Question 1

A tax system with a low marginal tax rate generates less deadweight loss and is more efficient than a similar tax system with a higher marginal tax rate.

Accepted Answer

A) True 
 B)False  True

Question 2

Since the supply of undeveloped land is relatively inelastic, a tax on undeveloped land would generate

Accepted Answer

A)  a small deadweight loss and the burden of the tax would fall on the renter. 
B)  a large deadweight loss and the burden of the tax would fall on the landlord. 
C)  a large deadweight loss and the burden of the tax would fall on the renter. 
D)  a small deadweight loss and the burden of the tax would fall on the landlord. 
A)  a small deadweight loss and the burden of the tax would fall on the renter. 
B)  a large deadweight loss and the burden of the tax would fall on the landlord. 
C)  a large deadweight loss and the burden of the tax would fall on the renter. 
D)  a small deadweight loss and the burden of the tax would fall on the landlord. D

Question 3

A larger tax always generates a larger deadweight loss.

Accepted Answer

A) True 
 B)False  True

Question 4

Why do some economists advocate taxing consumption rather than income?

Accepted Answer

Some economists advocate taxing consumpt

Question 5

An efficient tax is one that generates minimal deadweight losses and minimal administrative burdens.

Accepted Answer

A) True 
 B)False

Question 6

The marginal tax rate is

Accepted Answer

A)  the taxes paid by the marginal worker. 
B)  total income divided by total taxes paid. 
C)  the extra taxes paid on an additional unit of income. 
D)  total taxes paid divided by total income. 
A)  the taxes paid by the marginal worker. 
B)  total income divided by total taxes paid. 
C)  the extra taxes paid on an additional unit of income. 
D)  total taxes paid divided by total income.

Question 7

Use the following graph shown to fill in the table that follows.   $\begin{array}{|l|l|l|l|}
\hline & \text { WITHOUT TAX } & \text { WITH TAX } & \text { CHANGE } \
\hline \text { Consumer surplus } & & & \
\hline \text { Producer surplus } & & & \
\hline \text { Tax revenue } & & & \
\hline \text { Total surplus } & & & \
\hline
\end{array}$

Accepted Answer

None

Question 8

A per-unit tax on a good creates deadweight loss because

Accepted Answer

A)  it makes demand more price inelastic. 
B)  it makes supply more price elastic. 
C)  by increasing the price consumers pay, and reducing the price sellers receive, it prevents some mutually beneficial trades. 
D)  the government wastes the tax revenues it receives. 
A)  it makes demand more price inelastic. 
B)  it makes supply more price elastic. 
C)  by increasing the price consumers pay, and reducing the price sellers receive, it prevents some mutually beneficial trades. 
D)  the government wastes the tax revenues it receives.

Question 9

The ability-to-pay principle of taxation suggests that if a tax system is to be vertically equitable, it should be

Accepted Answer

A)  efficient. 
B)  progressive. 
C)  regressive. 
D)  proportional. 
E)  lump-sum. 
A)  efficient. 
B)  progressive. 
C)  regressive. 
D)  proportional. 
E)  lump-sum.

Question 10

Which of the following is true with regard to a tax on labour income? Taxes on labour income tend to encourage

Accepted Answer

A)  the unscrupulous to enter the underground economy. 
B)  the elderly to retire early. 
C)  all of the things described in these answers. 
D)  second earners to stay home. 
E)  workers to work fewer hours. 
A)  the unscrupulous to enter the underground economy. 
B)  the elderly to retire early. 
C)  all of the things described in these answers. 
D)  second earners to stay home. 
E)  workers to work fewer hours.

Question 11

In what way is raising tax on food a good way and bad way to raise revenue?

Accepted Answer

Since the demand for food is price inela

Question 12

A tax is __________ if it takes a smaller fraction of income as income rises.

Accepted Answer

A)  regressive 
B)  proportional 
C)  progressive 
D)  aggressive 
A)  regressive 
B)  proportional 
C)  progressive 
D)  aggressive

Question 13

Lump-sum taxes are equitable but not efficient.

Accepted Answer

A) True 
 B)False

Question 14

Why do experts disagree about whether labour taxes have small or large deadweight losses?

Accepted Answer

Experts disagree about whether labour ta

Question 15

If a tax on a good is doubled, the deadweight loss from the tax

Accepted Answer

A)  doubles. 
B)  stays the same. 
C)  increases by a factor of four. 
D)  could rise or fall. 
A)  doubles. 
B)  stays the same. 
C)  increases by a factor of four. 
D)  could rise or fall.

Question 16

When a tax is placed on a good, the revenue the government collects is exactly equal to the loss of consumer and producer surplus from the tax.

Accepted Answer

A) True 
 B)False

Question 17

Refer to the table below. The average tax rate for a taxpayer earning €40,000 (rounded up) is

Accepted Answer

A)  0 per cent. 
B)  5 per cent 
C)  7 per cent 
D)  12 per cent 
E)  14 per cent 
A)  0 per cent. 
B)  5 per cent 
C)  7 per cent 
D)  12 per cent 
E)  14 per cent

Question 18

John has been gardening for Sally once a week for €20. John's opportunity cost is €15, and Sally would be willing to pay €25 for the gardening tasks. What is the maximum tax the government could impose on gardening without discouraging John and Sally from continuing their mutually beneficial arrangement?

Accepted Answer

If the tax is less than €10, there will

Question 19

A government raises €100m through a €0.05 tax on widgets. It raises another €100m through a €0.10 tax on gadgets. It decides to eliminate the tax on gadgets and double the tax on widgets. Would it raise more, les or the same amount of money in tax revenue? Explain your answer.

Accepted Answer

Since the tax on gadgets was eliminated,

Question 20

Which of the following taxes is the most efficient tax?

Accepted Answer

A)  a consumption tax 
B)  a lump-sum tax 
C)  a progressive income tax 
D)  a proportional income tax 
A)  a consumption tax 
B)  a lump-sum tax 
C)  a progressive income tax 
D)  a proportional income tax

Exam 9: The Tax System

A tax system with a low marginal tax rate generates less deadweight loss and is more efficient than a similar tax system with a higher marginal tax rate.

Since the supply of undeveloped land is relatively inelastic, a tax on undeveloped land would generate

A larger tax always generates a larger deadweight loss.

Why do some economists advocate taxing consumption rather than income?

An efficient tax is one that generates minimal deadweight losses and minimal administrative burdens.

The marginal tax rate is

Use the following graph shown to fill in the table that follows. WITHOUT TAX WITH TAX CHANGE Consumer surplus Producer surplus Tax revenue Total surplus

A per-unit tax on a good creates deadweight loss because

The ability-to-pay principle of taxation suggests that if a tax system is to be vertically equitable, it should be

Which of the following is true with regard to a tax on labour income? Taxes on labour income tend to encourage

In what way is raising tax on food a good way and bad way to raise revenue?

A tax is __________ if it takes a smaller fraction of income as income rises.

Lump-sum taxes are equitable but not efficient.

Why do experts disagree about whether labour taxes have small or large deadweight losses?

If a tax on a good is doubled, the deadweight loss from the tax

When a tax is placed on a good, the revenue the government collects is exactly equal to the loss of consumer and producer surplus from the tax.

Refer to the table below. The average tax rate for a taxpayer earning €40,000 (rounded up) is

A government raises €100m through a €0.05 tax on widgets. It raises another €100m through a €0.10 tax on gadgets. It decides to eliminate the tax on gadgets and double the tax on widgets. Would it raise more, les or the same amount of money in tax revenue? Explain your answer.

Which of the following taxes is the most efficient tax?

What Is Economics

Thinking Like an Economist

The Market Forces of Supply and Demand

Elasticity and Its Applications

Background to Demand: Consumer Choices

Background to Supply: Firms in Competitive Markets

Consumers, Producers and the Efficiency of Markets

Supply, Demand and Government Policies

Public Goods, Common Resources and Merit Goods

Market Failure and Externalities

Information and Behavioural Economics

Firms Production Decisions

Market Structures I: Monopoly

Market Structures Ii: Monopolistic Competition

Market Structures Iii: Oligopoly

The Economics of Factor Markets

Income Inequality and Poverty

Interdependence and the Gains From Trade

Measuring a Nations Well-Being

Measuring the Cost of Living

Production and Growth

Unemployment

Saving, Investment and the Financial System

The Basic Tools of Finance

Issues in Financial Markets

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Business Cycles

Keynesian Economics and the Is-Lm Analysis

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Supply-Side Policies

Common Currency Areas and European Monetary Union

The Financial Crisis and Sovereign Debt

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