Question 1

What is meant by 'tax incidence'?
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Accepted Answer

The answer of What is meant by 'tax incidence'?
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Question 2

Rapid economic growth tends to increase the degree of income mobility.

Accepted Answer

A) True 
 B)False

Question 3

Which formula below would a taxpayer use to calculate marginal tax rate?

Accepted Answer

A)  Total taxable income ÷ by taxes paid 
B)  Taxes paid ÷ total taxable income 
C)  Change in taxes paid ÷ the change in total taxable income 
D)  (Total taxable income - taxes paid) / taxable income

Question 4

An income tax system is ________ if marginal tax rates increase as income increases.

Accepted Answer

A)  progressive 
B)  regressive 
C)  efficient 
D)  equitable

Question 5

'For a given supply curve,the excess burden of a tax will be greater when the demand for a product is less elastic than when the demand is more elastic.' This statement is

Accepted Answer

A)  correct. 
B)  incorrect because the incidence of the tax, not the burden of the tax, is affected by the elasticity of demand. 
C)  incorrect. When demand is less elastic, the burden of the tax is smaller than when the demand is more elastic. 
D)  incorrect. The statement confuses demand with quantity demanded.

Question 6

When the demand for a product is less elastic than the supply,consumers pay the majority of the tax on the product.

Accepted Answer

A) True 
 B)False

Question 7

Explain the effect of price elasticities of supply and demand on tax incidence.
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Accepted Answer

The answer of Explain the effect of price elasticities of...

Question 8

Globalisation is positively associated with

Accepted Answer

A)  poverty. 
B)  declining rates of investment. 
C)  declining standards of living. 
D)  economic growth.

Question 9

All Gini coefficients must lie between 0 and 1.The lower the value,

Accepted Answer

A)  the more unequal the income distribution. 
B)  the closer the income distribution is to being equal. 
C)  the greater the degree of poverty. 
D)  the lower the degree of poverty according to the federal government's definition of poverty.

Question 10

There is a difference between who is legally required to send a tax payment to the government and who bears the burden of the tax.Which of the following would have the most impact on who bears the burden of an excise tax?

Accepted Answer

A)  Whether the tax is imposed by the federal government or a state government 
B)  Whether the tax is based on the ability-to-pay principle or the benefits-received principle 
C)  The motive for the tax. If the tax is designed to raise revenue, more of the burden will fall on firms. If the tax is designed to achieve a social objective (for example, to discourage smoking) more of the burden will fall on consumers. 
D)  The elasticity of demand for the item that is taxed

Question 11

Which of the following summarises the information provided by a Lorenz curve?

Accepted Answer

A)  The Lorenz coefficient 
B)  The income distribution ratio 
C)  The Gini coefficient 
D)  The slope (the rise divided by the run) of the Lorenz curve at a particular point on the curve

Question 12

The actual division of the burden of a tax is called -.

Accepted Answer

A)  tax credit 
B)  tax incidence 
C)  excess burden 
D)  tax dispersion

Question 13

Figure 12.1 
-Refer to Figure 12.1.Area B + C + F + G represents

Accepted Answer

A)  the portion of sales tax revenue borne by consumers. 
B)  the portion of sales tax revenue borne by producers. 
C)  the excess burden of the sales tax. 
D)  sales tax revenue collected by the government.

Question 14

Suppose the government wants to finance housing for low-income families by placing a tax on the purchase of luxury homes.Assume the government defines a luxury home as a home that is purchased for at least $1 million.This tax is consistent with the

Accepted Answer

A)  benefits-received principle. 
B)  social equity principle. 
C)  ability-to-pay principle. 
D)  horizontal-equity principle.

Question 15

Suppose the government imposes an 8 per cent sales tax on clothing items and the tax is levied on sellers.Who pays for the tax in this situation? (Assume that the demand curve is downward sloping and that the supply curve is upward sloping.)

Accepted Answer

A)  The tax is borne entirely by the sellers. 
B)  The sellers will pass on the entire sales tax to consumers, and therefore the consumers bear the tax. 
C)  The tax will be borne partly by consumers and partly by sellers. 
D)  It is not possible to answer the question without information on price elasticities.

Question 16

Last year,Anthony Millanti earned exactly $30 000 of taxable income.Assume that the income tax system used to determine Anthony's tax liability is progressive.The table below lists the tax brackets and the marginal tax rates that apply to each bracket.
a.Draw a new table that lists the amounts of income tax that Anthony is obligated to pay for each tax bracket,and the total tax he owes the government.(Assume that there are no allowable tax deductions,tax credits,personal exemptions,or any other deductions that Anthony can use to reduce his tax liability).
b.Determine Anthony's average tax rate.
 $\begin{array}{|c|c|}
\hline\text { Tax Bracket } & \text { Marginal Tax } \
(\$) & \text { Rate }\
\hline 0-5000 & 0.05(5 \%) \
\hline 5001-10000 & 0.10(10 \%) \
\hline 10001-15 & \
000 & 0.15(15 \%) \
\hline 15001-20 & \
000 & 0.20(20 \%) \
\hline 20001-25 & \
000 & 0.25(25 \%) \
\hline 25001-30 & \
000 & 0.30(30 \%) \
\hline
\end{array}$
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Accepted Answer

The answer of Last year,Anthony Millanti earned exactly $30 000...

Question 17

Which formula below would a taxpayer use to calculate an average tax rate?

Accepted Answer

A)  Taxes paid/total taxable income 
B)  Total taxable income/taxes paid 
C)  Total taxable income × taxes paid 
D)  Total taxable income - taxes paid)/taxable income

Question 18

Policymakers focus on marginal tax rate changes when making changes in the tax code because the marginal tax rate

Accepted Answer

A)  determines how tax revenue will change as national income increases. 
B)  affects people's willingness to work, save, and invest. 
C)  always equals the average tax rate, which is harder to measure. 
D)  determines how much revenue the government will have to spend.

Question 19

For a given supply curve,how does the elasticity of demand affect the burden of a tax imposed on a product?

Accepted Answer

A)  The excess burden of the tax will be minimised when the demand is unit-elastic. 
B)  The excess burden of the tax will be greater when the elasticity of supply is greater than the elasticity of demand. 
C)  The excess burden of the tax will be greater when the demand is less elastic than when it is more elastic. 
D)  The excess burden of the tax will be greater when the demand is more elastic than when it is less elastic.

Question 20

If your income is $92 000 and you pay taxes of $19 475,what is your average tax rate? Show your work.
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Accepted Answer

The answer of If your income is $92 000 and...

Exam 12: Social Policy and Inequality