Question 1

A linear income tax schedule is known as

Accepted Answer

A) a flat income tax. 
B) a regressive tax. 
C) a Haig-Simons tax. 
D) a user fee. 
A) a flat income tax. 
B) a regressive tax. 
C) a Haig-Simons tax. 
D) a user fee.

Question 2

Choosing optimal user fees for government produced services is similar to choosing optimal taxes.

Accepted Answer

A) True 
 B)False

Question 3

The idea of two individuals being equally well off in the absence and existence of taxation is

Accepted Answer

A) time consistency of optimal taxation. 
B) flat tax income schedule. 
C) benefits received principle. 
D) utility definition of horizontal equity. 
A) time consistency of optimal taxation. 
B) flat tax income schedule. 
C) benefits received principle. 
D) utility definition of horizontal equity.

Question 4

Consider a monopolist that has a total cost curve of TC=110Q - (0.25)Q2.The market demand equation is Qd = 155 - P.
(A)What are the total revenue,marginal revenue,marginal cost,equilibrium quantity,equilibrium price,and profits for the monopolist in this market?
(B)Suppose the government instructs the firm to produce using average cost pricing.What are the equilibrium quantity,equilibrium price,and profits?
(C)Suppose further that the government wants the firm to produce where supply equals demand.What will be the equilibrium quantity,equilibrium price,and profits?

Accepted Answer

Price can be written as P = 155 - Q.
(A)

Question 5

-Refer to Figure 16.5.If the marginal cost of underreporting can be written as MC = X2 + 0.4.
(A)What is the maximum marginal tax level (t)possible that will ensure tax evasion is zero?
(B)If the Marginal Tax rate is equal to 0.56,how much income will be evaded?

Accepted Answer

(A)t* < 0.40
(B)Set

Question 6

Ms.Mahmood is a retired schoolteacher whose pension income is $25,000 per year.She also receives Social Security income of $5,000 per year.Mr.Little is a young man who does not choose to work.He inherited $600,000 from his Aunt Clara,which he invested in a bond fund that provides a 5 percent return,generating $30,000 income per year.If we are concerned about the equity of taxation,should we consider these two people as equals and tax them equally? Explain why or why not.

Accepted Answer

The incomes are not derived from the sam

Question 7

Suppose the demand for good X can be represented by the following equation: Xd = 22-(1/4)P.Furthermore,suppose that the demand for good Y can be represented by Yd = 50-P.
(A)Find the elasticity of demand for both good X and good Y when the price is $10.
(B)Suppose that an ad valorem tax is placed on both goods.Good Y is taxed at a rate of 5%.To ensure that the inverse elasticity rule holds,what must be the rate at which good X is taxed?
Reminder: Elasticity at a given price is found using the formula $\varepsilon$= -(1/S)(P/X),where S is the slope of the demand curve,X is the quantity demanded,and P is the price.

Accepted Answer

(A) @#IMG-DLM& x = (1/4)(10/19.5)= 0.128

Question 8

One of the conditions mentioned in our formulation of the Ramsey Rule is that goods be unrelated in consumption.Do you think this is a reasonable assumption? If this condition does not hold,will the Ramsey Rule still work?

Accepted Answer

The assumption is reasonable,b

Question 9

Optimal commodity taxation would

Accepted Answer

A) put a tax on leisure time,which is currently untaxed. 
B) have the smallest amount of excess burden possible for a given amount of tax revenue. 
C) optimize tax rates on the wealthiest Americans. 
D) eliminate tax evasion in the United States. 
A) put a tax on leisure time,which is currently untaxed. 
B) have the smallest amount of excess burden possible for a given amount of tax revenue. 
C) optimize tax rates on the wealthiest Americans. 
D) eliminate tax evasion in the United States.

Question 10

Working fewer hours to reduce your tax burden is tax evasion.

Accepted Answer

A) True 
 B)False

Question 11

Average cost pricing is found

Accepted Answer

A) when supply equals demand. 
B) when AC = MR. 
C) when P = 0. 
D) where AC = AR. 
A) when supply equals demand. 
B) when AC = MR. 
C) when P = 0. 
D) where AC = AR.

Question 12

The Ramsey Rule implies that goods be __________ in consumption.

Accepted Answer

A) unrelated 
B) equal 
C) opposite 
D) moderate 
A) unrelated 
B) equal 
C) opposite 
D) moderate

Question 13

Horizontal equity incorporates the notion that

Accepted Answer

A) those earning higher incomes should pay more in taxes. 
B) those earning equal incomes should pay the same in taxes. 
C) taxes paid should be unassociated with income levels. 
D) there should be no excess burden created by a tax. 
A) those earning higher incomes should pay more in taxes. 
B) those earning equal incomes should pay the same in taxes. 
C) taxes paid should be unassociated with income levels. 
D) there should be no excess burden created by a tax.

Question 14

Refer to the figure below.If the equation of MC of unreported income is MC = 4 + 2X,and the MB of unreported income is MB = 44 - 3X,what will be the amount of unreported income? How much of a change will there be if enforcement becomes more strict,resulting in MC = 9 + 2X?

Accepted Answer

Set MB = MC.Giving 4

A linear income tax schedule is known as

Choosing optimal user fees for government produced services is similar to choosing optimal taxes.

The idea of two individuals being equally well off in the absence and existence of taxation is

-Refer to Figure 16.5.If the marginal cost of underreporting can be written as MC = X² + 0.4. (A)What is the maximum marginal tax level (t)possible that will ensure tax evasion is zero? (B)If the Marginal Tax rate is equal to 0.56,how much income will be evaded?

One of the conditions mentioned in our formulation of the Ramsey Rule is that goods be unrelated in consumption.Do you think this is a reasonable assumption? If this condition does not hold,will the Ramsey Rule still work?

Optimal commodity taxation would

Working fewer hours to reduce your tax burden is tax evasion.

Average cost pricing is found

The Ramsey Rule implies that goods be __________ in consumption.

Horizontal equity incorporates the notion that

Refer to the figure below.If the equation of MC of unreported income is MC = 4 + 2X,and the MB of unreported income is MB = 44 - 3X,what will be the amount of unreported income? How much of a change will there be if enforcement becomes more strict,resulting in MC = 9 + 2X?

Introduction

Tools of Positive Analysis

Tools of Normative Analysis

Public Goods

Externalities

Political Economy

Education

Cost-Benefit Analysis

The Health Care Market

Government and the Market for Health Care

Social Security

Income Redistribution: Conceptual Issues

Expenditure Programs for the Poor

Taxation and Income Distribution

Taxation and Efficiency

The Personal Income Tax

Personal Taxation and Behavior

The Corporation Tax

Deficit Finance

Fundamental Tax Reform: Taxes on Consumption and Wealth

Public Finance in a Federal System

Filters

Exam 16: Efficient and Equitable Taxation

A linear income tax schedule is known as

Choosing optimal user fees for government produced services is similar to choosing optimal taxes.

The idea of two individuals being equally well off in the absence and existence of taxation is

-Refer to Figure 16.5.If the marginal cost of underreporting can be written as MC = X2 + 0.4. (A)What is the maximum marginal tax level (t)possible that will ensure tax evasion is zero? (B)If the Marginal Tax rate is equal to 0.56,how much income will be evaded?

One of the conditions mentioned in our formulation of the Ramsey Rule is that goods be unrelated in consumption.Do you think this is a reasonable assumption? If this condition does not hold,will the Ramsey Rule still work?

Optimal commodity taxation would

Working fewer hours to reduce your tax burden is tax evasion.

Average cost pricing is found

The Ramsey Rule implies that goods be __________ in consumption.

Horizontal equity incorporates the notion that

Refer to the figure below.If the equation of MC of unreported income is MC = 4 + 2X,and the MB of unreported income is MB = 44 - 3X,what will be the amount of unreported income? How much of a change will there be if enforcement becomes more strict,resulting in MC = 9 + 2X?

Introduction

Tools of Positive Analysis

Tools of Normative Analysis

Public Goods

Externalities

Political Economy

Education

Cost-Benefit Analysis

The Health Care Market

Government and the Market for Health Care

Social Security

Income Redistribution: Conceptual Issues

Expenditure Programs for the Poor

Taxation and Income Distribution

Taxation and Efficiency

The Personal Income Tax

Personal Taxation and Behavior

The Corporation Tax

Deficit Finance

Fundamental Tax Reform: Taxes on Consumption and Wealth

Public Finance in a Federal System

Filters

-Refer to Figure 16.5.If the marginal cost of underreporting can be written as MC = X² + 0.4. (A)What is the maximum marginal tax level (t)possible that will ensure tax evasion is zero? (B)If the Marginal Tax rate is equal to 0.56,how much income will be evaded?