Question 1

When it comes to taxes,horizontal equity means that

Accepted Answer

A)  people with lower incomes bear a smaller tax burden. 
B)  people with the same incomes pay the same amount of taxes. 
C)  progressive taxes must be imposed. 
D)  regressive taxes must be imposed. 
E)  only proportional taxes are fair. 
A)  people with lower incomes bear a smaller tax burden. 
B)  people with the same incomes pay the same amount of taxes. 
C)  progressive taxes must be imposed. 
D)  regressive taxes must be imposed. 
E)  only proportional taxes are fair.

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 is imposed. The government imposes a $10 per unit tax on sellers of MP3 players.
-Based on the figure above,after the tax is imposed,the consumer surplus

Accepted Answer

A)  decreases by $17,500. 
B)  increases by $17,500. 
C)  decreases by $7,500. 
D)  increases by $7,500. 
E)  does not change. 
A)  decreases by $17,500. 
B)  increases by $17,500. 
C)  decreases by $7,500. 
D)  increases by $7,500. 
E)  does not change.

Question 3

The average tax rate equals

Accepted Answer

A)  (total tax ÷ change in income) × 100. 
B)  (change in tax ÷ total income) × 100. 
C)  (total tax ÷ total income) × 100. 
D)  (change in tax ÷ change in income) × 100. 
E)  (marginal tax are × total income) × 100. 
A)  (total tax ÷ change in income) × 100. 
B)  (change in tax ÷ total income) × 100. 
C)  (total tax ÷ total income) × 100. 
D)  (change in tax ÷ change in income) × 100. 
E)  (marginal tax are × total income) × 100.

Question 4

The benefits principle of tax fairness argues that

Accepted Answer

A)  everyone receives equal benefits from public services so taxes should be the same for all. 
B)  highly paid people should pay lower taxes because they work harder. 
C)  taxes should be related to the amount of income earned. 
D)  people should pay taxes equal to the benefits from public services received. 
E)  the benefits people get from the government should not be related to their taxes. 
A)  everyone receives equal benefits from public services so taxes should be the same for all. 
B)  highly paid people should pay lower taxes because they work harder. 
C)  taxes should be related to the amount of income earned. 
D)  people should pay taxes equal to the benefits from public services received. 
E)  the benefits people get from the government should not be related to their taxes.

Question 5

In the Village of Punjab,Sheryl owns a well,which is the only source of drinking water.The supply of water is perfectly inelastic at a quantity of 1,000 gallons of water per day.At a price of $2.00 per gallon,the quantity demanded per day is 1,000 gallons.The government imposes a $0.50 per gallon tax.
a.After the tax is imposed,what is the price paid by the villagers? What is the price received by Sheryl?
b.How much revenue does the government collect?
c.What fraction of the tax does Sheryl pay? What fraction is paid by the villagers?

Accepted Answer

a.Because the supply is perfectly inelas

Question 6

From the standpoint of efficiency,imposing a tax on the income from what type of resource is best because it creates the least inefficiency?

Accepted Answer

A)  a resource with a perfectly elastic supply 
B)  a resource with a perfectly elastic demand 
C)  a resource that earns a high reward 
D)  a resource with a fixed supply 
E)  a resource that earns a low reward 
A)  a resource with a perfectly elastic supply 
B)  a resource with a perfectly elastic demand 
C)  a resource that earns a high reward 
D)  a resource with a fixed supply 
E)  a resource that earns a low reward

Question 7

Which of the following taxes guarantees vertical equity?
i.income tax
ii.Social Security tax on workers
iii.Social Security tax on employers

Accepted Answer

A)  i only 
B)  i and ii 
C)  ii and iii 
D)  iii only 
E)  None of the above taxes guarantees vertical equity. 
A)  i only 
B)  i and ii 
C)  ii and iii 
D)  iii only 
E)  None of the above taxes guarantees vertical equity.

Question 8

-The above figure shows the market for capital.With the tax on capital income,the total tax paid is equal to

Accepted Answer

A)  area C. 
B)  area B. 
C)  area A + area B + area C. 
D)  area C + area D + area G. 
E)  area B + area F. 
A)  area C. 
B)  area B. 
C)  area A + area B + area C. 
D)  area C + area D + area G. 
E)  area B + area F.

Question 9

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 10

The proposition that taxpayers with the same ability to pay should pay the same taxes is called

Accepted Answer

A)  the benefits principle. 
B)  the ability-to-pay imperative. 
C)  vertical equity. 
D)  horizontal equity. 
E)  the fair-tax incidence principle. 
A)  the benefits principle. 
B)  the ability-to-pay imperative. 
C)  vertical equity. 
D)  horizontal equity. 
E)  the fair-tax incidence principle.

Question 11

The figure above shows the market for MP3 players, where S is the supply curve and D is the demand curve before any tax is imposed. The government imposes a $10 per unit tax on sellers of MP3 players.
-Based on the figure above,the deadweight loss from the tax is

Accepted Answer

A)  $15,000 per week. 
B)  $20,000 per week. 
C)  $35,000 per week. 
D)  $17,500 per week. 
E)  zero. 
A)  $15,000 per week. 
B)  $20,000 per week. 
C)  $35,000 per week. 
D)  $17,500 per week. 
E)  zero.

Question 12

When a tax is imposed on a good,the resulting rise in the equilibrium price is usually less than the amount of the tax itself.Why doesn't the equilibrium price rise by the full amount of the tax?

Accepted Answer

Because firms collect taxes from consume

Question 13

If highly paid entertainers prefer to perform and would do so even if their pay were much lower,a tax of half of the entertainers' incomes would do which of the following?

Accepted Answer

A)  decrease the amount of entertaining done by moving along a given labor supply curve 
B)  decrease the entertainers' supply of performances 
C)  collect no taxes at all 
D)  not change the quantity supplied of performances 
E)  increase the entertainers' supply of performances as they work more to make up the income they lose in taxes 
A)  decrease the amount of entertaining done by moving along a given labor supply curve 
B)  decrease the entertainers' supply of performances 
C)  collect no taxes at all 
D)  not change the quantity supplied of performances 
E)  increase the entertainers' supply of performances as they work more to make up the income they lose in taxes

Question 14

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,after the tax is imposed,the price (including the tax)paid by the buyer is ________ per MP3 player.

Accepted Answer

A)  $105 
B)  $100 
C)  $95 
D)  $110 
E)  $90 
A)  $105 
B)  $100 
C)  $95 
D)  $110 
E)  $90

Question 15

The figure above shows the market for MP3 players, where S is the supply curve and D is the demand curve before any tax is imposed. The government imposes a $10 per unit tax on sellers of MP3 players.
-Based on the figure above,the tax ________ the price received (and kept)by the seller by ________ per MP3 player.

Accepted Answer

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

Question 16

A tax imposed on a resource's income is paid by both the resource's owners and the resource's employers,except for a tax

Accepted Answer

A)  on labor income. 
B)  on the income of capital. 
C)  on land rent. 
D)  that is imposed on employers. 
E)  that is imposed on employees. 
A)  on labor income. 
B)  on the income of capital. 
C)  on land rent. 
D)  that is imposed on employers. 
E)  that is imposed on employees.

Question 17

The proposition that people should pay taxes equal to the benefits they receive from public services is known as the

Accepted Answer

A)  ability-to-pay principle. 
B)  progressive tax principle. 
C)  fairness principle. 
D)  benefits principle. 
E)  "he or she who gets, pays" principle. 
A)  ability-to-pay principle. 
B)  progressive tax principle. 
C)  fairness principle. 
D)  benefits principle. 
E)  "he or she who gets, pays" principle.

Question 18

Because the U.S.income tax is a progressive tax,taxing married couples as two single persons can violate

Accepted Answer

A)  the benefits principle. 
B)  the ability-to-pay imperative. 
C)  vertical equity. 
D)  horizontal equity. 
E)  the government's need for more revenue. 
A)  the benefits principle. 
B)  the ability-to-pay imperative. 
C)  vertical equity. 
D)  horizontal equity. 
E)  the government's need for more revenue.

Question 19

A sales tax imposed on tires ________ consumer surplus and ________ producer surplus.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
E)  does not change; does not change 
A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
E)  does not change; does not change

Question 20

A tax on labor income

Accepted Answer

A)  increases the quantity employed because the demand for labor increases. 
B)  decreases the quantity employed because the supply of labor decreases. 
C)  increases the quantity employed because the supply of labor increases. 
D)  decreases the quantity employed because the demand for labor increases. 
E)  does not change the quantity employed because people must have jobs in order to earn any income. 
A)  increases the quantity employed because the demand for labor increases. 
B)  decreases the quantity employed because the supply of labor decreases. 
C)  increases the quantity employed because the supply of labor increases. 
D)  decreases the quantity employed because the demand for labor increases. 
E)  does not change the quantity employed because people must have jobs in order to earn any income.

When it comes to taxes,horizontal equity means that

The figure above shows the market for MP3 players, where S is the supply curve and D is the demand curve before any tax is imposed. The government imposes a $10 per unit tax on sellers of MP3 players. -Based on the figure above,after the tax is imposed,the consumer surplus

The average tax rate equals

The benefits principle of tax fairness argues that

From the standpoint of efficiency,imposing a tax on the income from what type of resource is best because it creates the least inefficiency?

Which of the following taxes guarantees vertical equity? i.income tax ii.Social Security tax on workers iii.Social Security tax on employers

-The above figure shows the market for capital.With the tax on capital income,the total tax paid is equal to

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

The proposition that taxpayers with the same ability to pay should pay the same taxes is called

The figure above shows the market for MP3 players, where S is the supply curve and D is the demand curve before any tax is imposed. The government imposes a $10 per unit tax on sellers of MP3 players. -Based on the figure above,the deadweight loss from the tax is

When a tax is imposed on a good,the resulting rise in the equilibrium price is usually less than the amount of the tax itself.Why doesn't the equilibrium price rise by the full amount of the tax?

If highly paid entertainers prefer to perform and would do so even if their pay were much lower,a tax of half of the entertainers' incomes would do which of the following?

The figure above shows the market for MP3 players, where S is the supply curve and D is the demand curve before any tax is imposed. The government imposes a $10 per unit tax on sellers of MP3 players. -Based on the figure above,the tax the price received (and kept)by the seller by per MP3 player.

A tax imposed on a resource's income is paid by both the resource's owners and the resource's employers,except for a tax

The proposition that people should pay taxes equal to the benefits they receive from public services is known as the

Because the U.S.income tax is a progressive tax,taxing married couples as two single persons can violate

A sales tax imposed on tires consumer surplus and producer surplus.

A tax on labor income

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

When it comes to taxes,horizontal equity means that

The figure above shows the market for MP3 players, where S is the supply curve and D is the demand curve before any tax is imposed. The government imposes a $10 per unit tax on sellers of MP3 players. -Based on the figure above,after the tax is imposed,the consumer surplus

The average tax rate equals

The benefits principle of tax fairness argues that

From the standpoint of efficiency,imposing a tax on the income from what type of resource is best because it creates the least inefficiency?

Which of the following taxes guarantees vertical equity? i.income tax ii.Social Security tax on workers iii.Social Security tax on employers

-The above figure shows the market for capital.With the tax on capital income,the total tax paid is equal to

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

The proposition that taxpayers with the same ability to pay should pay the same taxes is called

The figure above shows the market for MP3 players, where S is the supply curve and D is the demand curve before any tax is imposed. The government imposes a $10 per unit tax on sellers of MP3 players. -Based on the figure above,the deadweight loss from the tax is

When a tax is imposed on a good,the resulting rise in the equilibrium price is usually less than the amount of the tax itself.Why doesn't the equilibrium price rise by the full amount of the tax?

If highly paid entertainers prefer to perform and would do so even if their pay were much lower,a tax of half of the entertainers' incomes would do which of the following?

A tax imposed on a resource's income is paid by both the resource's owners and the resource's employers,except for a tax

The proposition that people should pay taxes equal to the benefits they receive from public services is known as the

Because the U.S.income tax is a progressive tax,taxing married couples as two single persons can violate

A sales tax imposed on tires ________ consumer surplus and ________ producer surplus.

A tax on labor income

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

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

A sales tax imposed on tires consumer surplus and producer surplus.