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Exam 10: The Government in the Economy: Taxation and Regulation

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Question 71

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Scenario: Consider a competitive market for baseball hats, a good that is indivisible. The supply and demand in this market are as shown in the following table. -Refer to the above scenario.The equilibrium price in this market is ________,and the number of baseball hats traded in this market is ________.

A) $5; 4 hats
B) $5; 6 hats
C) $6; 5 hats
D) $6; 6 hats

E) A) and B)
F) All of the above

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Question 72

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Governments impose taxes for all of the following reasons except ________.

A) correcting market failures and externalities
B) generating profits
C) raising revenues
D) redistributing income through the use of transfer payments

E) B) and C)
F) A) and B)

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Question 73

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The following figure depicts the market for a certain good and the incidence of a tax on consumers. -Refer to the figure above.The after-tax social surplus is ________.

The following figure shows the supply and demand curves in a competitive market for a good. The government is considering a $1.50 tax on this good. -Refer to the above figure.If the $1.50 tax is collected from the producers of this good,the effective price of a unit of this good for the producers will be ________.

The following figure shows a competitive labor market (supply and demand for work hours) , where the price of work is also known as wages. -Refer to the graph above.If the government levies a tax on wages,the inefficiency (deadweight loss) of this policy is ________.

A ________ tax system is one in which tax rates increase with taxable base incomes.

A tax collected at each stage of the production process is called a(n) ________ tax.

The price of chocolate is increasing rapidly in Richland because of a shortage of cocoa beans,which are roasted and ground to make chocolate.The government of Richland decides to set a price ceiling on chocolate.What will be the cost of this regulation to the economy? Explain with a diagram.

The government redistributes funds via transfer payments in order to ________.

The figure below shows the demand (D) and supply (S) curves for Good X before and after a tax is imposed on each unit of the good sold. -Refer to the figure above.If the pre-tax equilibrium price of Good X was $3 and the price that consumers need to pay after the imposition of a per-unit tax of $3 is $5,the tax incidence on consumers is approximately ________.

Distinguish between the concept of equity and that of efficiency.

Scenario: The table below shows the reservation values of ten buyers and a seller for a loaf of bread. Each buyer would buy at most one loaf and the seller can make up to ten loaves. -Refer to the scenario above.One way to achieve the efficient outcome is to let the market work so that the equilibrium is reached.What is the difference between the largest and the smallest among buyers' surpluses (including those who do not get a loaf at the equilibrium price) ?

Scenario: There are 4 households in a locality. The annual income of the first household is $20,000, the annual income of the second household is $47,000, the annual income of the third household is $50,000, and the annual income of the fourth household is $71,000. -Refer to the scenario above.If the first household pays 20 percent of its income in tax,the second household pays 17.5 percent of its income in tax,the third household pays 13 percent of its income in tax,and the fourth household pays 10 percent of its income in tax,income taxes are ________ in nature.

Explanation: The following figure shows the result of the tax imposition. -Refer to the scenario above.After the imposition of the tax,the government collects ________ in tax revenue,and there is a deadweight loss of ________ in the market.Explain your answer with a graph.

Consumer sovereignty is to free markets what paternalism is to ________.

Scenario: You are a U.S. taxpayer who had taxable income of $200,000 in 2017. You paid $49,400 in individual income taxes, and you paid 33 cents of the last dollar you earned as individual income tax. -Refer to the above scenario.What is your average tax rate? Explain your answer.

The government of Lithusia has set a minimum wage for factory workers.This will lead to an ________ if the minimum wage is above the current market wage.

The imposition of all taxes,except Pigouvian taxes,leads to ________.

One reason governments impose taxes is to ________.

A binding price floor will result in ________.