Question 1

A sales tax creates a deadweight loss because

Accepted Answer

A)  there is some paper work opportunity cost of sellers paying the sales tax. 
B)  demand and supply both decrease. 
C)  less is produced and consumed. 
D)  citizens value government goods less than private goods. 
E)  the government spends the tax revenue it collects. 
A)  there is some paper work opportunity cost of sellers paying the sales tax. 
B)  demand and supply both decrease. 
C)  less is produced and consumed. 
D)  citizens value government goods less than private goods. 
E)  the government spends the tax revenue it collects.

Question 2

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.
-Based on the figure above,the tax ________ the price received by the seller by ________ per MP3 player.

Accepted Answer

A)  raises; $5 
B)  lowers; $5 
C)  raises; $10 
D)  lowers; $10 
E)  lowers; $2.50 
A)  raises; $5 
B)  lowers; $5 
C)  raises; $10 
D)  lowers; $10 
E)  lowers; $2.50

Question 3

"The only fair tax is a progressive tax." Comment on this assertion.

Accepted Answer

There are many more sides to fairness be

Question 4

The supply of oil is more elastic than the demand for oil.If oil is taxed $10 per barrel,how will the tax be divided between the buyer and seller?

Accepted Answer

A)  The seller will pay more of the tax than the buyer pays. 
B)  The buyer will pay more of the tax than the seller pays. 
C)  The seller and buyer will split the tax evenly. 
D)  The seller will pay the entire tax. 
E)  The buyer will pay the entire tax. 
A)  The seller will pay more of the tax than the buyer pays. 
B)  The buyer will pay more of the tax than the seller pays. 
C)  The seller and buyer will split the tax evenly. 
D)  The seller will pay the entire tax. 
E)  The buyer will pay the entire tax.

Question 5

Tax incidence is the

Accepted Answer

A)  burden buyers have to absorb from a tax on goods and services. 
B)  burden sellers have to absorb from a tax on goods and services. 
C)  lost revenue the government endures from goods and services that are not taxed. 
D)  division of the burden of a tax between the buyer and the seller. 
E)  deadweight loss created by a tax. 
A)  burden buyers have to absorb from a tax on goods and services. 
B)  burden sellers have to absorb from a tax on goods and services. 
C)  lost revenue the government endures from goods and services that are not taxed. 
D)  division of the burden of a tax between the buyer and the seller. 
E)  deadweight loss created by a tax.

Question 6

The deadweight loss of a tax

Accepted Answer

A)  is the transfer of income from households to the government. 
B)  determines the incidence of a tax. 
C)  is part of the total burden of a tax. 
D)  is greater than the total burden of a tax. 
E)  equals the tax revenue collected by the government. 
A)  is the transfer of income from households to the government. 
B)  determines the incidence of a tax. 
C)  is part of the total burden of a tax. 
D)  is greater than the total burden of a tax. 
E)  equals the tax revenue collected by the government.

Question 7

In a labor market before any taxes are imposed,the equilibrium wage rate is $10.00 an hour and 10,000 people are employed.The government imposes a 20 percent income tax on workers' incomes.What is the wage rate that workers need to receive so that they can earn $10.00 per hour after the tax is paid? Suppose that after the tax is imposed,the wage rate rises to $12.00 an hour and that only 8,000 workers are employed.How is the tax incidence split between workers and firms?

Accepted Answer

In order to receive a wage of $10.00 an

Question 8

Suppose everybody paid the same total amount of tax regardless of their income.This type of tax system would be

Accepted Answer

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

Question 9

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

Accepted Answer

A)  progressive. 
B)  proportional. 
C)  regressive. 
D)  vertically unfair. 
E)  impossible to determine with the information given. 
A)  progressive. 
B)  proportional. 
C)  regressive. 
D)  vertically unfair. 
E)  impossible to determine with the information given.

Question 10

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 no

Question 11

The buyers pay all of a tax when the demand is

Accepted Answer

A)  perfectly elastic. 
B)  more elastic than the supply. 
C)  more inelastic than the supply. 
D)  unit elastic. 
E)  perfectly inelastic. 
A)  perfectly elastic. 
B)  more elastic than the supply. 
C)  more inelastic than the supply. 
D)  unit elastic. 
E)  perfectly inelastic.

Question 12

Suppose the government imposes a $1 per gallon per gallon tax on sellers of gasoline.As a result,the

Accepted Answer

A)  supply curve shifts leftward. 
B)  supply curve shifts rightward. 
C)  demand curve shifts leftward. 
D)  demand curve shifts rightward. 
E)  demand and supply curves both shift leftward. 
A)  supply curve shifts leftward. 
B)  supply curve shifts rightward. 
C)  demand curve shifts leftward. 
D)  demand curve shifts rightward. 
E)  demand and supply curves both shift leftward.

Question 13

What are the two conflicting principles of fairness that apply to a tax system? Briefly explain each.

Accepted Answer

The two principles are: the benefits pri

Question 14

-The table above gives the taxable income and the amount of tax paid.
a.Is this income tax progressive,regressive,or proportional?
b.If the taxable income is $25,000,what is the average tax rate?
c.If taxable income increases from $25,000 to $30,000,what is the marginal tax rate?

Accepted Answer

a.The income tax is progressiv

Question 15

If buyers pay more of a tax than do the sellers,

Accepted Answer

A)  demand is more elastic than supply. 
B)  the amount of tax revenue collected by the government is almost zero. 
C)  supply is more elastic than demand. 
D)  the equilibrium price paid by buyers rises by less than half the amount of the tax. 
E)  None of the above answers is correct. 
A)  demand is more elastic than supply. 
B)  the amount of tax revenue collected by the government is almost zero. 
C)  supply is more elastic than demand. 
D)  the equilibrium price paid by buyers rises by less than half the amount of the tax. 
E)  None of the above answers is correct.

Question 16

A $2.00 increase in the size of a tax on a good will only cause the price for buyers to increase by $2.00 if

Accepted Answer

A)  demand is perfectly inelastic. 
B)  demand is perfectly elastic. 
C)  demand is unit elastic. 
D)  demand is inelastic, but not perfectly inelastic. 
E)  demand is elastic, but not perfectly elastic. 
A)  demand is perfectly inelastic. 
B)  demand is perfectly elastic. 
C)  demand is unit elastic. 
D)  demand is inelastic, but not perfectly inelastic. 
E)  demand is elastic, but not perfectly elastic.

Question 17

Which of the following taxes best illustrates the benefits principle of taxation?

Accepted Answer

A)  sales tax on clothing used to fund food stamps 
B)  state income tax used to fund state universities 
C)  Medicare tax imposed on all workers used to fund medical care for the elderly 
D)  gasoline tax used to fund road repairs 
E)  federal income tax used to fund NASA spending 
A)  sales tax on clothing used to fund food stamps 
B)  state income tax used to fund state universities 
C)  Medicare tax imposed on all workers used to fund medical care for the elderly 
D)  gasoline tax used to fund road repairs 
E)  federal income tax used to fund NASA spending

Question 18

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 19

The benefits principle of fair taxation means that people

Accepted Answer

A)  pay taxes according to the level of benefits they receive. 
B)  pay taxes according to their ability to pay. 
C)  with the same ability pay the same taxes. 
D)  with a greater ability to pay, pay more taxes. 
E)  Answers B, C, and D are correct. 
A)  pay taxes according to the level of benefits they receive. 
B)  pay taxes according to their ability to pay. 
C)  with the same ability pay the same taxes. 
D)  with a greater ability to pay, pay more taxes. 
E)  Answers B, C, and D are correct.

Question 20

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

Accepted Answer

A)  progressive. 
B)  proportional. 
C)  regressive. 
D)  an excise tax. 
E)  a decreasing marginal-rate tax. 
A)  progressive. 
B)  proportional. 
C)  regressive. 
D)  an excise tax. 
E)  a decreasing marginal-rate tax.

A sales tax creates a deadweight loss because

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. -Based on the figure above,the tax the price received by the seller by per MP3 player.

"The only fair tax is a progressive tax." Comment on this assertion.

The supply of oil is more elastic than the demand for oil.If oil is taxed $10 per barrel,how will the tax be divided between the buyer and seller?

Tax incidence is the

The deadweight loss of a tax

Suppose everybody paid the same total amount of tax regardless of their income.This type of tax system would be

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

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.

The buyers pay all of a tax when the demand is

Suppose the government imposes a $1 per gallon per gallon tax on sellers of gasoline.As a result,the

What are the two conflicting principles of fairness that apply to a tax system? Briefly explain each.

-The table above gives the taxable income and the amount of tax paid. a.Is this income tax progressive,regressive,or proportional? b.If the taxable income is $25,000,what is the average tax rate? c.If taxable income increases from $25,000 to $30,000,what is the marginal tax rate?

If buyers pay more of a tax than do the sellers,

A $2.00 increase in the size of a tax on a good will only cause the price for buyers to increase by $2.00 if

Which of the following taxes best illustrates the benefits principle of taxation?

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

The benefits principle of fair taxation means that people

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

Getting Started

The U.S.and 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

A sales tax creates a deadweight loss because

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. -Based on the figure above,the tax ________ the price received by the seller by ________ per MP3 player.

"The only fair tax is a progressive tax." Comment on this assertion.

The supply of oil is more elastic than the demand for oil.If oil is taxed $10 per barrel,how will the tax be divided between the buyer and seller?

Tax incidence is the

The deadweight loss of a tax

Suppose everybody paid the same total amount of tax regardless of their income.This type of tax system would be

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

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.

The buyers pay all of a tax when the demand is

Suppose the government imposes a $1 per gallon per gallon tax on sellers of gasoline.As a result,the

What are the two conflicting principles of fairness that apply to a tax system? Briefly explain each.

-The table above gives the taxable income and the amount of tax paid. a.Is this income tax progressive,regressive,or proportional? b.If the taxable income is $25,000,what is the average tax rate? c.If taxable income increases from $25,000 to $30,000,what is the marginal tax rate?

If buyers pay more of a tax than do the sellers,

A $2.00 increase in the size of a tax on a good will only cause the price for buyers to increase by $2.00 if

Which of the following taxes best illustrates the benefits principle of taxation?

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

The benefits principle of fair taxation means that people

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

Getting Started

The U.S.and 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

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. -Based on the figure above,the tax the price received by the seller by per MP3 player.