Question 1

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

Accepted Answer

The answer of Explain the effect of price elasticities of...

Question 2

The person or firm that pays a tax bears the burden of the tax.

Accepted Answer

A) True 
 B)False

Question 3

Which of the methods below would avoid double taxation?

Accepted Answer

A) A flat tax, as opposed to a progressive tax, is levied on corporate profits 
B) A system where the federal government continues to tax corporate income through the corporate income tax but allows individual taxpayers to receive, tax free, corporate dividends and capital gains. 
C) A system whereby a corporation calculates its annual profit and notifies each shareholder of her portion of the profits.The shareholder would then be required to include this amount as taxable income for her personal income tax.The corporation also pays tax on its corporate income. 
D) None of the above.

Question 4

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 government's revenue from the tax

Accepted Answer

A) is larger if the supply curve is S0. 
B) is larger if the supply curve is S1. 
C) is identical under either supply curve. 
D) is not maximised.

Question 5

Holding all other factors constant, income earned from capital is more unequally distributed than income earned from labour.

Accepted Answer

A) True 
 B)False

Question 6

The government of Coppersmith raises revenue through a general income tax paid by all its residents to operate the city's golf course.The golf course is used by private members.This method of raising revenue to operate the golf course is

Accepted Answer

A) consistent with the benefits-received principle. 
B) consistent with the ability-to-pay principle. 
C) inconsistent with the benefits-received principle. 
D) inconsistent with the ability-to-pay principle.

Question 7

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 government's revenue from the tax is represented by the area

Accepted Answer

A) (PaPc × Qa)if the supply curve is S0 and (PbPc × Qb)if the supply curve is S1. 
B) (PaPd × Qa)if the supply curve is S0 and (PbPe × Qb)if the supply curve is S1. 
C) (PaPe × Qa)under either supply curve. 
D) (PbPe × Qb)under either supply curve.

Question 8

Figure 16.1 
-Refer to Figure 16.1.Of the tax revenue collected by the government, the portion borne by consumers is represented by the area

Accepted Answer

A) B + C. 
B) F + G. 
C) E + H. 
D) B + C + F + G.

Question 9

For a given supply curve, the deadweight loss from the imposition of a tax is smaller if demand is more elastic.

Accepted Answer

A) True 
 B)False

Question 10

What is a Lorenz curve and what is a Gini coefficient?

Accepted Answer

The answer of What is a Lorenz curve and what...

Question 11

A Lorezo curve illustrates

Accepted Answer

A) a comparison of the distribution of income in two different countries 
B) the share of taxes paid by different groups of households 
C) the distribution of income within a country in a given time period 
D) the change over time in the percentage of households with incomes that place them below the poverty line

Question 12

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.

Question 13

Figure 16.5  Figure 16.5 shows the Lorenz curve for a hypothetical country.
-Refer to Figure 16.5.The highest 40 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 48 per cent of the society's total income. 
D) earn 72 per cent of the society's total income.

Question 14

Figure 16.6  Figure 16.6 shows the Lorenz curves for Islandia and Syldavia.
-Refer to Figure 16.6.If area X = 2060, area Y = 240, and area Z = 2700, calculate the Gini coefficient for Islandia.

Accepted Answer

A) 0)41 
B) 0)45 
C) 0)70 
D) 0)76

Question 15

If you pay $3000 in taxes on an income of $30 000, and a tax of $4400 on an income of $40 000, then over this range of income the tax is

Accepted Answer

A) regressive. 
B) proportional. 
C) progressive. 
D) There is insufficient information to answer the question.

Question 16

A Lorenz curve summarises the information provided by a Gini coefficient.

Accepted Answer

A) True 
 B)False

Question 17

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.

Question 18

Consider a public good such as fire protection services.Rich people may benefit more than the poor from such a service because rich people stand to lose more from a fire that destroys property.In this case

Accepted Answer

A) the ability-to-pay principle may support the rich paying more taxes than the poor, but not the benefits-received principle. 
B) the benefits-received principle may support the rich paying more taxes than the poor, but not the ability-to-pay principle. 
C) both the benefits-received and the ability-to-pay principles may support the rich paying more taxes than the poor. 
D) neither the benefits-received nor the ability-to-pay principles may support the rich paying more taxes than the poor.

Question 19

If your income is $40 000 and you pay taxes of $4650, what is your average tax rate? Show your work.

Accepted Answer

The answer of If your income is $40 000 and...

Question 20

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

Exam 16: The Distribution of Income and Social Policy

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

The person or firm that pays a tax bears the burden of the tax.

Which of the methods below would avoid double taxation?

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 government's revenue from the tax

Holding all other factors constant, income earned from capital is more unequally distributed than income earned from labour.

The government of Coppersmith raises revenue through a general income tax paid by all its residents to operate the city's golf course.The golf course is used by private members.This method of raising revenue to operate the golf course is

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 government's revenue from the tax is represented by the area

Figure 16.1 -Refer to Figure 16.1.Of the tax revenue collected by the government, the portion borne by consumers is represented by the area

For a given supply curve, the deadweight loss from the imposition of a tax is smaller if demand is more elastic.

What is a Lorenz curve and what is a Gini coefficient?

A Lorezo curve illustrates

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

Figure 16.5 Figure 16.5 shows the Lorenz curve for a hypothetical country. -Refer to Figure 16.5.The highest 40 per cent of households

Figure 16.6 Figure 16.6 shows the Lorenz curves for Islandia and Syldavia. -Refer to Figure 16.6.If area X = 2060, area Y = 240, and area Z = 2700, calculate the Gini coefficient for Islandia.

If you pay $3000 in taxes on an income of $30 000, and a tax of $4400 on an income of $40 000, then over this range of income the tax is

A Lorenz curve summarises the information provided by a Gini coefficient.

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

Consider a public good such as fire protection services.Rich people may benefit more than the poor from such a service because rich people stand to lose more from a fire that destroys property.In this case

If your income is $40 000 and you pay taxes of $4650, what is your average tax rate? Show your work.

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