Question 1

The average tax rate is the

Accepted Answer

A)   percentage of an additional dollar of income paid in tax.
B)   percentage of income paid in tax.
C)   total amount of taxes paid by an individual.
D)   average of the rates at which income and taxes increase.
E)   same as the marginal tax rate for a progressive tax.F) D) and E)
G) All of the above

Question 2

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.F) A) and B)
G) A) and C)

Question 3

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,the tax ________ the price received (and kept) by the seller by ________ per MP3 player.

Accepted Answer

A)   lowers; $5
B)   raises; $5
C)   raises; $10
D)   lowers; $10
E)   lowers; $2.50F) A) and E)
G) B) and E)

Question 4

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.F) C) and D)
G) None of the above

Question 5

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 consumer surplus

Accepted Answer

A)   decreases by $17,500.
B)   increases by $17,500.
C)   decreases by $7,500.
D)   increases by $7,500.
E)   does not change.F) A) and E)
G) A) and D)

Question 6

Vertical equity implies that
i.tax rates should be equal for all tax payers.
ii.people with higher income should pay more in taxes.
iii.people with higher incomes should pay a lower average tax rate.

Accepted Answer

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

Question 7

Tax incidence is the

Accepted Answer

A)   burden buyers have to absorb from a tax on goods and services.
B)   burden sellers have to absorb from a tax on goods and services.
C)   lost revenue the government endures from goods and services that are not taxed.
D)   division of the burden of a tax between the buyer and the seller.
E)   deadweight loss created by a tax.F) A) and B)
G) A) and E)

Question 8

Explain under what conditions a sales tax on a specific good would be paid entirely by buyers.

Accepted Answer

Buyers pay all of a tax when t...

Question 9

A sales tax creates a deadweight loss because

Accepted Answer

A)   there is some paper work opportunity cost of sellers paying the sales tax.
B)   demand and supply both decrease.
C)   less is produced and consumed.
D)   citizens value government goods less than private goods.
E)   the government spends the tax revenue it collects.F) B) and D)
G) B) and E)

Question 10

Cigarettes are highly addictive and therefore have a very low elasticity of demand.A $2.00 increase in the national sales tax on cigarettes would likely cause the price paid by buyers of cigarettes to

Accepted Answer

A)   increase by more than $1.00 but less than $2.00.
B)   increase by $2.00.
C)   increase by more than $2.00.
D)   increase by less than $1.00.
E)   remain unchanged.F) A) and E)
G) A) and D)

Question 11

Vertical equity is the idea that

Accepted Answer

A)   taxpayers with a greater ability to pay should bear a greater share of the taxes.
B)   people should pay taxes equal to the benefits they receive from public benefits.
C)   as income rises, taxes should be efficient, not equitable.
D)   the marriage tax is equitable.
E)   taxes must be fairest to people with the largest incomes.F) All of the above
G) C) and D)

Question 12

A tax on labor income ________ a deadweight loss for low-wage workers and ________ a deadweight loss for high-wage workers.

Accepted Answer

A)   creates; creates
B)   creates; does not create
C)   does not create; creates
D)   does not create; does not create
E)   eliminates; eliminatesF) None of the above
G) B) and D)

Question 13

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; efficientF) None of the above
G) A) and D)

Question 14

Because the supply of land is perfectly inelastic,a tax on land income

Accepted Answer

A)   is paid entirely by the suppliers.
B)   is paid entirely by the demanders.
C)   is shared equally between the suppliers and the demanders.
D)   is shared, but not equally, between the suppliers and the demanders.
E)   creates a deadweight loss.F) All of the above
G) None of the above

Question 15

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.F) B) and D)
G) A) and B)

Question 16

-The figure above shows the market for tickets to the Super Bowl the day of the game.Suppose the government imposes an entertainment tax of $100 per ticket.
a.What is the equilibrium price of a Super Bowl ticket before the tax? What is the price paid by buyers after the tax? What is the price received by sellers after the tax?
b.What is the equilibrium quantity of tickets before the tax? What is the equilibrium quantity after the tax?
c.Do buyers or sellers bear most of the incidence of the tax?

Accepted Answer

a.The equilibrium price before the tax i...

Question 17

Using fuel taxes to pay for maintaining public highways is an example of

Accepted Answer

A)   the benefits principle of fair taxation.
B)   horizontal equity approach to taxation.
C)   vertical equity approach to taxation.
D)   the ability-to-pay principle of taxation.
E)   the excess burden from taxes.F) A) and E)
G) A) and D)

Question 18

________ tax is progressive if the ________.

Accepted Answer

A)   An income; average tax rate is constant as income increases
B)   An income; average tax rate increases with income
C)   Any; average tax rate is constant as income increases
D)   Any; average tax rate decreases as income increases
E)   A Social Security; tax is imposed on employers rather than workersF) A) and E)
G) C) and D)

Question 19

The proposition that people should pay taxes equal to the benefits they receive from public services is known as the

Accepted Answer

A)   ability-to-pay principle.
B)   progressive tax principle.
C)   fairness principle.
D)   benefits principle.
E)   "he or she who gets, pays" principle.F) B) and C)
G) B) and D)

Question 20

Suppose that Anthony and Melissa both earn $30,000 and are otherwise the same.If they both pay 10 percent of their income as taxes,then

Accepted Answer

A)   the income tax is regressive.
B)   the benefits principle of fairness has been achieved.
C)   horizontal equity has been achieved.
D)   proportional equity has been achieved.
E)   vertical equity has been achieved.F) A) and B)
G) All of the above

Exam 8: Taxes

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

Correct Answer
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tax is progressive if the .

Correct Answer
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The proposition that people should pay taxes equal to the benefits they receive from public services is known as the

Correct Answer
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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
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The average tax rate is the

Correct Answer
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a.The equilibrium price before the tax i...
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A sales tax creates a deadweight loss because

Correct Answer
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Vertical equity is the idea that

Correct Answer
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Because the supply of land is perfectly inelastic,a tax on land income

Correct Answer
verified

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,the tax the price received (and kept) by the seller by per MP3 player.

Correct Answer
verified

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 consumer surplus

Correct Answer
verified

Suppose that Anthony and Melissa both earn $30,000 and are otherwise the same.If they both pay 10 percent of their income as taxes,then

Correct Answer
verified

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
verified

Explain under what conditions a sales tax on a specific good would be paid entirely by buyers.

Correct Answer
verified
Buyers pay all of a tax when t...
View Answer

Using fuel taxes to pay for maintaining public highways is an example of

Correct Answer
verified

Tax incidence is the

Correct Answer
verified

Cigarettes are highly addictive and therefore have a very low elasticity of demand.A $2.00 increase in the national sales tax on cigarettes would likely cause the price paid by buyers of cigarettes to

Correct Answer
verified

A tax on labor income a deadweight loss for low-wage workers and a deadweight loss for high-wage workers.

Correct Answer
verified

Vertical equity implies that i.tax rates should be equal for all tax payers. ii.people with higher income should pay more in taxes. iii.people with higher incomes should pay a lower average tax rate.

Correct Answer
verified

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 .

Correct Answer
verified

Exam 8: Taxes

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

Correct AnswerverifiedShow Answer

________ tax is progressive if the ________.

Correct AnswerverifiedShow Answer

The proposition that people should pay taxes equal to the benefits they receive from public services is known as the

Correct AnswerverifiedShow Answer

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

The average tax rate is the

Correct AnswerverifiedShow Answer

Correct Answerverifieda.The equilibrium price before the tax i...View AnswerShow Answer

A sales tax creates a deadweight loss because

Correct AnswerverifiedShow Answer

Vertical equity is the idea that

Correct AnswerverifiedShow Answer

Because the supply of land is perfectly inelastic,a tax on land income

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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 consumer surplus

Correct AnswerverifiedShow Answer

Suppose that Anthony and Melissa both earn $30,000 and are otherwise the same.If they both pay 10 percent of their income as taxes,then

Correct AnswerverifiedShow Answer

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

Explain under what conditions a sales tax on a specific good would be paid entirely by buyers.

Correct AnswerverifiedBuyers pay all of a tax when t...View AnswerShow Answer

Using fuel taxes to pay for maintaining public highways is an example of

Correct AnswerverifiedShow Answer

Tax incidence is the

Correct AnswerverifiedShow Answer

Cigarettes are highly addictive and therefore have a very low elasticity of demand.A $2.00 increase in the national sales tax on cigarettes would likely cause the price paid by buyers of cigarettes to

Correct AnswerverifiedShow Answer

A tax on labor income ________ a deadweight loss for low-wage workers and ________ a deadweight loss for high-wage workers.

Correct AnswerverifiedShow Answer

Vertical equity implies that i.tax rates should be equal for all tax payers. ii.people with higher income should pay more in taxes. iii.people with higher incomes should pay a lower average tax rate.

Correct AnswerverifiedShow Answer

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 ________.

Correct AnswerverifiedShow Answer

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tax is progressive if the .

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a.The equilibrium price before the tax i...
View Answer

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Buyers pay all of a tax when t...
View Answer

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A tax on labor income a deadweight loss for low-wage workers and a deadweight loss for high-wage workers.

Correct Answer
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Correct Answer
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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 .

Correct Answer
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