Question 1

The loss to society resulting from a tax includes the

Accepted Answer

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

Question 2

Suppose that the elasticity of demand for insulin is 0.1, the elasticity of demand for oranges is 1.2, and the elasticity of supply for insulin and oranges is 0.4.If the government imposes a 10 percent tax on both insulin and oranges, the decrease in the quantity of oranges is ________ the decrease in the quantity of insulin.

Accepted Answer

A) larger than 
B) smaller than 
C) equals to 
D) not comparable to 
E) More information is needed to determine how the decrease in the quantity of oranges compares to the decrease in the quantity of insulin. 
A) larger than 
B) smaller than 
C) equals to 
D) not comparable to 
E) More information is needed to determine how the decrease in the quantity of oranges compares to the decrease in the quantity of insulin. A

Question 3

To levy a tax based on the benefits principle to pay for a bridge, the government

Accepted Answer

A) would impose an income tax instead of a social security tax on workers. 
B) would impose a social security tax on workers instead of an income tax. 
C) needs to know each person's benefit from the bridge. 
D) needs to be able to calculate the deadweight loss of a tax. 
E) cannot impose the tax on anyone who uses the bridge. 
A) would impose an income tax instead of a social security tax on workers. 
B) would impose a social security tax on workers instead of an income tax. 
C) needs to know each person's benefit from the bridge. 
D) needs to be able to calculate the deadweight loss of a tax. 
E) cannot impose the tax on anyone who uses the bridge. C

Question 4

When a product is taxed,

Accepted Answer

A) part of the initial consumer surplus goes to the government as revenue. 
B) part of the initial consumer surplus becomes a deadweight loss. 
C) the producer surplus never changes because consumers pay taxes, not producers. 
D) Both answers A and B are correct. 
E) Both answers B and C are correct. 
A) part of the initial consumer surplus goes to the government as revenue. 
B) part of the initial consumer surplus becomes a deadweight loss. 
C) the producer surplus never changes because consumers pay taxes, not producers. 
D) Both answers A and B are correct. 
E) Both answers B and C are correct.

Question 5

A sales tax on cigarettes would likely decrease the quantity demanded by a smaller amount

Accepted Answer

A) for smokers who view cigarettes as a necessity. 
B) for smokers who are not addicted. 
C) for smokers with smaller incomes. 
D) the longer the time elapsed. 
E) for smokers who view cigarettes as a luxury. 
A) for smokers who view cigarettes as a necessity. 
B) for smokers who are not addicted. 
C) for smokers with smaller incomes. 
D) the longer the time elapsed. 
E) for smokers who view cigarettes as a luxury.

Question 6

Why do sellers pay all of a tax when supply is perfectly inelastic?

Accepted Answer

A) because a perfectly inelastic supply means that the demand is elastic 
B) because the government requires firms to collect the tax 
C) because a perfectly inelastic supply means that the quantity supplied is quite sensitive to a change in price 
D) because a perfectly inelastic supply means that suppliers will produce the same amount regardless of the price 
E) because in this case the price of the good that suppliers receive and keep does not change 
A) because a perfectly inelastic supply means that the demand is elastic 
B) because the government requires firms to collect the tax 
C) because a perfectly inelastic supply means that the quantity supplied is quite sensitive to a change in price 
D) because a perfectly inelastic supply means that suppliers will produce the same amount regardless of the price 
E) because in this case the price of the good that suppliers receive and keep does not change

Question 7

If buyers pay more of a tax than do the sellers,

Accepted Answer

A) demand is more elastic than supply. 
B) the amount of tax revenue collected by the government is almost zero. 
C) supply is more elastic than demand. 
D) the equilibrium price paid by buyers rises by less than half the amount of the tax. 
E) None of the above answers is correct. 
A) demand is more elastic than supply. 
B) the amount of tax revenue collected by the government is almost zero. 
C) supply is more elastic than demand. 
D) the equilibrium price paid by buyers rises by less than half the amount of the tax. 
E) None of the above answers is correct.

Question 8

Joan's income is $60,000 and she pays $6,000 in taxes.Juan's income is $40,000 and he pays $7,000 in taxes.This situation violates

Accepted Answer

A) the benefits principle. 
B) the big tradeoff. 
C) vertical equity. 
D) horizontal equity. 
E) the fair-tax incidence principle. 
A) the benefits principle. 
B) the big tradeoff. 
C) vertical equity. 
D) horizontal equity. 
E) the fair-tax incidence principle.

Question 9

Which of the following types of taxes generates the most revenue for governments in the United States?

Accepted Answer

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

Question 10

Sellers bear the entire incidence of a tax on a good.This outcome can occur if

Accepted Answer

A) supply is perfectly inelastic. 
B) the good is an inferior good. 
C) demand is perfectly inelastic. 
D) the demand curve is downward sloping and the supply curve is upward sloping. 
E) supply is perfectly elastic. 
A) supply is perfectly inelastic. 
B) the good is an inferior good. 
C) demand is perfectly inelastic. 
D) the demand curve is downward sloping and the supply curve is upward sloping. 
E) supply is perfectly elastic.

Question 11

The tax ________ the price paid by the buyer by ________ per MP3 player.

Accepted Answer

A) raises; $5 
B) lowers; $5 
C) raises; $10 
D) lowers; $10 
E) raises; $7.50 
A) raises; $5 
B) lowers; $5 
C) raises; $10 
D) lowers; $10 
E) raises; $7.50

Question 12

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) equals 
B) is greater than 
C) is less than 
D) can be calculated but is not comparable to 
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) equals 
B) is greater than 
C) is less than 
D) can be calculated but is not comparable to 
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 13

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 
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 14

"For the U.S.personal income tax, the average tax rate is greater than the marginal tax rate." Is the previous statement correct or incorrect?

Accepted Answer

The statement is incorrect.The U.S.perso

Question 15

Because the U.S.income tax is a progressive tax, taxing married couples as two single persons can violate

Accepted Answer

A) the benefits principle. 
B) the ability-to-pay imperative. 
C) vertical equity. 
D) horizontal equity. 
E) the government's need for more revenue. 
A) the benefits principle. 
B) the ability-to-pay imperative. 
C) vertical equity. 
D) horizontal equity. 
E) the government's need for more revenue.

Question 16

The deadweight loss of a tax

Accepted Answer

A) is the transfer of income from households to the government. 
B) determines the incidence of a tax. 
C) is part of the total burden of a tax. 
D) is greater than the total burden of a tax. 
E) equals the tax revenue collected by the government. 
A) is the transfer of income from households to the government. 
B) determines the incidence of a tax. 
C) is part of the total burden of a tax. 
D) is greater than the total burden of a tax. 
E) equals the tax revenue collected by the government.

Question 17

What is the difference between vertical equity and horizontal equity?

Accepted Answer

Vertical equity is the requirement that

Question 18

The benefits principle of fairness of taxes is the proposition that

Accepted Answer

A) taxes should only be used to correct market failures. 
B) people should pay taxes according to how easily they can bear the burden. 
C) tax systems can only be fair if all people agree on them. 
D) people should pay taxes equal to their benefit from public services. 
E) the incidence of taxes should be equal across households. 
A) taxes should only be used to correct market failures. 
B) people should pay taxes according to how easily they can bear the burden. 
C) tax systems can only be fair if all people agree on them. 
D) people should pay taxes equal to their benefit from public services. 
E) the incidence of taxes should be equal across households.

Question 19

-The figure above shows the market for tires.The figure shows that the government has imposed a tax of ________ per tire and that ________ pay most of the tax.

Accepted Answer

A) $30; buyers 
B) $40; buyers 
C) $30; sellers 
D) $60; sellers 
E) $60; buyers 
A) $30; buyers 
B) $40; buyers 
C) $30; sellers 
D) $60; sellers 
E) $60; buyers

Question 20

-In the labor market shown in the graph, the government introduces a 10 percent income tax.The employer pays ________ cents of the tax and the employee pays ________ cents of the tax.

Accepted Answer

A) 45; 50 
B) 95; 0 
C) 0; 95 
D) 50; 45 
E) 42.5; 42.5 
A) 45; 50 
B) 95; 0 
C) 0; 95 
D) 50; 45 
E) 42.5; 42.5

The loss to society resulting from a tax includes the

To levy a tax based on the benefits principle to pay for a bridge, the government

When a product is taxed,

A sales tax on cigarettes would likely decrease the quantity demanded by a smaller amount

Why do sellers pay all of a tax when supply is perfectly inelastic?

If buyers pay more of a tax than do the sellers,

Joan's income is $60,000 and she pays $6,000 in taxes.Juan's income is $40,000 and he pays $7,000 in taxes.This situation violates

Which of the following types of taxes generates the most revenue for governments in the United States?

Sellers bear the entire incidence of a tax on a good.This outcome can occur if

The tax the price paid by the buyer by per MP3 player.

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

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

"For the U.S.personal income tax, the average tax rate is greater than the marginal tax rate." Is the previous statement correct or incorrect?

Because the U.S.income tax is a progressive tax, taxing married couples as two single persons can violate

The deadweight loss of a tax

What is the difference between vertical equity and horizontal equity?

The benefits principle of fairness of taxes is the proposition that

-The figure above shows the market for tires.The figure shows that the government has imposed a tax of per tire and that pay most of the tax.

-In the labor market shown in the graph, the government introduces a 10 percent income tax.The employer pays cents of the tax and the employee pays cents of the tax.

Getting Started

The Usand 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

Markets With Private Information

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 loss to society resulting from a tax includes the

To levy a tax based on the benefits principle to pay for a bridge, the government

When a product is taxed,

A sales tax on cigarettes would likely decrease the quantity demanded by a smaller amount

Why do sellers pay all of a tax when supply is perfectly inelastic?

If buyers pay more of a tax than do the sellers,

Joan's income is $60,000 and she pays $6,000 in taxes.Juan's income is $40,000 and he pays $7,000 in taxes.This situation violates

Which of the following types of taxes generates the most revenue for governments in the United States?

Sellers bear the entire incidence of a tax on a good.This outcome can occur if

The tax ________ the price paid by the buyer by ________ per MP3 player.

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

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

"For the U.S.personal income tax, the average tax rate is greater than the marginal tax rate." Is the previous statement correct or incorrect?

Because the U.S.income tax is a progressive tax, taxing married couples as two single persons can violate

The deadweight loss of a tax

What is the difference between vertical equity and horizontal equity?

The benefits principle of fairness of taxes is the proposition that

-The figure above shows the market for tires.The figure shows that the government has imposed a tax of ________ per tire and that ________ pay most of the tax.

-In the labor market shown in the graph, the government introduces a 10 percent income tax.The employer pays ________ cents of the tax and the employee pays ________ cents of the tax.

Getting Started

The Usand 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

Markets With Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

The tax the price paid by the buyer by per MP3 player.

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

-The figure above shows the market for tires.The figure shows that the government has imposed a tax of per tire and that pay most of the tax.

-In the labor market shown in the graph, the government introduces a 10 percent income tax.The employer pays cents of the tax and the employee pays cents of the tax.