Question 1

Which of the following taxes best illustrates the ability to pay principle?

Accepted Answer

A)  sales tax 
B)  state property tax 
C)  federal income tax 
D)  cigarette tax 
E)  marriage tax 
A)  sales tax 
B)  state property tax 
C)  federal income tax 
D)  cigarette tax 
E)  marriage tax

Question 2

To determine who bears the greater share of a tax,we compare the

Accepted Answer

A)  number of buyers to the number of sellers. 
B)  elasticity of supply to the elasticity of demand. 
C)  size of the tax to the price of the good. 
D)  government tax revenue to the revenue collected by the suppliers. 
E)  pre-tax quantity to the post-tax quantity. 
A)  number of buyers to the number of sellers. 
B)  elasticity of supply to the elasticity of demand. 
C)  size of the tax to the price of the good. 
D)  government tax revenue to the revenue collected by the suppliers. 
E)  pre-tax quantity to the post-tax quantity.

Question 3

Compared to taxes on labor income,taxes on capital income generate ________ deadweight loss and are paid by people who generally have the ________ ability to pay.

Accepted Answer

A)  a larger; most 
B)  a larger; least 
C)  a smaller; most 
D)  a smaller; least 
E)  no; least 
A)  a larger; most 
B)  a larger; least 
C)  a smaller; most 
D)  a smaller; least 
E)  no; least

Question 4

Consider the two principles of fair taxation,the benefits principle and the ability-to-pay principle.

Accepted Answer

A)  Both state that people should pay taxes according to the benefits they receive from public services. 
B)  Both state that people should pay taxes according to how easily they can bear the burden. 
C)  Both are based on horizontal equity. 
D)  Both present conflicting ideas on the fairness of taxes. 
E)  Both are based on vertical equity. 
A)  Both state that people should pay taxes according to the benefits they receive from public services. 
B)  Both state that people should pay taxes according to how easily they can bear the burden. 
C)  Both are based on horizontal equity. 
D)  Both present conflicting ideas on the fairness of taxes. 
E)  Both are based on vertical equity.

Question 5

Which of the following is an example of a tax following the benefits principle?
i.sales taxes on gasoline used to fund road maintenance projects
ii.federal income tax used to fund food stamps for poorer households
iii.property taxes used to finance public education

Accepted Answer

A)  i only 
B)  ii only 
C)  iii only 
D)  ii and iii 
E)  i, ii, and iii 
A)  i only 
B)  ii only 
C)  iii only 
D)  ii and iii 
E)  i, ii, and iii

Question 6

-The above figure shows the market for gourmet ice cream.In effort to reduce obesity,government places a $2 tax per gallon on suppliers in this market,shifting the supply curve from S? to S?.The quantity of ice cream consumed before the tax is ________ gallons and the quantity consumed after the tax is ________ gallons.

Accepted Answer

A)  300,000; 200,000 
B)  200,000; 250,000 
C)  250,000; 200,000 
D)  200,000; 300,000 
E)  200,000; 200,000 
A)  300,000; 200,000 
B)  200,000; 250,000 
C)  250,000; 200,000 
D)  200,000; 300,000 
E)  200,000; 200,000

Question 7

-The above figure shows the supply curves in four different markets.If each of the markets has an identical downward sloping demand curve and the same tax is levied on suppliers,which market would produce the smallest amount of deadweight loss?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
E)  A and D 
A)  A 
B)  B 
C)  C 
D)  D 
E)  A and D

Question 8

-The figure above shows the market for tires.The government has imposed a tax on tires,and the sellers pay ________ of the tax.

Accepted Answer

A)  $10 
B)  $20 
C)  $50 
D)  $60 
E)  $30 
A)  $10 
B)  $20 
C)  $50 
D)  $60 
E)  $30

Question 9

Suppose the government increases the Social Security tax imposed on employers by 25 percent.This tax leads to

Accepted Answer

A)  an increase in the supply of labor. 
B)  a decrease in the supply of labor. 
C)  a decrease in the demand for labor. 
D)  no change in the demand for labor. 
E)  a decrease in the supply of labor and an increase in the demand for labor. 
A)  an increase in the supply of labor. 
B)  a decrease in the supply of labor. 
C)  a decrease in the demand for labor. 
D)  no change in the demand for labor. 
E)  a decrease in the supply of labor and an increase in the demand for labor.

Question 10

If the supply of capital is perfectly ________ end up paying the tax on capital income.

Accepted Answer

A)  elastic, lenders 
B)  elastic, firms that demand capital 
C)  inelastic, lenders 
D)  inelastic, firms that demand capital 
E)  unit elastic, firms that demand capital 
A)  elastic, lenders 
B)  elastic, firms that demand capital 
C)  inelastic, lenders 
D)  inelastic, firms that demand capital 
E)  unit elastic, firms that demand capital

Question 11

-The above figure shows the market for buckets of golf balls at the driving range.A new leisure time tax is placed on suppliers in this market,shifting the supply curve from S? to S?.The tax incidence is

Accepted Answer

A)  split equally between buyers and sellers, each paying $1 per bucket. 
B)  split equally between buyers and sellers, each paying $2 per bucket. 
C)  such that buyers pay $2 per bucket and sellers pay $1 per bucket. 
D)  such that buyers pay $1 per bucket and sellers pay $2 per bucket. 
E)  such that sellers pay all of the tax. 
A)  split equally between buyers and sellers, each paying $1 per bucket. 
B)  split equally between buyers and sellers, each paying $2 per bucket. 
C)  such that buyers pay $2 per bucket and sellers pay $1 per bucket. 
D)  such that buyers pay $1 per bucket and sellers pay $2 per bucket. 
E)  such that sellers pay all of the tax.

Question 12

Neither the demand nor the supply of gasoline is perfectly elastic or inelastic.When the government increases the federal tax on gasoline,the effect on buyers is that the price they pay

Accepted Answer

A)  rises. 
B)  falls. 
C)  does not change. 
D)  rises if the demand is inelastic and falls if the demand is elastic. 
E)  rises if the supply is inelastic and falls if the supply is elastic. 
A)  rises. 
B)  falls. 
C)  does not change. 
D)  rises if the demand is inelastic and falls if the demand is elastic. 
E)  rises if the supply is inelastic and falls if the supply is elastic.

Question 13

-The figure above shows the market for tires.According to the figure,the price elasticity of demand is ________ the price elasticity of supply.

Accepted Answer

A)  greater than 
B)  equal to 
C)  less than 
D)  not comparable to 
E)  More information is needed to determine if the price elasticity of demand is greater than, equal to, less than, or comparable to the price elasticity of supply. 
A)  greater than 
B)  equal to 
C)  less than 
D)  not comparable to 
E)  More information is needed to determine if the price elasticity of demand is greater than, equal to, less than, or comparable to the price elasticity of supply.

Question 14

What is the marginal tax rate? Average tax rate? Can these rates ever differ?

Accepted Answer

The marginal tax rate is the percentage

Question 15

For a given elasticity of supply,the more ________ the demand for the good,the share of the tax paid by the buyers is ________.

Accepted Answer

A)  inelastic; larger 
B)  inelastic; smaller 
C)  elastic; larger 
D)  elastic; smaller 
E)  elastic; the same 
A)  inelastic; larger 
B)  inelastic; smaller 
C)  elastic; larger 
D)  elastic; smaller 
E)  elastic; the same

Question 16

A tax on the income from land or other resource with a perfectly inelastic supply

Accepted Answer

A)  is efficient because it does not decrease the equilibrium quantity. 
B)  has no deadweight loss. 
C)  is paid entirely by the owner. 
D)  Only answers A and B are correct. 
E)  Answers A, B, and C are correct. 
A)  is efficient because it does not decrease the equilibrium quantity. 
B)  has no deadweight loss. 
C)  is paid entirely by the owner. 
D)  Only answers A and B are correct. 
E)  Answers A, B, and C are correct.

Question 17

The demand curve for pizza is downward sloping and the supply curve is upward sloping.If the government imposes a $2 tax on a pizza,________ the tax.

Accepted Answer

A)  only consumers pay 
B)  only producers pay 
C)  both producers and consumers pay part of 
D)  neither producers nor consumers pay part of 
E)  the government pays 
A)  only consumers pay 
B)  only producers pay 
C)  both producers and consumers pay part of 
D)  neither producers nor consumers pay part of 
E)  the government pays

Question 18

If the government eliminates a tax on a good with a perfectly elastic supply,who benefits most?

Accepted Answer

A)  buyers 
B)  sellers 
C)  buyers if the demand is also perfectly elastic, otherwise sellers 
D)  buyers if the demand is unit elastic, otherwise sellers 
E)  Buyers and sellers benefit equally. 
A)  buyers 
B)  sellers 
C)  buyers if the demand is also perfectly elastic, otherwise sellers 
D)  buyers if the demand is unit elastic, otherwise sellers 
E)  Buyers and sellers benefit equally.

Question 19

If a $10 sales tax is imposed on a good and the equilibrium price increases by $10,the tax is

Accepted Answer

A)  split between buyers and sellers but not evenly. 
B)  paid fully by sellers. 
C)  paid fully by buyers. 
D)  split evenly between buyers and sellers. 
E)  perhaps split between buyers and sellers but it is impossible to determine the incidence without further information. 
A)  split between buyers and sellers but not evenly. 
B)  paid fully by sellers. 
C)  paid fully by buyers. 
D)  split evenly between buyers and sellers. 
E)  perhaps split between buyers and sellers but it is impossible to determine the incidence without further information.

Question 20

-The above figure shows the market for buckets of golf balls at the driving range.A new leisure time tax is placed on suppliers in this market,shifting the supply curve from S? to S?.The total tax revenue is equal to

Accepted Answer

A)  $1,800. 
B)  $600. 
C)  $1,200. 
D)  $900. 
E)  $5,600. 
A)  $1,800. 
B)  $600. 
C)  $1,200. 
D)  $900. 
E)  $5,600.

Which of the following taxes best illustrates the ability to pay principle?

To determine who bears the greater share of a tax,we compare the

Compared to taxes on labor income,taxes on capital income generate deadweight loss and are paid by people who generally have the ability to pay.

Consider the two principles of fair taxation,the benefits principle and the ability-to-pay principle.

Which of the following is an example of a tax following the benefits principle? i.sales taxes on gasoline used to fund road maintenance projects ii.federal income tax used to fund food stamps for poorer households iii.property taxes used to finance public education

-The above figure shows the supply curves in four different markets.If each of the markets has an identical downward sloping demand curve and the same tax is levied on suppliers,which market would produce the smallest amount of deadweight loss?

-The figure above shows the market for tires.The government has imposed a tax on tires,and the sellers pay ________ of the tax.

Suppose the government increases the Social Security tax imposed on employers by 25 percent.This tax leads to

If the supply of capital is perfectly ________ end up paying the tax on capital income.

-The above figure shows the market for buckets of golf balls at the driving range.A new leisure time tax is placed on suppliers in this market,shifting the supply curve from S? to S?.The tax incidence is

Neither the demand nor the supply of gasoline is perfectly elastic or inelastic.When the government increases the federal tax on gasoline,the effect on buyers is that the price they pay

-The figure above shows the market for tires.According to the figure,the price elasticity of demand is ________ the price elasticity of supply.

What is the marginal tax rate? Average tax rate? Can these rates ever differ?

For a given elasticity of supply,the more the demand for the good,the share of the tax paid by the buyers is .

A tax on the income from land or other resource with a perfectly inelastic supply

The demand curve for pizza is downward sloping and the supply curve is upward sloping.If the government imposes a $2 tax on a pizza,________ the tax.

If the government eliminates a tax on a good with a perfectly elastic supply,who benefits most?

If a $10 sales tax is imposed on a good and the equilibrium price increases by $10,the tax is

-The above figure shows the market for buckets of golf balls at the driving range.A new leisure time tax is placed on suppliers in this market,shifting the supply curve from S? to S?.The total tax revenue is equal to

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

Which of the following taxes best illustrates the ability to pay principle?

To determine who bears the greater share of a tax,we compare the

Compared to taxes on labor income,taxes on capital income generate ________ deadweight loss and are paid by people who generally have the ________ ability to pay.

Consider the two principles of fair taxation,the benefits principle and the ability-to-pay principle.

Which of the following is an example of a tax following the benefits principle? i.sales taxes on gasoline used to fund road maintenance projects ii.federal income tax used to fund food stamps for poorer households iii.property taxes used to finance public education

-The above figure shows the supply curves in four different markets.If each of the markets has an identical downward sloping demand curve and the same tax is levied on suppliers,which market would produce the smallest amount of deadweight loss?

-The figure above shows the market for tires.The government has imposed a tax on tires,and the sellers pay ________ of the tax.

Suppose the government increases the Social Security tax imposed on employers by 25 percent.This tax leads to

If the supply of capital is perfectly ________ end up paying the tax on capital income.

-The above figure shows the market for buckets of golf balls at the driving range.A new leisure time tax is placed on suppliers in this market,shifting the supply curve from S? to S?.The tax incidence is

Neither the demand nor the supply of gasoline is perfectly elastic or inelastic.When the government increases the federal tax on gasoline,the effect on buyers is that the price they pay

-The figure above shows the market for tires.According to the figure,the price elasticity of demand is ________ the price elasticity of supply.

What is the marginal tax rate? Average tax rate? Can these rates ever differ?

For a given elasticity of supply,the more ________ the demand for the good,the share of the tax paid by the buyers is ________.

A tax on the income from land or other resource with a perfectly inelastic supply

The demand curve for pizza is downward sloping and the supply curve is upward sloping.If the government imposes a $2 tax on a pizza,________ the tax.

If the government eliminates a tax on a good with a perfectly elastic supply,who benefits most?

If a $10 sales tax is imposed on a good and the equilibrium price increases by $10,the tax is

-The above figure shows the market for buckets of golf balls at the driving range.A new leisure time tax is placed on suppliers in this market,shifting the supply curve from S? to S?.The total tax revenue is equal to

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

Compared to taxes on labor income,taxes on capital income generate deadweight loss and are paid by people who generally have the ability to pay.

For a given elasticity of supply,the more the demand for the good,the share of the tax paid by the buyers is .