Question 1

Determining who bears the burden of the tax is a question about:

Accepted Answer

A) tax incidence. 
B) externality analysis. 
C) public interest theory. 
D) public choice theory. 
A) tax incidence. 
B) externality analysis. 
C) public interest theory. 
D) public choice theory. A

Question 2

The governor wants to levy a $1 excise tax on a product but wants to minimize the deadweight loss.The deadweight loss will be LEAST when the demand curve is _____ and the supply curve is _____.

Accepted Answer

A) elastic;elastic 
B) elastic;inelastic 
C) inelastic;elastic 
D) inelastic;inelastic 
A) elastic;elastic 
B) elastic;inelastic 
C) inelastic;elastic 
D) inelastic;inelastic D

Question 3

Eli has annual earnings of $100,000 and Molly has annual earnings of $50,000.Each consumer goes to the mall and purchases a microwave oven for $100,and each pays an additional 7%,or $7,in sales tax.This tax is:

Accepted Answer

A) regressive. 
B) a wealth tax. 
C) progressive. 
D) a property tax. 
A) regressive. 
B) a wealth tax. 
C) progressive. 
D) a property tax. A

Question 4

Suppose an income tax is levied on none of the first $1,000,10% of the next $9,000,and 20% of the remainder of earnings.How much tax would Miranda have to pay if she earned $20,000?

Accepted Answer

A) $2,900 
B) $5,000 
C) $4,900 
D) $3,000 
A) $2,900 
B) $5,000 
C) $4,900 
D) $3,000

Question 5

A tax system achieves efficiency when:

Accepted Answer

A) the right people actually bear the burden of taxes. 
B) it minimizes the costs to the economy of tax collection. 
C) the tax is fair. 
D) it is in equilibrium. 
A) the right people actually bear the burden of taxes. 
B) it minimizes the costs to the economy of tax collection. 
C) the tax is fair. 
D) it is in equilibrium.

Question 6

Use the following to answer question:  
-(Figure: A Market with a Tax)Use Figure: A Market with a Tax.Before the tax,producer surplus is equal to the areas:

Accepted Answer

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

Question 7

When the government imposes an excise tax,the deadweight loss is caused by:

Accepted Answer

A) equal the tax revenue paid to the government. 
B) be greater than the tax revenue paid to the government. 
C) be less than the tax revenue paid to the government. 
D) prevention of transactions because of the cost of the tax. 
A) equal the tax revenue paid to the government. 
B) be greater than the tax revenue paid to the government. 
C) be less than the tax revenue paid to the government. 
D) prevention of transactions because of the cost of the tax.

Question 8

If personal income up to and including $25,000 is not taxed,income of $25,001 to $50,000 is taxed at 10%,and income over $50,000 is taxed at 25%,a family earning income equal to $60,000 will pay a marginal tax rate of _____% and a average tax rate of _____%.

Accepted Answer

A) 12.5;25 
B) 10;15 
C) 25;8.3 
D) 25;25 
A) 12.5;25 
B) 10;15 
C) 25;8.3 
D) 25;25

Question 9

FICA taxes are considered to be:

Accepted Answer

A) proportional. 
B) progressive. 
C) flat. 
D) regressive. 
A) proportional. 
B) progressive. 
C) flat. 
D) regressive.

Question 10

If the main purpose of a tax is to decrease the amount of a harmful activity,such as underage drinking,the government should impose it on harmful activities whose supply is _____ and demand is _____.

Accepted Answer

A) elastic;elastic 
B) inelastic;inelastic 
C) elastic;inelastic 
D) inelastic;elastic 
A) elastic;elastic 
B) inelastic;inelastic 
C) elastic;inelastic 
D) inelastic;elastic

Question 11

The deadweight loss from an excise tax comes about because:

Accepted Answer

A) the number of transactions in the market is smaller than the no-tax equilibrium. 
B) some mutually beneficial transactions do not take place. 
C) a quota rent exists. 
D) the number of transactions in the market is reduced and some mutually beneficial transactions do not take place. 
A) the number of transactions in the market is smaller than the no-tax equilibrium. 
B) some mutually beneficial transactions do not take place. 
C) a quota rent exists. 
D) the number of transactions in the market is reduced and some mutually beneficial transactions do not take place.

Question 12

Since the terrorist attacks of September 11,2001,the Federal Aviation Agency has added a small security fee to every airplane ticket purchased.This is an example of:

Accepted Answer

A) the benefits principle of tax fairness. 
B) a lump-sum tax. 
C) the ability-to-pay principle of tax fairness. 
D) a profits tax. 
A) the benefits principle of tax fairness. 
B) a lump-sum tax. 
C) the ability-to-pay principle of tax fairness. 
D) a profits tax.

Question 13

If demand for a good is perfectly inelastic,then consumers will bear the entire burden of an excise tax imposed on that good.

Accepted Answer

A) True 
 B)False

Question 14

_____ taxes are paid on wages.

Accepted Answer

A) Income 
B) Profits 
C) Property 
D) Sales 
A) Income 
B) Profits 
C) Property 
D) Sales

Question 15

Tax incidence analysis seeks to determine:

Accepted Answer

A) who sends the tax payment to the government. 
B) who actually pays the tax. 
C) who ultimately gets the tax revenue. 
D) whether a tax is in the benefits-received category or the ability-to-pay category. 
A) who sends the tax payment to the government. 
B) who actually pays the tax. 
C) who ultimately gets the tax revenue. 
D) whether a tax is in the benefits-received category or the ability-to-pay category.

Question 16

A regressive tax takes a:

Accepted Answer

A) fixed percentage of income. 
B) lower percentage of income as income rises. 
C) higher percentage of income as income rises. 
D) lower percentage of income as income falls. 
A) fixed percentage of income. 
B) lower percentage of income as income rises. 
C) higher percentage of income as income rises. 
D) lower percentage of income as income falls.

Question 17

In general,the incidence of an excise tax is shared between buyers and sellers.

Accepted Answer

A) True 
 B)False

Question 18

If an excise tax is imposed on wine and collected from the consumers,the _____ curve will shift _____ by the amount of the tax.

Accepted Answer

A) demand;upward 
B) demand;downward 
C) supply;upward 
D) supply;downward 
A) demand;upward 
B) demand;downward 
C) supply;upward 
D) supply;downward

Question 19

You have to pay a fee every time you use your community swimming pool.This is an example of the _____ principle.

Accepted Answer

A) regressive tax 
B) ability-to-pay 
C) progressive tax 
D) benefits 
A) regressive tax 
B) ability-to-pay 
C) progressive tax 
D) benefits

Question 20

Use the following to answer question:  
-(Table: Three Tax Structure Proposals)Use Table: Three Tax Structure Proposals.If one wished to use a proportional or flat tax structure,one should use proposal _____,in which the percentage of income taxed is _____%.

Accepted Answer

A) 1;20 
B) 2;10 
C) 3;20 
D) 2;20 
A) 1;20 
B) 2;10 
C) 3;20 
D) 2;20

Exam 7: Taxes

Determining who bears the burden of the tax is a question about:

The governor wants to levy a $1 excise tax on a product but wants to minimize the deadweight loss.The deadweight loss will be LEAST when the demand curve is _____ and the supply curve is _____.

Eli has annual earnings of $100,000 and Molly has annual earnings of $50,000.Each consumer goes to the mall and purchases a microwave oven for $100,and each pays an additional 7%,or $7,in sales tax.This tax is:

Suppose an income tax is levied on none of the first $1,000,10% of the next $9,000,and 20% of the remainder of earnings.How much tax would Miranda have to pay if she earned $20,000?

A tax system achieves efficiency when:

Use the following to answer question: -(Figure: A Market with a Tax)Use Figure: A Market with a Tax.Before the tax,producer surplus is equal to the areas:

When the government imposes an excise tax,the deadweight loss is caused by:

If personal income up to and including $25,000 is not taxed,income of $25,001 to $50,000 is taxed at 10%,and income over $50,000 is taxed at 25%,a family earning income equal to $60,000 will pay a marginal tax rate of _____% and a average tax rate of _____%.

FICA taxes are considered to be:

If the main purpose of a tax is to decrease the amount of a harmful activity,such as underage drinking,the government should impose it on harmful activities whose supply is _____ and demand is _____.

The deadweight loss from an excise tax comes about because:

Since the terrorist attacks of September 11,2001,the Federal Aviation Agency has added a small security fee to every airplane ticket purchased.This is an example of:

If demand for a good is perfectly inelastic,then consumers will bear the entire burden of an excise tax imposed on that good.

_____ taxes are paid on wages.

Tax incidence analysis seeks to determine:

A regressive tax takes a:

In general,the incidence of an excise tax is shared between buyers and sellers.

If an excise tax is imposed on wine and collected from the consumers,the _____ curve will shift _____ by the amount of the tax.

You have to pay a fee every time you use your community swimming pool.This is an example of the _____ principle.

Use the following to answer question: -(Table: Three Tax Structure Proposals)Use Table: Three Tax Structure Proposals.If one wished to use a proportional or flat tax structure,one should use proposal _____,in which the percentage of income taxed is _____%.

First Principles

Economic Models: Trade-Offs and Trade

Consumer and Producer Surplus

Supply and Demand

Price Controls and Quotas: Meddling With Markets

Elasticity

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Graphs in Economics

Consumer Preferences and Consumer Choice

Filters

The governor wants to levy a $1 excise tax on a product but wants to minimize the deadweight loss.The deadweight loss will be LEAST when the demand curve is _ and the supply curve is _.

If personal income up to and including $25,000 is not taxed,income of $25,001 to $50,000 is taxed at 10%,and income over $50,000 is taxed at 25%,a family earning income equal to $60,000 will pay a marginal tax rate of _% and a average tax rate of _%.

If the main purpose of a tax is to decrease the amount of a harmful activity,such as underage drinking,the government should impose it on harmful activities whose supply is _ and demand is _.

If an excise tax is imposed on wine and collected from the consumers,the _ curve will shift _ by the amount of the tax.

Use the following to answer question: -(Table: Three Tax Structure Proposals)Use Table: Three Tax Structure Proposals.If one wished to use a proportional or flat tax structure,one should use proposal _,in which the percentage of income taxed is _%.