Question 1

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 2

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

The answer of In the Village of Punjab,Sheryl owns a...

Question 3

The 2010 health care reform included a 10 percent tax on indoor tanning services.This tax would reflect _______ if indoor tanning leads to higher usage of government paid health care services from skin cancer.

Accepted Answer

A)  the benefits principle of taxation 
B)  the ability-to-pay principle of taxation 
C)  horizontal equity 
D)  vertical equity 
E)  a regressive tax

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 figure above shows the impact of an income tax.The revenue collected by the government equals area

Accepted Answer

A)  bce. 
B)  feba. 
C)  fed. 
D)  acf. 
E)  None of the above answers is correct.

Question 6

With a proportional tax,as income increases the amount of tax paid

Accepted Answer

A)  eventually phases out to zero. 
B)  rises as a percentage of income. 
C)  falls as a percentage income. 
D)  remains constant as a percentage of income. 
E)  first rises and then falls as a percentage of income.

Question 7

What is the difference between vertical equity and horizontal equity?

Accepted Answer

The answer of What is the difference between vertical equity...

Question 8

At harvest time the supply of wheat is perfectly inelastic.If the government taxes wheat at $1 a bushel,then

Accepted Answer

A)  the seller pays the entire tax. 
B)  the buyer pays the entire tax. 
C)  the seller and the buyer split the tax evenly. 
D)  the seller and the buyer split the tax but the seller pays more. 
E)  no one pays the tax because the wheat must be harvested or it will go to waste.

Question 9

The largest percentage of the government's tax revenue received comes from

Accepted Answer

A)  personal income taxes. 
B)  property taxes. 
C)  Social Security taxes. 
D)  sales taxes. 
E)  excise taxes.

Question 10

-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

Question 11

Imposing a sales tax on sellers of a product has an effect that is similar to which of the following?

Accepted Answer

A)  a decrease in consumers' preferences for the good 
B)  an increase in the costs of production 
C)  an increase in demand for the good 
D)  a decrease in people's willingness to work 
E)  anything that decreases the demand and shifts the demand curve leftward2

Question 12

If the average tax rate is constant as income increases,then the tax is called

Accepted Answer

A)  regressive. 
B)  progressive. 
C)  proportional. 
D)  an average tax. 
E)  efficient.

Question 13

Vertical equity is the idea that

Accepted Answer

A)  taxpayers with a greater ability to pay should bear a greater share of the taxes. 
B)  people should pay taxes equal to the benefits they receive from public benefits. 
C)  as income rises, taxes should be efficient, not equitable. 
D)  the marriage tax is equitable. 
E)  taxes must be fairest to people with the largest incomes.

Question 14

Which of the following is true?
i.A tax on buyers has the same effect as the same sized tax on sellers.
ii.The more elastic the demand,the larger is the share of the tax paid by the buyers.
iii.The U.S.income tax is regressive.

Accepted Answer

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

Question 15

A tax on income from land in Montana is borne entirely by landowners because the

Accepted Answer

A)  demand for land is perfectly inelastic. 
B)  supply of land is perfectly inelastic. 
C)  supply of land is perfectly elastic. 
D)  demand for land is perfectly elastic. 
E)  deadweight loss from the tax would otherwise be infinite.

Question 16

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

Accepted Answer

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

Question 17

The demand for insulin is quite inelastic.The demand for Pepsi is quite elastic.Suppose the elasticity of supply for insulin is the same as the elasticity of supply for Pepsi.If a $0.20 tax was imposed on each of these goods (holding everything else constant),which consumers would pay more of the tax?

Accepted Answer

A)  the Pepsi consumers 
B)  the insulin consumers 
C)  There would be no difference in the amount of tax paid by the consumers. 
D)  More information is needed to determine which consumers pay more of the tax. 
E)  The premise of the question is wrong because the elasticity of demand and the incidence of a tax are not related.

Question 18

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.

Question 19

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

Accepted Answer

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

Question 20

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.

Exam 8: Taxes

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