Question 1

Points on the same utility curve are

Accepted Answer

A)  points where the person is indifferent between bundles on the line. 
B)  points where utility is maximized. 
C)  never possible. 
D)  known as "points of light." 
A)  points where the person is indifferent between bundles on the line. 
B)  points where utility is maximized. 
C)  never possible. 
D)  known as "points of light." A

Question 2

All taxes impose an excess burden.

Accepted Answer

A)  True 
B)  False 
C)  Uncertain 
A)  True 
B)  False 
C)  Uncertain B

Question 3

Equivalent variation means

Accepted Answer

A)  finding an equivalent change in income that puts a person on the same utility as a change in price would. 
B)  finding equal tax rates that insure quantity demanded does not change. 
C)  equalizing excess burden across all markets. 
D)  moving the same distance in either direction from a starting point on an indifference curve. 
A)  finding an equivalent change in income that puts a person on the same utility as a change in price would. 
B)  finding equal tax rates that insure quantity demanded does not change. 
C)  equalizing excess burden across all markets. 
D)  moving the same distance in either direction from a starting point on an indifference curve. A

Question 4

The Double Dividend Effect requires

Accepted Answer

A)  double credit on airline miles. 
B)  two different taxes. 
C)  no taxes on stock dividends. 
D)  Pigouvian taxes. 
A)  double credit on airline miles. 
B)  two different taxes. 
C)  no taxes on stock dividends. 
D)  Pigouvian taxes.

Question 5

Suppose the inverse demand curve for good A is given by the equation PA = 10 - QA/10,and the supply curve is perfectly elastic (horizontal)at $1.Good A is presently taxed at $2 per unit.Good B (which is independent of good A)has an inverse demand curve,PB = 5 - QB/20,and is also perfectly elastic at $1.Good B is untaxed.
(A)How much tax revenue is collected and what is the excess burden of the $2 tax on A?
(B)How much revenue is collected if the tax on good A is reduced to $1 per unit and good B is taxed at $1 per unit?
(C)What is the total excess burden of taxing both goods at $1 per unit?
(D)Which tax system is preferable from the point of view of economic efficiency?

Accepted Answer

(A)Tax revenue = (2) (70)= 140.Excess bu

Question 6

Suppose you had to design an economic system for a country that had never existed before,like one of the former Soviet Union countries.What criteria would you consider to minimize the excess burden of the system of taxation?

Accepted Answer

Reducing excess burden would be critical

Question 7

When a single tax is imposed,the excess burden is proportional to the compensated elasticity of demand and to the square of the tax rate.

Accepted Answer

A)  True 
B)  False 
C)  Uncertain 
A)  True 
B)  False 
C)  Uncertain

Question 8

The differential taxation of inputs does not create an excess burden.

Accepted Answer

A)  True 
B)  False 
C)  Uncertain 
A)  True 
B)  False 
C)  Uncertain

Question 9

A lump sum tax can create an excess burden.

Accepted Answer

A)  True 
B)  False 
C)  Uncertain 
A)  True 
B)  False 
C)  Uncertain

Question 10

An income effect

Accepted Answer

A)  is measured as the change in prices over time. 
B)  is not possible when people are unemployed. 
C)  requires interest rates to remain constant. 
D)  is the change in the quantity demand,due to the fact that real income changes when prices change. 
A)  is measured as the change in prices over time. 
B)  is not possible when people are unemployed. 
C)  requires interest rates to remain constant. 
D)  is the change in the quantity demand,due to the fact that real income changes when prices change.

Question 11

The marginal rate of substitution is

Accepted Answer

A)  the slope of the utility curve. 
B)  the slope of the contract curve. 
C)  the slope of the utility possibilities curve. 
D)  none of these answer options are correct. 
A)  the slope of the utility curve. 
B)  the slope of the contract curve. 
C)  the slope of the utility possibilities curve. 
D)  none of these answer options are correct.

Question 12

Excess burden calculations typically assume many other distortions.

Accepted Answer

A)  True 
B)  False 
C)  Uncertain 
A)  True 
B)  False 
C)  Uncertain

Question 13

When a demand curve is vertical,the elasticity of demand is equal to

Accepted Answer

A)  0. 
B)  1. 
C)  ∞. 
D)  -1. 
A)  0. 
B)  1. 
C)  ∞. 
D)  -1.

Question 14

The tax interaction effect is the _________ in excess burden in the labor market stemming from the _______ in real wages caused by a Pigouvian tax.

Accepted Answer

A)  increase; increase 
B)  reduce; reduction 
C)  increase; reduction 
D)  reduction; increase 
A)  increase; increase 
B)  reduce; reduction 
C)  increase; reduction 
D)  reduction; increase

Question 15

Taxing in labor markets creates more excess burden than taxing in commodity markets.

Accepted Answer

A)  True 
B)  False 
C)  Uncertain 
A)  True 
B)  False 
C)  Uncertain

Question 16

A tax that causes the price that producers receive for a commodity to deviate from the buyer's price is

Accepted Answer

A)  an unit tax. 
B)  a compensated tax. 
C)  an income tax. 
D)  a price-distorting tax. 
A)  an unit tax. 
B)  a compensated tax. 
C)  an income tax. 
D)  a price-distorting tax.

Question 17

Excess burden is largest with

Accepted Answer

A)  lump-sum taxes. 
B)  unit taxes. 
C)  no taxes. 
D)  all of these answer options are correct. 
A)  lump-sum taxes. 
B)  unit taxes. 
C)  no taxes. 
D)  all of these answer options are correct.

Question 18

Is it possible to design a tax that does all of the following: i)leaves behavior unchanged so that the quantity demanded of goods and services does not change,ii)creates no excess burden,iii)is not regressive,and iv)is welfare enhancing?

Accepted Answer

No.Currently,it would be diffi

Question 19

Which of the following should be expected if the tax for a certain good increases?

Accepted Answer

A)  price of the good increases. 
B)  the composition of the commodity bundle is distorted. 
C)  the budget line pivots out. 
D)  the composition of the commodity bundle is distorted and the price of the good increases. 
A)  price of the good increases. 
B)  the composition of the commodity bundle is distorted. 
C)  the budget line pivots out. 
D)  the composition of the commodity bundle is distorted and the price of the good increases.

Question 20

Lump sum taxation is an attractive policy tool.

Accepted Answer

A)  True 
B)  False 
C)  Uncertain 
A)  True 
B)  False 
C)  Uncertain

Exam 15: Taxation and Efficiency

Points on the same utility curve are

All taxes impose an excess burden.

Equivalent variation means

The Double Dividend Effect requires

Suppose you had to design an economic system for a country that had never existed before,like one of the former Soviet Union countries.What criteria would you consider to minimize the excess burden of the system of taxation?

When a single tax is imposed,the excess burden is proportional to the compensated elasticity of demand and to the square of the tax rate.

The differential taxation of inputs does not create an excess burden.

A lump sum tax can create an excess burden.

An income effect

The marginal rate of substitution is

Excess burden calculations typically assume many other distortions.

When a demand curve is vertical,the elasticity of demand is equal to

The tax interaction effect is the _________ in excess burden in the labor market stemming from the _______ in real wages caused by a Pigouvian tax.

Taxing in labor markets creates more excess burden than taxing in commodity markets.

A tax that causes the price that producers receive for a commodity to deviate from the buyer's price is

Excess burden is largest with

Is it possible to design a tax that does all of the following: i)leaves behavior unchanged so that the quantity demanded of goods and services does not change,ii)creates no excess burden,iii)is not regressive,and iv)is welfare enhancing?

Which of the following should be expected if the tax for a certain good increases?

Lump sum taxation is an attractive policy tool.

Introduction

Tools of Positive Analysis

Tools of Normative Analysis

Public Goods

Externalities

Political Economy

Education

Cost-Benefit Analysis

The Health Care Market

Government and the Market for Health Care

Social Security

Income Redistribution: Conceptual Issues

Expenditure Programs for the Poor

Taxation and Income Distribution

Efficient and Equitable Taxation

The Personal Income Tax

Personal Taxation and Behavior

The Corporation Tax

Deficit Finance

Fundamental Tax Reform: Taxes on Consumption and Wealth

Public Finance in a Federal System

Filters

The tax interaction effect is the ___ in excess burden in the labor market stemming from the _ in real wages caused by a Pigouvian tax.