemes that satisfy the benefits principle are always considered to be the most equitable.

The person who bears the burden of a tax is:

One tax system is less efficient than another if it:

The largest source of revenue for the federal government is the:

Harry's average tax rate on his November income is 15 per cent. The marginal tax rate on his December income of $10 000 exceeds his average tax rate. The tax liability on his December income:

Ten Lessons From Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand and Government Policies

Consumers, Producers and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Costs of Production

Firms in Competitive Markets

Monopoly

Business Strategy

Competition Policy

Monopolistic Competition

The Markets for the Factors of Production

Earnings, Unions and Discrimination

Income Inequity and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters