Exam 4: A : Supply and Demand: Applications and Extensions

A subsidy is defined as

How would an increase in the price of paper influence the market for college textbooks?

A tax is levied on products A and B, both of which have the same price elasticity of supply. The demand for A is more inelastic than is the demand for B. Other things constant, how will this affect the incidence of an excise tax on these products?

The Laffer curve indicates that

An excise tax levied on a product will impose a larger relative burden on consumers (and a smaller relative burden on sellers) when

In 2010 the federal government reduced the Social Security tax withholding rate from 12.4 percent (6.2 percent on both the employer and employee) to 8.4 percent (4.2 percent on both the employer and employee) on the wages of all workers. If the tax were redefined such that the entire 12.4 percent was statutorily levied on employers, economic analysis suggests that the actual burden of the tax would

Which of the following will most likely occur when government price controls fix the price of a good above market equilibrium?

Kathy works full time during the day as an economist and faces a 50 percent marginal tax rate. If Kathy were to get an offer to work a second job in the evenings doing consulting work for a local business for $10,000 per year, how much of this additional income would she be able to keep as net pay after taxes?

When a price ceiling prevents a higher market price from rationing a good,

Which of the following examples illustrates a progressive income tax?

When a price ceiling is imposed below the equilibrium price of a commodity,

The more inelastic the demand for a product, the more likely that the actual benefit of a subsidy granted on the product will

A tax for which the average tax rate remains constant at all levels of income is defined as a

A law establishing a maximum legal price for a good or service (rent controls for example) is known as

Ron works full time as a teacher making $50,000 while his wife Ellen stays at home taking care of their two children. Ron's income puts the family in a tax bracket with a 40 percent marginal tax rate. Ellen receives a full-time job offer as an administrative assistant making $30,000 per year, however to take the job would require the family to start paying $8,000 per year in child care expenses. If Ellen were to accept the job offer, after paying taxes and subtracting child care expenses, by how much would the family's net disposable income increase?

Susan works as an advertising executive for a small business making $40,000 per year and is in a tax bracket with a 30 percent marginal rate. She currently purchases a $5,000 health insurance plan outside of her employer from her net pay. Her employer offers her the option to purchase the same health insurance plan on a pretax basis through the company (in other words, the cost of the health insurance is subtracted out of her gross pay before her taxes are computed). If she decides to do so, the purchase of the $5,000 health insurance plan through her employer would now only cost her how much in terms of a reduction in her net pay?

If the government wants to raise tax revenue and shift most of the tax burden to the sellers it would impose a tax on a good with a

The benefit of a subsidy will go primarily to buyers when the

A progressive tax is defined as a tax for which the

The imposition of price ceilings on a market often results in