Question 1

The figure above shows the demand (D) and supply (S) curves for insulin before any tax is imposed. The government imposes a $0.20 a dose tax on sellers of insulin.
-Based on the figure above,at the market equilibrium with the tax,marginal benefit ________ marginal cost,and the quantity of insulin sold is ________.

Accepted Answer

A)  equals; efficient 
B)  exceeds; inefficient 
C)  is below; inefficient 
D)  is below; efficient 
E)  exceeds; efficient

Question 2

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

Question 3

The idea that taxpayers with the same ability to pay a tax should pay the same taxes is called

Accepted Answer

A)  progressive taxes. 
B)  regressive taxes. 
C)  horizontal equity. 
D)  vertical equity. 
E)  fair-incidence principle.

Question 4

Consider the market for dining at Mexican restaurants.Suppose the price elasticity of demand for Mexican food is 1.23 and the price elasticity of supply is 0.47.If the government imposes a tax on Mexican food,do buyers or sellers pay most of the tax? Why?

Accepted Answer

The answer of Consider the market for dining at Mexican...

Question 5

The benefits principle of fairness of taxes is the proposition that

Accepted Answer

A)  taxes should only be used to correct market failures. 
B)  people should pay taxes according to how easily they can bear the burden. 
C)  tax systems can only be fair if all people agree on them. 
D)  people should pay taxes equal to their benefit from public services. 
E)  the incidence of taxes should be equal across households.

Question 6

-The figure above shows the market for a life-saving drug.Suppose the government imposes a $150 tax per dose on the drug.Show and describe the impact on the market.Who pays this tax?

Accepted Answer

The answer of 
-The figure above shows the market for...

Question 7

-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.

Question 8

Which of the following is true?
i.If supply is perfectly inelastic,the tax creates no deadweight loss.
ii.The elasticities of supply and demand,not Congress,determine who pays the income tax.
iii.A tax is progressive if the average tax rate falls with income.

Accepted Answer

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

Question 9

The size of the deadweight loss,or excess burden,of a tax depends on the

Accepted Answer

A)  amount of producer surplus but not the amount of consumer surplus because it is the producers who send the tax revenues to the government. 
B)  strength of demand. 
C)  strength of supply. 
D)  elasticities of demand and supply. 
E)  number of demanders and the number of suppliers.

Question 10

If the average tax rate ________ as income increases,then the tax is a ________ tax.

Accepted Answer

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

Question 11

Which resource has the least elastic supply?

Accepted Answer

A)  labor 
B)  capital 
C)  land 
D)  money 
E)  taxes

Question 12

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.

Question 13

-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 S₀ to S₁.The total tax revenue is equal to

Accepted Answer

A)  $400,000. 
B)  $800,000. 
C)  $500,000. 
D)  $200,000. 
E)  More information is needed to determine the total tax revenue.

Question 14

-The above figure shows the labor market for land surveyors.Dave is a land surveyor.If there was no income tax,Dave would work ________ hours per year and the wage rate would be ________ per hour.

Accepted Answer

A)  2000; $28 
B)  1500; $28 
C)  1500; $27 
D)  2000; $30 
E)  1500; $30

Question 15

$$\begin{array} { l c c c c } 
& \begin{array} { c } 
\text { Income } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Taxespaid in } \
\text { State A } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Taxespaid in } \
\text { State B } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Taxespaid in } \
\text { State C } \
\text { (dollars) }
\end{array} \
\hline \text { Adam } & 30,000 & 3,000 & 3,000 & 3,000 \
\text { Aaron } & 50,000 & 5,000 & 7,000 & 4,000 \
\text { Fatima } & 100,000 & 10,000 & 20,000 & 7,000 \
\hline
\end{array}$$
-Adam,Aaron,and Fatima earn,respectively,$30,000,$50,000 and $100,000 per year.The amount of state income taxes they pay on their income depends on which state they choose to live in.The table above shows how much they would pay in taxes in each state.
a.Is the tax in State A progressive,regressive or proportional?
b.Is the tax in State B progressive,regressive or proportional?
c.Is the tax in State C progressive,regressive or proportional?

Accepted Answer

The answer of \[\begin{array} { l c c c c...

Question 16

Neither the demand nor the supply of sugar is perfectly elastic or inelastic.If the government imposes a 5 percent tax on sugar,the

Accepted Answer

A)  price of sugar buyers pay falls by 5 percent. 
B)  price of sugar buyers pay increases by less then 5 percent. 
C)  price of sugar buyers pay does not change. 
D)  quantity of sugar increases. 
E)  price of sugar buyers pay rises by 5 percent.

Question 17

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.

Question 18

-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 S₀ to S₁.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

Question 19

We can see the inefficiencies created by a sales tax because

Accepted Answer

A)  a deadweight loss occurs. 
B)  the tax creates an excess burden. 
C)  at the quantity produced, marginal benefit equals marginal cost. 
D)  Both answers A and B are correct. 
E)  Both answers B and C are correct.

Question 20

For a given elasticity of demand,the less elastic the supply,the

Accepted Answer

A)  larger the deadweight loss from a tax. 
B)  larger the share of a tax paid by the sellers. 
C)  greater the burden on the government from a tax. 
D)  greater is the excess burden from a tax. 
E)  larger the share of a tax paid by the buyers.

Exam 8: Taxes

The figure above shows the demand (D) and supply (S) curves for insulin before any tax is imposed. The government imposes a $0.20 a dose tax on sellers of insulin. -Based on the figure above,at the market equilibrium with the tax,marginal benefit marginal cost,and the quantity of insulin sold is .

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