Question 1

If the supply of capital is perfectly elastic,the incidence of a tax on capital income is

Accepted Answer

A)  paid entirely by the suppliers of capital. 
B)  paid entirely by firms that demand capital. 
C)  shared equally between firms that demand capital and the suppliers of capital. 
D)  shared but not equally between firms that demand capital and the suppliers of capital. 
E)  unknown. 
A)  paid entirely by the suppliers of capital. 
B)  paid entirely by firms that demand capital. 
C)  shared equally between firms that demand capital and the suppliers of capital. 
D)  shared but not equally between firms that demand capital and the suppliers of capital. 
E)  unknown. B

Question 2

The inefficiency of a sales tax on a good is ultimately the result of the

Accepted Answer

A)  low tax revenue earned by the government relative to the cost of collection. 
B)  wedge between what buyers pay for the good and what sellers receive for the good. 
C)  buyers being unable to avoid paying the tax. 
D)  sellers being unable to avoid paying the tax. 
E)  increase in the consumer surplus that is more than offset by the decrease in the producer surplus. 
A)  low tax revenue earned by the government relative to the cost of collection. 
B)  wedge between what buyers pay for the good and what sellers receive for the good. 
C)  buyers being unable to avoid paying the tax. 
D)  sellers being unable to avoid paying the tax. 
E)  increase in the consumer surplus that is more than offset by the decrease in the producer surplus. B

Question 3

A tax that has the same average rate at all levels is

Accepted Answer

A)  a proportional tax. 
B)  a regressive tax. 
C)  a marginal tax. 
D)  a sales tax. 
E)  an efficient-price tax. 
A)  a proportional tax. 
B)  a regressive tax. 
C)  a marginal tax. 
D)  a sales tax. 
E)  an efficient-price tax. A

Question 4

-The figure above shows the labor supply and labor demand curves for personal trainers in the state of Florida.The initial equilibrium hourly wage is $10.Suppose the state of Florida institutes an income tax on labor income of $6 an hour in order to buy voting machines for the next election.With the tax in place,the labor supply curve will

Accepted Answer

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

Question 5

Imposing a sales tax on sellers of a product has an effect that is similar to which of the following?

Accepted Answer

A)  a decrease in consumers' preferences for the good 
B)  an increase in the costs of production 
C)  an increase in demand for the good 
D)  a decrease in people's willingness to work 
E)  anything that decreases the demand and shifts the demand curve leftward 
A)  a decrease in consumers' preferences for the good 
B)  an increase in the costs of production 
C)  an increase in demand for the good 
D)  a decrease in people's willingness to work 
E)  anything that decreases the demand and shifts the demand curve leftward

Question 6

-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 7

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 8

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.

Question 9

If income tax rates on labor income are decreased,what is the effect on the labor supply and the labor supply curve? What is the effect on the equilibrium quantity of labor hired?

Accepted Answer

The decrease in the income tax

Question 10

Which of the following is true?
i.If supply is perfectly inelastic,the tax creates no deadweight loss.
ii.The elasticities of supply and demand,not Congress,determine who pays the income tax.
iii.A tax is progressive if the average tax rate falls with income.

Accepted Answer

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

Question 11

Most of a tax hike will be paid by workers if the demand for labor is ________ and the supply of labor is ________.

Accepted Answer

A)  elastic; inelastic 
B)  elastic; elastic 
C)  inelastic; inelastic 
D)  inelastic; stable 
E)  elastic; stable 
A)  elastic; inelastic 
B)  elastic; elastic 
C)  inelastic; inelastic 
D)  inelastic; stable 
E)  elastic; stable

Question 12

Which of the following taxes best illustrate the ability-to-pay principle of tax fairness?

Accepted Answer

A)  Roads and highways are built and maintained through a tax on gasoline. 
B)  The local library is funded through a flat $10 tax levied on all homeowners. 
C)  A sales tax on food pays for local police and fire protection. 
D)  The WIC program provides food to low income mothers and is funded through the progressive federal income tax. 
E)  State parks are maintained through the state lottery. 
A)  Roads and highways are built and maintained through a tax on gasoline. 
B)  The local library is funded through a flat $10 tax levied on all homeowners. 
C)  A sales tax on food pays for local police and fire protection. 
D)  The WIC program provides food to low income mothers and is funded through the progressive federal income tax. 
E)  State parks are maintained through the state lottery.

Question 13

-At harvest time the supply of wheat is perfectly inelastic.If the government taxes wheat at $1 a bushel,then

Accepted Answer

A)  the seller pays the entire tax. 
B)  the buyer pays the entire tax. 
C)  the seller and the buyer split the tax evenly. 
D)  the seller and the buyer split the tax but the seller pays more. 
E)  no one pays the tax because the wheat must be harvested or it will go to waste. 
A)  the seller pays the entire tax. 
B)  the buyer pays the entire tax. 
C)  the seller and the buyer split the tax evenly. 
D)  the seller and the buyer split the tax but the seller pays more. 
E)  no one pays the tax because the wheat must be harvested or it will go to waste.

Question 14

The supply curve of sand is horizontal so the supply of sand is perfectly ________.A tax of 1 cent a pound increases the price by 1 cent a pound and the buyer pays ________ the tax.The tax is therefore ________.

Accepted Answer

A)  elastic; all; inefficient 
B)  elastic; none; inefficient 
C)  elastic; all, efficient 
D)  inelastic; all; inefficient 
E)  inelastic; none; efficient 
A)  elastic; all; inefficient 
B)  elastic; none; inefficient 
C)  elastic; all, efficient 
D)  inelastic; all; inefficient 
E)  inelastic; none; efficient

Question 15

If a tax is placed on tires,then
i.the equilibrium quantity of tires will decrease.
ii.a deadweight loss will be created.
iii.the producer surplus will decrease.

Accepted Answer

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

Question 16

With a proportional tax,as income increases the amount of tax paid

Accepted Answer

A)  eventually phases out to zero. 
B)  rises as a percentage of income. 
C)  falls as a percentage income. 
D)  remains constant as a percentage of income. 
E)  first rises and then falls as a percentage of income. 
A)  eventually phases out to zero. 
B)  rises as a percentage of income. 
C)  falls as a percentage income. 
D)  remains constant as a percentage of income. 
E)  first rises and then falls as a percentage of income.

Question 17

The figure above shows the market for MP3 players, where S is the supply curve and D is the demand curve before any tax is imposed. The government imposes a $10 per unit tax on sellers of MP3 players.
-Based on the figure above,after the tax is imposed,the government collects tax revenue of ________ a week.

Accepted Answer

A)  $20,000 
B)  $10,000 
C)  $50,000 
D)  $60,000 
E)  $40,000 
A)  $20,000 
B)  $10,000 
C)  $50,000 
D)  $60,000 
E)  $40,000

Question 18

What is the difference in the tax incidence between imposing the Social Security tax on workers and imposing the same tax on employers?

Accepted Answer

There is no difference; the ta

Question 19

-Suppose we acquire the technology necessary to colonize the moon and 3 billion acres are made available to the general population.The figure above represents the supply and demand for land on the moon.
a.Suppose the government imposes a $1,000 dollar per acre tax on land income.What is the before-tax rent and what is the after-tax rent?
b.How much is the deadweight loss associated with this tax?

Accepted Answer

a.The before-tax rent is $3,000 per acre

Question 20

If the supply of land is perfectly inelastic,what is the deadweight loss from a tax on land?

Accepted Answer

If the supply of land is perfe

If the supply of capital is perfectly elastic,the incidence of a tax on capital income is

The inefficiency of a sales tax on a good is ultimately the result of the

A tax that has the same average rate at all levels is

Imposing a sales tax on sellers of a product has an effect that is similar to which of the following?

-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.

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

The loss to society resulting from a tax includes the

If income tax rates on labor income are decreased,what is the effect on the labor supply and the labor supply curve? What is the effect on the equilibrium quantity of labor hired?

Which of the following is true? i.If supply is perfectly inelastic,the tax creates no deadweight loss. ii.The elasticities of supply and demand,not Congress,determine who pays the income tax. iii.A tax is progressive if the average tax rate falls with income.

Most of a tax hike will be paid by workers if the demand for labor is and the supply of labor is .

Which of the following taxes best illustrate the ability-to-pay principle of tax fairness?

-At harvest time the supply of wheat is perfectly inelastic.If the government taxes wheat at $1 a bushel,then

The supply curve of sand is horizontal so the supply of sand is perfectly .A tax of 1 cent a pound increases the price by 1 cent a pound and the buyer pays the tax.The tax is therefore .

If a tax is placed on tires,then i.the equilibrium quantity of tires will decrease. ii.a deadweight loss will be created. iii.the producer surplus will decrease.

With a proportional tax,as income increases the amount of tax paid

What is the difference in the tax incidence between imposing the Social Security tax on workers and imposing the same tax on employers?

If the supply of land is perfectly inelastic,what is the deadweight loss from a tax on land?

Getting Started

The U.S.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

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

If the supply of capital is perfectly elastic,the incidence of a tax on capital income is

The inefficiency of a sales tax on a good is ultimately the result of the

A tax that has the same average rate at all levels is

Imposing a sales tax on sellers of a product has an effect that is similar to which of the following?

-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.

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

The loss to society resulting from a tax includes the

If income tax rates on labor income are decreased,what is the effect on the labor supply and the labor supply curve? What is the effect on the equilibrium quantity of labor hired?

Which of the following is true? i.If supply is perfectly inelastic,the tax creates no deadweight loss. ii.The elasticities of supply and demand,not Congress,determine who pays the income tax. iii.A tax is progressive if the average tax rate falls with income.

Most of a tax hike will be paid by workers if the demand for labor is ________ and the supply of labor is ________.

Which of the following taxes best illustrate the ability-to-pay principle of tax fairness?

-At harvest time the supply of wheat is perfectly inelastic.If the government taxes wheat at $1 a bushel,then

The supply curve of sand is horizontal so the supply of sand is perfectly ________.A tax of 1 cent a pound increases the price by 1 cent a pound and the buyer pays ________ the tax.The tax is therefore ________.

If a tax is placed on tires,then i.the equilibrium quantity of tires will decrease. ii.a deadweight loss will be created. iii.the producer surplus will decrease.

With a proportional tax,as income increases the amount of tax paid

What is the difference in the tax incidence between imposing the Social Security tax on workers and imposing the same tax on employers?

If the supply of land is perfectly inelastic,what is the deadweight loss from a tax on land?

Getting Started

The U.S.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

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 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.

Most of a tax hike will be paid by workers if the demand for labor is and the supply of labor is .

The supply curve of sand is horizontal so the supply of sand is perfectly .A tax of 1 cent a pound increases the price by 1 cent a pound and the buyer pays the tax.The tax is therefore .