Question 1

Which statement is TRUE regarding a $1 per gallon tax on gasoline?

Accepted Answer

A)  The consumer tax burden is greater when the tax is imposed on consumers. 
B)  The consumer tax burden is greater when the tax is imposed on the producers. 
C)  The producer tax burden is the same no matter on whom the tax is imposed. 
D)  The producer tax burden depends both on whom the tax is imposed and on the demand and supply elasticities. 
A)  The consumer tax burden is greater when the tax is imposed on consumers. 
B)  The consumer tax burden is greater when the tax is imposed on the producers. 
C)  The producer tax burden is the same no matter on whom the tax is imposed. 
D)  The producer tax burden depends both on whom the tax is imposed and on the demand and supply elasticities. C

Question 2

Suppose the pre-tax price of cigarettes is $3.00 per pack and the post-tax price is $4.00 per pack.The tax is $1.50 per pack and is paid to the government by cigarette retailers.Six hundred packs were sold prior to the tax increase; 500 were sold after the tax.What is the producer tax burden?

Accepted Answer

A)  $0.50 
B)  100 packs 
C)  $150 
D)  $1.50 
A)  $0.50 
B)  100 packs 
C)  $150 
D)  $1.50 A

Question 3

Why is general equilibrium analysis called a game of "follow the tax burden"?

Accepted Answer

General equilibrium analysis does not stop with the effects on the market in which a particular tax is imposed,but instead continues to all of the other markets that are related.The goal is to discover who ultimately bears the tax burden.

Question 4

In a labor market in which demand is perfectly elastic and supply is perfectly inelastic,who bears a tax levied on the firms?

Accepted Answer

A)  only the workers 
B)  only the firms 
C)  both the workers and the firms,although the workers bear more of the tax 
D)  both the workers and the firms,although the firms bear more of the tax 
A)  only the workers 
B)  only the firms 
C)  both the workers and the firms,although the workers bear more of the tax 
D)  both the workers and the firms,although the firms bear more of the tax

Question 5

Balanced budget incidence takes into account:

Accepted Answer

A)  the benefits of the spending financed out of the tax revenues. 
B)  the extent to which the tax helps balance the federal budget. 
C)  the benefits received by taxpayers when the federal government's budget is balanced. 
D)  whether the business firms being taxed are perfectly competitive or monopolists. 
A)  the benefits of the spending financed out of the tax revenues. 
B)  the extent to which the tax helps balance the federal budget. 
C)  the benefits received by taxpayers when the federal government's budget is balanced. 
D)  whether the business firms being taxed are perfectly competitive or monopolists.

Question 6

Suppose the government levies a tax on all ink pens sold in the country.Assume all goods are normal goods.Which of the following is a spillover income effect of the tax?

Accepted Answer

A)  People buy more pencils because they have less after-tax income. 
B)  People buy fewer books because they have less after-tax income. 
C)  People buy more pencils because pencils are now cheaper compared with pens. 
D)  People buy more ink pens because sellers bear the tax. 
A)  People buy more pencils because they have less after-tax income. 
B)  People buy fewer books because they have less after-tax income. 
C)  People buy more pencils because pencils are now cheaper compared with pens. 
D)  People buy more ink pens because sellers bear the tax.

Question 7

Tax incidence focuses on who:

Accepted Answer

A)  has the most elastic demand. 
B)  has the most inelastic supply. 
C)  bears the economic burden of a tax. 
D)  bears the statutory or legal burden of a tax. 
A)  has the most elastic demand. 
B)  has the most inelastic supply. 
C)  bears the economic burden of a tax. 
D)  bears the statutory or legal burden of a tax.

Question 8

What does the Congressional Budget Office assume with respect to the tax incidence of excise taxes?

Accepted Answer

A)  Producers bear the entire tax burden. 
B)  Consumers bear the entire tax burden. 
C)  Producers and consumers each bear part of the tax burden. 
D)  The owners of the capital used to produce the taxed goods bear all of the tax burden. 
A)  Producers bear the entire tax burden. 
B)  Consumers bear the entire tax burden. 
C)  Producers and consumers each bear part of the tax burden. 
D)  The owners of the capital used to produce the taxed goods bear all of the tax burden.

Question 9

Which statement is TRUE regarding a $1 per pack tax on cigarettes that is imposed on producers?

Accepted Answer

A)  It shifts the supply of cigarettes to the left. 
B)  It shifts the supply of cigarettes to the right. 
C)  It shifts the demand for cigarettes to the left. 
D)  It shifts the demand for cigarettes to the right. 
A)  It shifts the supply of cigarettes to the left. 
B)  It shifts the supply of cigarettes to the right. 
C)  It shifts the demand for cigarettes to the left. 
D)  It shifts the demand for cigarettes to the right.

Question 10

According to analysis by the Congressional Budget Office and Urban Institute's Tax Policy Center,which statement related to the effective tax rates by income group for the last half century is NOT true?

Accepted Answer

A)  The total average tax rate on the bottom quintile fell sharply in the recession to only 1.1%. 
B)  The average tax rate on the top quintile was 23.8% in 2011. 
C)  Average corporate tax rates are small relative to income and payroll tax rates. 
D)  Average excise tax has fallen for the bottom of the income distribution while rising for the top. 
A)  The total average tax rate on the bottom quintile fell sharply in the recession to only 1.1%. 
B)  The average tax rate on the top quintile was 23.8% in 2011. 
C)  Average corporate tax rates are small relative to income and payroll tax rates. 
D)  Average excise tax has fallen for the bottom of the income distribution while rising for the top.

Question 11

Which statement related to elasticity and tax incidence is NOT true?

Accepted Answer

A)  For products with an inelastic demand,the burden of the tax is borne almost entirely by the consumer. 
B)  For products with an inelastic supply,the burden of the tax is borne almost entirely by the producers. 
C)  For products with an elastic demand,the burden of the tax is borne almost entirely by the producers. 
D)  Parties with elastic demand or supply bear taxes; parties with inelastic demand or supply avoid them. 
A)  For products with an inelastic demand,the burden of the tax is borne almost entirely by the consumer. 
B)  For products with an inelastic supply,the burden of the tax is borne almost entirely by the producers. 
C)  For products with an elastic demand,the burden of the tax is borne almost entirely by the producers. 
D)  Parties with elastic demand or supply bear taxes; parties with inelastic demand or supply avoid them.

Question 12

Suppose the government levies a tax on all ink pens sold in the country.Assume all goods are normal goods.Which of the following is a spillover complementary effect of the tax?

Accepted Answer

A)  People buy fewer pencils because they have less income. 
B)  People buy less paper as a result of the tax. 
C)  People buy more pencils because pencils are now cheaper compared with pens. 
D)  People buy more ink pens because sellers bear the tax. 
A)  People buy fewer pencils because they have less income. 
B)  People buy less paper as a result of the tax. 
C)  People buy more pencils because pencils are now cheaper compared with pens. 
D)  People buy more ink pens because sellers bear the tax.

Question 13

Discuss how the sources of federal government revenue evolved in the past half-century.Do you think the change can be regarded as an equitable shift in the burden of taxation?

Accepted Answer

5% was collected from individuals throug

Question 14

Suppose the pre-tax price of cigarettes is $3.00 per pack and the post-tax price is $4.00 per pack.The tax is $1.50 per pack and is paid by the retailers of cigarettes to the government.Six hundred packs were sold prior to the tax increase; 500 packs were sold after the tax.What is the statutory incidence of the tax on consumers?

Accepted Answer

A)  $0 
B)  $1 
C)  $1.50 
D)  $150 
A)  $0 
B)  $1 
C)  $1.50 
D)  $150

Question 15

Suppose the pretax price of gasoline is $1 per gallon.A tax of $0.50 is imposed and is paid by consumers to the government.What must the gross price of gasoline be after the tax so that the consumer tax burden is equal to the producer tax burden?

Accepted Answer

A)  $0.50 
B)  $0.75 
C)  $1.00 
D)  $1.25 
A)  $0.50 
B)  $0.75 
C)  $1.00 
D)  $1.25

Question 16

Suppose the government were to impose a $3 tax on high-speed Internet connections.The law states that $2/connection is to be paid to the government by the producer,and the remaining $1 to be paid by the consumer.Which statement regarding the tax is TRUE?

Accepted Answer

A)  It shifts the supply curve of high-speed Internet connections to the left. 
B)  It shifts the supply curve of high-speed Internet connections to the right. 
C)  It shifts the demand curve for high-speed Internet connections to the right. 
D)  It does not shift either the supply curve or the demand curve. 
A)  It shifts the supply curve of high-speed Internet connections to the left. 
B)  It shifts the supply curve of high-speed Internet connections to the right. 
C)  It shifts the demand curve for high-speed Internet connections to the right. 
D)  It does not shift either the supply curve or the demand curve.

Question 17

Suppose that a monopolist has a cost function given by C(q)= 10 + 2q + 0.5q2.The (inverse)demand for the product is given by P(q)= 47 - q.The government levies a tax of $9 per unit,to be paid to the government by the monopolist.
(a)What is the market quantity and price?
(b)The government levies a tax of $9 per unit,to be paid to the government by the monopolist.What is the new market price and quantity?
(c)How much of the tax do the consumers bear? How much does the monopolist bear?

Accepted Answer

Now it receives a price of $35

Question 18

Suppose the wage of unskilled workers is equal to the minimum wage.If a tax on labor is levied on _____,the presence of the minimum wage _____.

Accepted Answer

A)  workers; does not affect the tax burden of workers 
B)  workers; reduces the tax burden of workers 
C)  firms; reduces the tax burden of firms 
D)  firms; does not affect the tax burden of firms. 
A)  workers; does not affect the tax burden of workers 
B)  workers; reduces the tax burden of workers 
C)  firms; reduces the tax burden of firms 
D)  firms; does not affect the tax burden of firms.

Question 19

If a tax on labor is levied on workers,the gross wage will _______ and the after-tax wage will _______.Assume that supply and demand are neither perfectly elastic nor perfectly inelastic.

Accepted Answer

A)  fall; fall 
B)  fall; rise 
C)  rise; rise 
D)  rise; fall 
A)  fall; fall 
B)  fall; rise 
C)  rise; rise 
D)  rise; fall

Question 20

Suppose the pre-tax price of cigarettes is $3 per pack and the post-tax price is $4 per pack.The tax is $1.50 per pack and is paid by the retailers of cigarettes to the government.Prior to the tax,600 packs were sold; after the tax 500 packs were sold.What is the consumer tax burden?

Accepted Answer

A)  $1 
B)  $1.50 
C)  $2.50 
D)  $3 
A)  $1 
B)  $1.50 
C)  $2.50 
D)  $3

Exam 19: The Equity Implications of Taxation- Tax Incidence

Which statement is TRUE regarding a $1 per gallon tax on gasoline?

Suppose the pre-tax price of cigarettes is $3.00 per pack and the post-tax price is $4.00 per pack.The tax is $1.50 per pack and is paid to the government by cigarette retailers.Six hundred packs were sold prior to the tax increase; 500 were sold after the tax.What is the producer tax burden?

Why is general equilibrium analysis called a game of "follow the tax burden"?

In a labor market in which demand is perfectly elastic and supply is perfectly inelastic,who bears a tax levied on the firms?

Balanced budget incidence takes into account:

Suppose the government levies a tax on all ink pens sold in the country.Assume all goods are normal goods.Which of the following is a spillover income effect of the tax?

Tax incidence focuses on who:

What does the Congressional Budget Office assume with respect to the tax incidence of excise taxes?

Which statement is TRUE regarding a $1 per pack tax on cigarettes that is imposed on producers?

According to analysis by the Congressional Budget Office and Urban Institute's Tax Policy Center,which statement related to the effective tax rates by income group for the last half century is NOT true?

Which statement related to elasticity and tax incidence is NOT true?

Suppose the government levies a tax on all ink pens sold in the country.Assume all goods are normal goods.Which of the following is a spillover complementary effect of the tax?

Discuss how the sources of federal government revenue evolved in the past half-century.Do you think the change can be regarded as an equitable shift in the burden of taxation?

Suppose the pretax price of gasoline is $1 per gallon.A tax of $0.50 is imposed and is paid by consumers to the government.What must the gross price of gasoline be after the tax so that the consumer tax burden is equal to the producer tax burden?

Suppose the government were to impose a $3 tax on high-speed Internet connections.The law states that $2/connection is to be paid to the government by the producer,and the remaining $1 to be paid by the consumer.Which statement regarding the tax is TRUE?

Suppose the wage of unskilled workers is equal to the minimum wage.If a tax on labor is levied on _____,the presence of the minimum wage _____.

If a tax on labor is levied on workers,the gross wage will _______ and the after-tax wage will _______.Assume that supply and demand are neither perfectly elastic nor perfectly inelastic.

Suppose the pre-tax price of cigarettes is $3 per pack and the post-tax price is $4 per pack.The tax is $1.50 per pack and is paid by the retailers of cigarettes to the government.Prior to the tax,600 packs were sold; after the tax 500 packs were sold.What is the consumer tax burden?

Why Study Public Finance

Theoretical Tools of Public Finance

Empirical Tools of Public Finance

Budget Analysis and Deficit Financing

Externalities- Problems and Solutions

Externalities in Action- Environmental and Health Externalities

Public Goods

Cost-Benefit Analysis

Political Economy

State and Local Government Expenditures

Education

Social Insurance- the New Function of Government

Social Security

Unemployment Insurance, disability Insurance, and Workers Compensation

Health Insurance I- Health Economics and Private Health Insurance

Health Insurance Ii- Medicare, medicaid, and Health Care Reform

Income Distribution and Welfare Programs

Taxation- How It Works and What It Means

Taxes on Labor Supply

Taxes on Savings

Taxes on Risk Taking and Wealth

Taxation of Business Income

Fundamental Tax Reform and Consumption Tax

Filters

Suppose the wage of unskilled workers is equal to the minimum wage.If a tax on labor is levied on _,the presence of the minimum wage _.

If a tax on labor is levied on workers,the gross wage will _ and the after-tax wage will _.Assume that supply and demand are neither perfectly elastic nor perfectly inelastic.