Question 1

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.

Question 2

What is the difference between vertical equity and horizontal equity?

Accepted Answer

Vertical equity is the requirement that ...

Question 3

-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

Question 4

A sales tax on cigarettes would likely decrease the quantity demanded by a smaller amount

Accepted Answer

A)  for smokers who view cigarettes as a necessity.
B)  for smokers who are not addicted.
C)  for smokers with smaller incomes.
D)  the longer the time elapsed.
E)  for smokers who view cigarettes as a luxury.

Question 5

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

Question 6

Joan's income is $60,000 and she pays $6,000 in taxes.Juan's income is $40,000 and he pays $7,000 in taxes.This situation violates

Accepted Answer

A)  the benefits principle.
B)  the big tradeoff.
C)  vertical equity.
D)  horizontal equity.
E)  the fair-tax incidence principle.

Question 7

Sellers bear the entire incidence of a tax on a good.This outcome can occur if

Accepted Answer

A)  supply is perfectly inelastic.
B)  the good is an inferior good.
C)  demand is perfectly inelastic.
D)  the demand curve is downward sloping and the supply curve is upward sloping.
E)  supply is perfectly elastic.

Question 8

Which of the following types of taxes generates the most revenue for governments in the United States?

Accepted Answer

A)  Social Security tax
B)  personal income tax
C)  property tax
D)  sales tax
E)  excise tax

Question 9

The tax ________ the price paid by the buyer by ________ per MP3 player.

Accepted Answer

A)  raises; $5
B)  lowers; $5
C)  raises; $10
D)  lowers; $10
E)  raises; $7.50

Question 10

When a product is taxed,

Accepted Answer

A)  part of the initial consumer surplus goes to the government as revenue.
B)  part of the initial consumer surplus becomes a deadweight loss.
C)  the producer surplus never changes because consumers pay taxes, not producers.
D)  Both answers A and B are correct.
E)  Both answers B and C are correct.

Question 11

If buyers pay more of a tax than do the sellers,

Accepted Answer

A)  demand is more elastic than supply.
B)  the amount of tax revenue collected by the government is almost zero.
C)  supply is more elastic than demand.
D)  the equilibrium price paid by buyers rises by less than half the amount of the tax.
E)  None of the above answers is correct.

Question 12

Suppose that the elasticity of demand for insulin is 0.1, the elasticity of demand for oranges is 1.2, and the elasticity of supply for insulin and oranges is 0.4.If the government imposes a 10 percent tax on both insulin and oranges, the decrease in the quantity of oranges is ________ the decrease in the quantity of insulin.

Accepted Answer

A)  larger than
B)  smaller than
C)  equals to
D)  not comparable to
E)  More information is needed to determine how the decrease in the quantity of oranges compares to the decrease in the quantity of insulin. A

Question 13

The deadweight loss of a tax

Accepted Answer

A)  is the transfer of income from households to the government.
B)  determines the incidence of a tax.
C)  is part of the total burden of a tax.
D)  is greater than the total burden of a tax.
E)  equals the tax revenue collected by the government.

Question 14

If there is an income tax levied on labor income, the labor demand curve ________ and the labor supply curve ________.

Accepted Answer

A)  shifts rightward; does not shift
B)  shifts leftward; does not shift
C)  does not shift; shifts rightward
D)  does not shift; shifts leftward
E)  shifts leftward; shifts leftward

Question 15

To levy a tax based on the benefits principle to pay for a bridge, the government

Accepted Answer

A)  would impose an income tax instead of a social security tax on workers.
B)  would impose a social security tax on workers instead of an income tax.
C)  needs to know each person's benefit from the bridge.
D)  needs to be able to calculate the deadweight loss of a tax.
E)  cannot impose the tax on anyone who uses the bridge. C

Question 16

-In the labor market shown in the graph, the government introduces a 10 percent income tax.The employer pays ________ cents of the tax and the employee pays ________ cents of the tax.

Accepted Answer

A)  45; 50
B)  95; 0
C)  0; 95
D)  50; 45
E)  42.5; 42.5

Question 17

"For the U.S.personal income tax, the average tax rate is greater than the marginal tax rate." Is the previous statement correct or incorrect?

Accepted Answer

The statement is incorrect.The U.S.perso...

Question 18

The benefits principle of fairness of taxes is the proposition that

Accepted Answer

A)  taxes should only be used to correct market failures.
B)  people should pay taxes according to how easily they can bear the burden.
C)  tax systems can only be fair if all people agree on them.
D)  people should pay taxes equal to their benefit from public services.
E)  the incidence of taxes should be equal across households.

Question 19

Why do sellers pay all of a tax when supply is perfectly inelastic?

Accepted Answer

A)  because a perfectly inelastic supply means that the demand is elastic
B)  because the government requires firms to collect the tax
C)  because a perfectly inelastic supply means that the quantity supplied is quite sensitive to a change in price
D)  because a perfectly inelastic supply means that suppliers will produce the same amount regardless of the price
E)  because in this case the price of the good that suppliers receive and keep does not change

Question 20

Because the U.S.income tax is a progressive tax, taxing married couples as two single persons can violate

Accepted Answer

A)  the benefits principle.
B)  the ability-to-pay imperative.
C)  vertical equity.
D)  horizontal equity.
E)  the government's need for more revenue.

Exam 8: Taxes

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

Correct Answer
verified

What is the difference between vertical equity and horizontal equity?

Correct Answer
verified
Vertical equity is the requirement that ...
View Answer

-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.

Correct Answer
verified

A sales tax on cigarettes would likely decrease the quantity demanded by a smaller amount

Correct Answer
verified

The loss to society resulting from a tax includes the

Correct Answer
verified
A

Joan's income is $60,000 and she pays $6,000 in taxes.Juan's income is $40,000 and he pays $7,000 in taxes.This situation violates

Correct Answer
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Sellers bear the entire incidence of a tax on a good.This outcome can occur if

Correct Answer
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Which of the following types of taxes generates the most revenue for governments in the United States?

Correct Answer
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The tax the price paid by the buyer by per MP3 player.

Correct Answer
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When a product is taxed,

Correct Answer
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If buyers pay more of a tax than do the sellers,

Correct Answer
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Correct Answer
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A

The deadweight loss of a tax

Correct Answer
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If there is an income tax levied on labor income, the labor demand curve and the labor supply curve .

Correct Answer
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To levy a tax based on the benefits principle to pay for a bridge, the government

Correct Answer
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C

-In the labor market shown in the graph, the government introduces a 10 percent income tax.The employer pays cents of the tax and the employee pays cents of the tax.

Correct Answer
verified

"For the U.S.personal income tax, the average tax rate is greater than the marginal tax rate." Is the previous statement correct or incorrect?

Correct Answer
verified
The statement is incorrect.The U.S.perso...
View Answer

The benefits principle of fairness of taxes is the proposition that

Correct Answer
verified

Why do sellers pay all of a tax when supply is perfectly inelastic?

Correct Answer
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Because the U.S.income tax is a progressive tax, taxing married couples as two single persons can violate

Correct Answer
verified

Exam 8: Taxes

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

Correct AnswerverifiedShow Answer

What is the difference between vertical equity and horizontal equity?

Correct AnswerverifiedVertical equity is the requirement that ...View AnswerShow Answer

-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.

Correct AnswerverifiedShow Answer

A sales tax on cigarettes would likely decrease the quantity demanded by a smaller amount

Correct AnswerverifiedShow Answer

The loss to society resulting from a tax includes the

Correct AnswerverifiedA

Joan's income is $60,000 and she pays $6,000 in taxes.Juan's income is $40,000 and he pays $7,000 in taxes.This situation violates

Correct AnswerverifiedShow Answer

Sellers bear the entire incidence of a tax on a good.This outcome can occur if

Correct AnswerverifiedShow Answer

Which of the following types of taxes generates the most revenue for governments in the United States?

Correct AnswerverifiedShow Answer

The tax ________ the price paid by the buyer by ________ per MP3 player.

Correct AnswerverifiedShow Answer

When a product is taxed,

Correct AnswerverifiedShow Answer

If buyers pay more of a tax than do the sellers,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA

The deadweight loss of a tax

Correct AnswerverifiedShow Answer

If there is an income tax levied on labor income, the labor demand curve ________ and the labor supply curve ________.

Correct AnswerverifiedShow Answer

To levy a tax based on the benefits principle to pay for a bridge, the government

Correct AnswerverifiedC

-In the labor market shown in the graph, the government introduces a 10 percent income tax.The employer pays ________ cents of the tax and the employee pays ________ cents of the tax.

Correct AnswerverifiedShow Answer

"For the U.S.personal income tax, the average tax rate is greater than the marginal tax rate." Is the previous statement correct or incorrect?

Correct AnswerverifiedThe statement is incorrect.The U.S.perso...View AnswerShow Answer

The benefits principle of fairness of taxes is the proposition that

Correct AnswerverifiedShow Answer

Why do sellers pay all of a tax when supply is perfectly inelastic?

Correct AnswerverifiedShow Answer

Because the U.S.income tax is a progressive tax, taxing married couples as two single persons can violate

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
verified
Vertical equity is the requirement that ...
View Answer

-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.

Correct Answer
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Correct Answer
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Correct Answer
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A

Correct Answer
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Correct Answer
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Correct Answer
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The tax the price paid by the buyer by per MP3 player.

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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A

Correct Answer
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If there is an income tax levied on labor income, the labor demand curve and the labor supply curve .

Correct Answer
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Correct Answer
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C

-In the labor market shown in the graph, the government introduces a 10 percent income tax.The employer pays cents of the tax and the employee pays cents of the tax.

Correct Answer
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Correct Answer
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The statement is incorrect.The U.S.perso...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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