Question 1

-The above figure shows the labour market for surveyors. The total amount collected as taxes equals

Accepted Answer

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

Question 2

-The figure above shows the labour supply and labour demand curves for personal trainers in Victoria. The initial equilibrium hourly wage is $10. The government of Victoria institutes an additional income tax on the income of personal trainers of $6 an hour in order to fund school sports programs. With the tax in place, the labour supply curve will

Accepted Answer

A)  shift to LS2. 
B)  shift to LS1. 
C)  remain at LS. 
D)  change so that it becomes the same as LD. 
E)  None of the above answers is correct. 
A)  shift to LS2. 
B)  shift to LS1. 
C)  remain at LS. 
D)  change so that it becomes the same as LD. 
E)  None of the above answers is correct. B

Question 3

The buyers pay all of a tax when the demand is

Accepted Answer

A)  perfectly elastic. 
B)  perfectly inelastic. 
C)  more inelastic than the supply. 
D)  unit elastic. 
E)  more elastic than the supply. 
A)  perfectly elastic. 
B)  perfectly inelastic. 
C)  more inelastic than the supply. 
D)  unit elastic. 
E)  more elastic than the supply. B

Question 4

If the average tax rate increases as income increases, then the

Accepted Answer

A)  tax is a regressive tax. 
B)  income is tax exempt so that no tax needs to be paid on it. 
C)  tax is a progressive tax. 
D)  tax is a proportional tax. 
E)  marginal tax rate must be falling as income increases. 
A)  tax is a regressive tax. 
B)  income is tax exempt so that no tax needs to be paid on it. 
C)  tax is a progressive tax. 
D)  tax is a proportional tax. 
E)  marginal tax rate must be falling as income increases.

Question 5

-The above figure shows the demand curves in four different markets. If each of the markets has an identical upward-sloping supply curve and the same tax is levied on suppliers, which market would produce the largest amount of deadweight loss?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
E)  C and D 
A)  A 
B)  B 
C)  C 
D)  D 
E)  C and D

Question 6

Suppose the elasticity of demand for takeaway food is 3.00 and the elasticity of supply is 1.20. If the government imposes a sales tax on takeaway food to promote healthy eating, which of the following occurs? i. Less takeaway food is purchased by buyers.
Ii) Less takeaway food is produced by sellers.
Iii) The government receives the excess burden as revenue.
Iv) Both the consumer surplus and the producer surplus decrease.

Accepted Answer

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

Question 7

A tax on the income from land or other resource with a perfectly inelastic supply

Accepted Answer

A)  is paid entirely by the owner. 
B)  is efficient because it does not decrease the equilibrium quantity. 
C)  has no deadweight loss. 
D)  Only answers A and B are correct. 
E)  Answers A, B and C are correct. 
A)  is paid entirely by the owner. 
B)  is efficient because it does not decrease the equilibrium quantity. 
C)  has no deadweight loss. 
D)  Only answers A and B are correct. 
E)  Answers A, B and C are correct.

Question 8

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

Accepted Answer

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

Question 9

When a tax is imposed on a good, at the after-tax equilibrium the marginal benefit of the last unit produced ________ the marginal cost.

Accepted Answer

A)  is less than 
B)  can be calculated but is not comparable to 
C)  is greater than 
D)  equals 
E)  The premise of the question is incorrect because after a tax is imposed, it becomes impossible to determine the marginal benefit and the marginal cost. 
A)  is less than 
B)  can be calculated but is not comparable to 
C)  is greater than 
D)  equals 
E)  The premise of the question is incorrect because after a tax is imposed, it becomes impossible to determine the marginal benefit and the marginal cost.

Question 10

To calculate the revenue the government receives when a tax is imposed on a good, multiply the

Accepted Answer

A)  after-tax equilibrium price by the after-tax quantity. 
B)  after-tax equilibrium price by the after-tax quantity and then subtract the pre-tax equilibrium price multiplied by the pre-tax quantity. 
C)  tax by the pre-tax quantity. 
D)  pre-tax equilibrium price by the pre-tax quantity. 
E)  tax by the after-tax quantity. 
A)  after-tax equilibrium price by the after-tax quantity. 
B)  after-tax equilibrium price by the after-tax quantity and then subtract the pre-tax equilibrium price multiplied by the pre-tax quantity. 
C)  tax by the pre-tax quantity. 
D)  pre-tax equilibrium price by the pre-tax quantity. 
E)  tax by the after-tax quantity.

Question 11

Suppose the elasticity of demand for a product is 0 and elasticity of supply is 1. If the government imposes a tax on the product, then

Accepted Answer

A)  buyers and sellers pay exactly the same share of the tax. 
B)  buyers pay a smaller share of the tax than sellers, but both buyers and sellers pay some of the tax. 
C)  sellers pay all of the tax. 
D)  buyers pay all of the tax. 
E)  because the elasticity of demand is zero, the government collects no revenue from this tax. 
A)  buyers and sellers pay exactly the same share of the tax. 
B)  buyers pay a smaller share of the tax than sellers, but both buyers and sellers pay some of the tax. 
C)  sellers pay all of the tax. 
D)  buyers pay all of the tax. 
E)  because the elasticity of demand is zero, the government collects no revenue from this tax.

Question 12

The buyer will pay the entire tax levied on a good when the demand for the good is ________ or when the supply of the good is ________.

Accepted Answer

A)  perfectly elastic; perfectly inelastic 
B)  unit elastic; unit elastic 
C)  perfectly elastic; perfectly elastic 
D)  perfectly inelastic; perfectly elastic 
E)  perfectly inelastic; perfectly inelastic 
A)  perfectly elastic; perfectly inelastic 
B)  unit elastic; unit elastic 
C)  perfectly elastic; perfectly elastic 
D)  perfectly inelastic; perfectly elastic 
E)  perfectly inelastic; perfectly inelastic

Question 13

Which of the following is an example of a tax following the benefits principle? i. Sales taxes on petrol used to fund road maintenance projects.
Ii) Federal income tax used to provide income support for poorer households.
Iii) Property taxes used to finance public education.

Accepted Answer

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

Question 14

Consider a payroll tax paid by workers versus a payroll tax paid by employers. In comparing the outcomes of each type of tax, we see that

Accepted Answer

A)  workers receive a higher take-home wage when the tax is imposed on employers than when the tax is imposed on workers. 
B)  employers pay a lower total wage when the tax is imposed on workers. 
C)  employment decreases by more when the tax is imposed on employers than when the tax is imposed on workers. 
D)  workers receive the same take-home wage when the tax is imposed on workers and when the tax is imposed on employers. 
E)  employment decreases by more when the tax is imposed on workers than when the tax is imposed on employers. 
A)  workers receive a higher take-home wage when the tax is imposed on employers than when the tax is imposed on workers. 
B)  employers pay a lower total wage when the tax is imposed on workers. 
C)  employment decreases by more when the tax is imposed on employers than when the tax is imposed on workers. 
D)  workers receive the same take-home wage when the tax is imposed on workers and when the tax is imposed on employers. 
E)  employment decreases by more when the tax is imposed on workers than when the tax is imposed on employers.

Question 15

Ann pays $3,850 in taxes on an income of $38,500. Therefore her

Accepted Answer

A)  proportional tax rate is undefined. 
B)  marginal tax rate must be 10 per cent. 
C)  average tax rate must be 10 per cent. 
D)  personal exemption is 10 per cent. 
E)  taxes must be progressive in nature. 
A)  proportional tax rate is undefined. 
B)  marginal tax rate must be 10 per cent. 
C)  average tax rate must be 10 per cent. 
D)  personal exemption is 10 per cent. 
E)  taxes must be progressive in nature.

Question 16

The loss to society resulting from a tax includes the

Accepted Answer

A)  consumer surplus paid to the government in the form of tax revenue. 
B)  deadweight loss. 
C)  deadweight loss minus the tax revenue collected by the government. 
D)  deadweight loss plus the consumer surplus and producer surplus paid to the government as tax revenue. 
E)  producer surplus paid to the government in the form of tax revenue. 
A)  consumer surplus paid to the government in the form of tax revenue. 
B)  deadweight loss. 
C)  deadweight loss minus the tax revenue collected by the government. 
D)  deadweight loss plus the consumer surplus and producer surplus paid to the government as tax revenue. 
E)  producer surplus paid to the government in the form of tax revenue.

Question 17

Which of the following taxes best illustrates the benefits principle of taxation?

Accepted Answer

A)  State income tax used to fund state universities. 
B)  The Medicare levy imposed on all workers to fund health care. 
C)  Petrol taxes used to fund road repairs. 
D)  Sales tax on clothing used to fund food stamps. 
E)  Federal income tax used to fund defence spending. 
A)  State income tax used to fund state universities. 
B)  The Medicare levy imposed on all workers to fund health care. 
C)  Petrol taxes used to fund road repairs. 
D)  Sales tax on clothing used to fund food stamps. 
E)  Federal income tax used to fund defence spending.

Question 18

The supply of sand is perfectly inelastic and the demand curve for sand is downward sloping. Hence, if a tax on sand is imposed,

Accepted Answer

A)  sand buyers pay the entire tax. 
B)  the tax is split evenly between the buyers and sellers. 
C)  sand sellers pay the entire tax. 
D)  the government pays the entire tax. 
E)  the government collects no tax revenue because the supply is perfectly inelastic. 
A)  sand buyers pay the entire tax. 
B)  the tax is split evenly between the buyers and sellers. 
C)  sand sellers pay the entire tax. 
D)  the government pays the entire tax. 
E)  the government collects no tax revenue because the supply is perfectly inelastic.

Question 19

-The above figure shows the market for gourmet ice cream. In an effort to reduce obesity, the government places a $2 tax per litre on suppliers in this market, shifting the supply curve from S0 to S1. The tax incidence is

Accepted Answer

A)  split equally between consumers and producers, each paying $2 per litre. 
B)  such that producers pay all of the tax. 
C)  such that consumers pay $1 per litre and producers pay $2 per litre. 
D)  split equally between consumers and producers, each paying $1 per litre. 
E)  such that consumers pay $2 per litre and producers pay $1 per litre. 
A)  split equally between consumers and producers, each paying $2 per litre. 
B)  such that producers pay all of the tax. 
C)  such that consumers pay $1 per litre and producers pay $2 per litre. 
D)  split equally between consumers and producers, each paying $1 per litre. 
E)  such that consumers pay $2 per litre and producers pay $1 per litre.

Question 20

-The above figure shows the market for gourmet ice cream. In an effort to reduce obesity, the government places a $2 tax per litre on suppliers in this market, shifting the supply curve from S0 to S1. The quantity of ice cream consumed before the tax is ________ litres and the quantity consumed after the tax is ________ litres.

Accepted Answer

A)  200,000; 300,000 
B)  300,000; 200,000 
C)  250,000; 200,000 
D)  200,000; 250,000 
E)  200,000; 200,000 
A)  200,000; 300,000 
B)  300,000; 200,000 
C)  250,000; 200,000 
D)  200,000; 250,000 
E)  200,000; 200,000

-The above figure shows the labour market for surveyors. The total amount collected as taxes equals

The buyers pay all of a tax when the demand is

If the average tax rate increases as income increases, then the

-The above figure shows the demand curves in four different markets. If each of the markets has an identical upward-sloping supply curve and the same tax is levied on suppliers, which market would produce the largest amount of deadweight loss?

A tax on the income from land or other resource with a perfectly inelastic supply

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

When a tax is imposed on a good, at the after-tax equilibrium the marginal benefit of the last unit produced ________ the marginal cost.

To calculate the revenue the government receives when a tax is imposed on a good, multiply the

Suppose the elasticity of demand for a product is 0 and elasticity of supply is 1. If the government imposes a tax on the product, then

The buyer will pay the entire tax levied on a good when the demand for the good is or when the supply of the good is .

Which of the following is an example of a tax following the benefits principle? i. Sales taxes on petrol used to fund road maintenance projects. Ii) Federal income tax used to provide income support for poorer households. Iii) Property taxes used to finance public education.

Consider a payroll tax paid by workers versus a payroll tax paid by employers. In comparing the outcomes of each type of tax, we see that

Ann pays $3,850 in taxes on an income of $38,500. Therefore her

The loss to society resulting from a tax includes the

Which of the following taxes best illustrates the benefits principle of taxation?

The supply of sand is perfectly inelastic and the demand curve for sand is downward sloping. Hence, if a tax on sand is imposed,

-The above figure shows the market for gourmet ice cream. In an effort to reduce obesity, the government places a $2 tax per litre on suppliers in this market, shifting the supply curve from S0 to S1. The tax incidence is

Getting Started

The Australian and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities

Public Goods and Common Resources

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 8: Taxes

-The above figure shows the labour market for surveyors. The total amount collected as taxes equals

The buyers pay all of a tax when the demand is

If the average tax rate increases as income increases, then the

-The above figure shows the demand curves in four different markets. If each of the markets has an identical upward-sloping supply curve and the same tax is levied on suppliers, which market would produce the largest amount of deadweight loss?

A tax on the income from land or other resource with a perfectly inelastic supply

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

When a tax is imposed on a good, at the after-tax equilibrium the marginal benefit of the last unit produced ________ the marginal cost.

To calculate the revenue the government receives when a tax is imposed on a good, multiply the

Suppose the elasticity of demand for a product is 0 and elasticity of supply is 1. If the government imposes a tax on the product, then

The buyer will pay the entire tax levied on a good when the demand for the good is ________ or when the supply of the good is ________.

Which of the following is an example of a tax following the benefits principle? i. Sales taxes on petrol used to fund road maintenance projects. Ii) Federal income tax used to provide income support for poorer households. Iii) Property taxes used to finance public education.

Consider a payroll tax paid by workers versus a payroll tax paid by employers. In comparing the outcomes of each type of tax, we see that

Ann pays $3,850 in taxes on an income of $38,500. Therefore her

The loss to society resulting from a tax includes the

Which of the following taxes best illustrates the benefits principle of taxation?

The supply of sand is perfectly inelastic and the demand curve for sand is downward sloping. Hence, if a tax on sand is imposed,

-The above figure shows the market for gourmet ice cream. In an effort to reduce obesity, the government places a $2 tax per litre on suppliers in this market, shifting the supply curve from S0 to S1. The tax incidence is

Getting Started

The Australian and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities

Public Goods and Common Resources

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

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

The buyer will pay the entire tax levied on a good when the demand for the good is or when the supply of the good is .