Question 1

An average tax rate is calculated as

Accepted Answer

A) total taxable income × taxes paid. 
B) total taxable income ÷ taxes paid. 
C) taxes paid ÷ total taxable income. 
D) (total taxable income - taxes paid)÷ taxable income. 
A) total taxable income × taxes paid. 
B) total taxable income ÷ taxes paid. 
C) taxes paid ÷ total taxable income. 
D) (total taxable income - taxes paid)÷ taxable income.

Question 2

When the demand for a product is less elastic than the supply,consumers pay the majority of the tax on the product.

Accepted Answer

A) True 
 B)False

Question 3

Suppose the government wants to finance housing for low-income families by placing a tax on the purchase of luxury homes.Assume the government defines a luxury home as a home that is purchased for at least $1 million.This tax is consistent with the

Accepted Answer

A) benefits-received principle. 
B) social equity principle. 
C) ability-to-pay principle. 
D) horizontal-equity principle. 
A) benefits-received principle. 
B) social equity principle. 
C) ability-to-pay principle. 
D) horizontal-equity principle.

Question 4

According to the ability-to-pay principle of taxation,

Accepted Answer

A) individuals who receive the benefit of a good or service should bear a greater share of the tax burden. 
B) it is fair to expect a greater share of the tax burden to be borne by people who have a greater ability to pay. 
C) people in the same economic situation should bear an equal share of the tax burden. 
D) individuals who are willing to bear a greater share of the tax burden should be compensated with nonmonetary benefits. 
A) individuals who receive the benefit of a good or service should bear a greater share of the tax burden. 
B) it is fair to expect a greater share of the tax burden to be borne by people who have a greater ability to pay. 
C) people in the same economic situation should bear an equal share of the tax burden. 
D) individuals who are willing to bear a greater share of the tax burden should be compensated with nonmonetary benefits.

Question 5

Explain the effect of price elasticities of supply and demand on tax incidence.

Accepted Answer

If demand is less elastic than

Question 6

Figure 16-1  
-Refer to Figure 16-1.Area B + C represents

Accepted Answer

A) the portion of sales tax revenue borne by consumers. 
B) the portion of sales tax revenue borne by producers. 
C) the excess burden of the sales tax. 
D) sales tax revenue collected by the government. 
A) the portion of sales tax revenue borne by consumers. 
B) the portion of sales tax revenue borne by producers. 
C) the excess burden of the sales tax. 
D) sales tax revenue collected by the government.

Question 7

A marginal tax rate is calculated as

Accepted Answer

A) total taxable income ÷ by taxes paid. 
B) taxes paid ÷ total taxable income. 
C) change in taxes paid ÷ the change in total taxable income. 
D) change in taxable income ÷ change in taxes paid. 
A) total taxable income ÷ by taxes paid. 
B) taxes paid ÷ total taxable income. 
C) change in taxes paid ÷ the change in total taxable income. 
D) change in taxable income ÷ change in taxes paid.

Question 8

When the demand for a product is more elastic than the supply,

Accepted Answer

A) consumers pay the majority of the tax on the product. 
B) consumers pay the entire tax on the product. 
C) firms pay the majority of the tax on the product. 
D) firms pay the entire tax on the product. 
A) consumers pay the majority of the tax on the product. 
B) consumers pay the entire tax on the product. 
C) firms pay the majority of the tax on the product. 
D) firms pay the entire tax on the product.

Question 9

What is the difference between a marginal tax rate and an average tax rate? Which is more important in determining the impact of the tax system on economic behaviour?

Accepted Answer

A marginal tax rate is the fraction of e

Question 10

A Gini coefficient of ________ means that an income distribution is perfectly equal and a Gini coefficient of ________ means the income distribution is perfectly unequal.

Accepted Answer

A) 0;1 
B) 1;0 
C) 0;100 
D) 100;0 
A) 0;1 
B) 1;0 
C) 0;100 
D) 100;0

Question 11

Figure 16-4  
-Refer to Figure 16-4.Rank the above panels in terms of most unequal income distribution to least unequal income distribution.

Accepted Answer

A) Panel A,Panel B,Panel C 
B) Panel B,Panel C,Panel A 
C) Panel A,Panel C,Panel B 
D) Panel C,Panel B,Panel A 
A) Panel A,Panel B,Panel C 
B) Panel B,Panel C,Panel A 
C) Panel A,Panel C,Panel B 
D) Panel C,Panel B,Panel A

Question 12

All Gini coefficients must lie between 0 and 1.The lower the value,

Accepted Answer

A) the more unequal the income distribution. 
B) the closer the income distribution is to being equal. 
C) the greater the degree of poverty. 
D) the lower the degree of poverty according to the federal government's definition of poverty. 
A) the more unequal the income distribution. 
B) the closer the income distribution is to being equal. 
C) the greater the degree of poverty. 
D) the lower the degree of poverty according to the federal government's definition of poverty.

Question 13

Figure 16-2   Figure 16-2 shows a demand curve and two sets of supply curves,one set more elastic than the other.
-Refer to Figure 16-2.If the government imposes an excise tax of $1.00 on every unit sold,the producer's burden of the tax

Accepted Answer

A) is Pa - Pd under either supply curve. 
B) is Pb - Pe under either supply curve. 
C) is Pa - Pd if the supply curve is S0 and Pb - Pe if the supply curve is S1. 
D) is Pc - Pd if the supply curve is S0 and Pc - Pe if the supply curve is S1. 
A) is Pa - Pd under either supply curve. 
B) is Pb - Pe under either supply curve. 
C) is Pa - Pd if the supply curve is S0 and Pb - Pe if the supply curve is S1. 
D) is Pc - Pd if the supply curve is S0 and Pc - Pe if the supply curve is S1.

Question 14

Figure 16-7   Figure 16-7 shows the Lorenz curve for a hypothetical country.
-Refer to Figure 16-7.The second highest 20 per cent of households

Accepted Answer

A) earn 24 per cent of the society's total income. 
B) earn 28 per cent of the society's total income. 
C) earn 42 per cent of the society's total income. 
D) earn 72 per cent of the society's total income. 
A) earn 24 per cent of the society's total income. 
B) earn 28 per cent of the society's total income. 
C) earn 42 per cent of the society's total income. 
D) earn 72 per cent of the society's total income.

Question 15

If the marginal tax rate is less than the average tax rate as taxable income increases,the tax structure is

Accepted Answer

A) regressive. 
B) proportional. 
C) progressive. 
D) unfair. 
A) regressive. 
B) proportional. 
C) progressive. 
D) unfair.

Question 16

Since lower-income people spend a larger proportion of their incomes on groceries than do higher-income people,if grocery stores were required by law to charge a 10-cent fee for disposable bags,this fee could be considered

Accepted Answer

A) a proportional tax. 
B) a progressive tax. 
C) a regressive tax. 
D) an income tax. 
A) a proportional tax. 
B) a progressive tax. 
C) a regressive tax. 
D) an income tax.

Question 17

If the marginal tax rate is greater than the average tax rate,the tax structure is described as regressive.

Accepted Answer

A) True 
 B)False

Question 18

According to the benefits-received principle of taxation,

Accepted Answer

A) individuals who receive the benefits from a government program should pay the taxes that support the program. 
B) because high income individuals receive the most benefits from government programs,they should pay more taxes than lower income individuals. 
C) people in the same economic situation should bear an equal share of the tax burden. 
D) the benefits of government programs such as national defense are shared equally by all people;therefore,the burden of paying for these programs should be shared equally. 
A) individuals who receive the benefits from a government program should pay the taxes that support the program. 
B) because high income individuals receive the most benefits from government programs,they should pay more taxes than lower income individuals. 
C) people in the same economic situation should bear an equal share of the tax burden. 
D) the benefits of government programs such as national defense are shared equally by all people;therefore,the burden of paying for these programs should be shared equally.

Question 19

How would the elimination of a sales tax affect the market for a product that had been subject to the tax?

Accepted Answer

A) The demand for the product would rise and the equilibrium price would fall by the amount of the tax. 
B) The equilibrium price for the product would fall by less than the amount of the tax. 
C) The reduction in government revenue from the tax would be made up by an increase in property taxes. 
D) The supply of the product would become more elastic. 
A) The demand for the product would rise and the equilibrium price would fall by the amount of the tax. 
B) The equilibrium price for the product would fall by less than the amount of the tax. 
C) The reduction in government revenue from the tax would be made up by an increase in property taxes. 
D) The supply of the product would become more elastic.

Question 20

Economists argue that the corporate income tax is an example of a tax with a high deadweight loss because

Accepted Answer

A) some of the burden of the tax is passed on to consumers in the form of higher prices. 
B) it discourages corporations from undertaking capital investments to enhance market competitiveness. 
C) taxing a corporation's income amounts to double taxing the earnings on individual shareholders' investments in corporations. 
D) it encourages corporations to seek ways to evade taxes. 
A) some of the burden of the tax is passed on to consumers in the form of higher prices. 
B) it discourages corporations from undertaking capital investments to enhance market competitiveness. 
C) taxing a corporation's income amounts to double taxing the earnings on individual shareholders' investments in corporations. 
D) it encourages corporations to seek ways to evade taxes.

An average tax rate is calculated as

When the demand for a product is less elastic than the supply,consumers pay the majority of the tax on the product.

Suppose the government wants to finance housing for low-income families by placing a tax on the purchase of luxury homes.Assume the government defines a luxury home as a home that is purchased for at least $1 million.This tax is consistent with the

According to the ability-to-pay principle of taxation,

Explain the effect of price elasticities of supply and demand on tax incidence.

Figure 16-1 -Refer to Figure 16-1.Area B + C represents

A marginal tax rate is calculated as

When the demand for a product is more elastic than the supply,

What is the difference between a marginal tax rate and an average tax rate? Which is more important in determining the impact of the tax system on economic behaviour?

A Gini coefficient of means that an income distribution is perfectly equal and a Gini coefficient of means the income distribution is perfectly unequal.

Figure 16-4 -Refer to Figure 16-4.Rank the above panels in terms of most unequal income distribution to least unequal income distribution.

All Gini coefficients must lie between 0 and 1.The lower the value,

Figure 16-2 Figure 16-2 shows a demand curve and two sets of supply curves,one set more elastic than the other. -Refer to Figure 16-2.If the government imposes an excise tax of $1.00 on every unit sold,the producer's burden of the tax

Figure 16-7 Figure 16-7 shows the Lorenz curve for a hypothetical country. -Refer to Figure 16-7.The second highest 20 per cent of households

If the marginal tax rate is less than the average tax rate as taxable income increases,the tax structure is

Since lower-income people spend a larger proportion of their incomes on groceries than do higher-income people,if grocery stores were required by law to charge a 10-cent fee for disposable bags,this fee could be considered

If the marginal tax rate is greater than the average tax rate,the tax structure is described as regressive.

According to the benefits-received principle of taxation,

How would the elimination of a sales tax affect the market for a product that had been subject to the tax?

Economists argue that the corporate income tax is an example of a tax with a high deadweight loss because

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: the Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Technology, Production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

The Markets for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

Filters

Exam 16: The Distribution of Income and Social Policy

An average tax rate is calculated as

When the demand for a product is less elastic than the supply,consumers pay the majority of the tax on the product.

Suppose the government wants to finance housing for low-income families by placing a tax on the purchase of luxury homes.Assume the government defines a luxury home as a home that is purchased for at least $1 million.This tax is consistent with the

According to the ability-to-pay principle of taxation,

Explain the effect of price elasticities of supply and demand on tax incidence.

Figure 16-1 -Refer to Figure 16-1.Area B + C represents

A marginal tax rate is calculated as

When the demand for a product is more elastic than the supply,

What is the difference between a marginal tax rate and an average tax rate? Which is more important in determining the impact of the tax system on economic behaviour?

A Gini coefficient of ________ means that an income distribution is perfectly equal and a Gini coefficient of ________ means the income distribution is perfectly unequal.

Figure 16-4 -Refer to Figure 16-4.Rank the above panels in terms of most unequal income distribution to least unequal income distribution.

All Gini coefficients must lie between 0 and 1.The lower the value,

Figure 16-2 Figure 16-2 shows a demand curve and two sets of supply curves,one set more elastic than the other. -Refer to Figure 16-2.If the government imposes an excise tax of $1.00 on every unit sold,the producer's burden of the tax

Figure 16-7 Figure 16-7 shows the Lorenz curve for a hypothetical country. -Refer to Figure 16-7.The second highest 20 per cent of households

If the marginal tax rate is less than the average tax rate as taxable income increases,the tax structure is

Since lower-income people spend a larger proportion of their incomes on groceries than do higher-income people,if grocery stores were required by law to charge a 10-cent fee for disposable bags,this fee could be considered

If the marginal tax rate is greater than the average tax rate,the tax structure is described as regressive.

According to the benefits-received principle of taxation,

How would the elimination of a sales tax affect the market for a product that had been subject to the tax?

Economists argue that the corporate income tax is an example of a tax with a high deadweight loss because

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: the Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Technology, Production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

The Markets for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

Filters

A Gini coefficient of means that an income distribution is perfectly equal and a Gini coefficient of means the income distribution is perfectly unequal.