Deck 12: Taxes on Economic Transactions

Question 1

_____ prefer an import tax to a quota.

A)Taxpayers
B)Domestic producers
C)Foreign producers
D)Consumers

Answer 1

A

Question 2

In developed countries,tariffs are generally imposed _____.

A)because they generate a large portion of federal revenue
B)because they discourage imports
C)because they are equitable
D)because they are efficient

Answer 2

B

Question 3

A tax of 10 percent of the ticket price of an airplane ticket is _____.

A)a unit tax
B)an ad valorem tax
C)an income tax
D)a value-added tax

Answer 3

B

Question 4

Which of the following is not an advantage of user charges?

A)User charges help ration consumption of the taxed good.
B)User charges are equitable from the standpoint of the benefit principle of taxation.
C)User charges reveal consumer preferences for the taxed good.
D)User chargers are easy to apply in cases where the benefits are spread diffusely.

Question 5

An income tax to pay for national defense can approximate a _____ if there is a close relationship between income and _____.

A)user charge;wealth
B)unit tax;wealth
C)user charge;consumption
D)sales tax;consumption

Question 6

An ad valorem tax on suppliers causes the _____ to shift by a constant _____.

A)supply curve;percentage
B)supply curve;amount
C)demand curve;percentage
D)demand curve;amount

Question 7

A disadvantage of unit excise taxes is they create the incentive _____.

A)for producers to favor smaller products over larger products
B)for producers to favor expensive products over inexpensive products
C)for buyers to purchase more of the good then they otherwise would
D)for buyers to shift to substitute goods with ad valorem excise taxes

Question 8

An ad valorem tax on demanders causes the _____ to shift by a constant _____.

A)supply curve;percentage
B)supply curve;amount
C)demand curve;percentage
D)demand curve;amount

Question 9

_____ prefer a quota to an import tax.

A)Foreign producers
B)Importers
C)Consumers
D)Foreign consumers

Question 10

Tariffs are frequently used in less-developed countries because _____.

A)the governments need more revenue
B)the governments want to encourage exports
C)the governments find it easier to monitor border transactions than interior transactions
D)the governments prefer to tax goods over services

Question 11

When attempting to determine if a sales tax is regressive or not,it is important to consider _____.

A)bequests
B)that a general sales tax is a consumption tax
C)that people pay income taxes
D)that individual's incomes change over their lifetime

Question 12

The most important difference between unit excise taxes and ad valorem excise taxes is _____.

A)the unit tax will change in response to a change in the price of the taxed good,while the ad valorem tax will not
B)the unit tax will not change in response to a change in the price of the taxed good,while the ad valorem tax will
C)the unit tax increases in response to a change in the price of the taxed good,while the ad valorem tax will decline
D)the unit tax declines in response to a change in the price of the taxed good,while the ad valorem tax will increase

Question 13

Which of the following is not an excise tax?

A)A tax on cigarettes.
B)A tax on beer.
C)A tax on corporations.
D)A tax on airline tickets.

Question 14

One advantage of ad valorem taxes over unit taxes is that _____.

A)the tax is more difficult to evade
B)the tax is easier to collect
C)the tax increases with inflation
D)the tax automatically adjusts for inflation

Question 15

A unit tax has an advantage over an ad valorem tax in situations when _____.

A)inflation is high
B)it is easy to estimate the value of the good being taxed
C)it is difficult to estimate the value of the good being taxed
D)inflation is low

Question 16

A general sales tax comes close to _____.

A)meeting the budget needs of state governments
B)approximating a consumption tax
C)approximating an income tax
D)a perfectly regressive tax

Question 17

Producers may respond to a unit tax by _____.

A)increasing the value of each unit
B)increasing the number of units sold
C)differentiating their product line
D)selling the product in bundles

Question 18

A tax of $5 per airplane ticket is _____.

A)a unit tax
B)an ad valorem tax
C)an income tax
D)a value-added tax

Question 19

Which of the following is not a user charge?

A)An entry fee to a national park.
B)A toll for a toll road.
C)A bus fare for a municipal bus service.
D)A flat monthly fee for municipal water service.

Question 20

One advantage of user charges is they _____.

A)increase with inflation
B)they apply the ability-to-pay principle of taxation
C)help ration consumption of the taxed good
D)a and c

Question 21

Value-added taxes were introduced in the European Union _____.

A)to get rid of inefficient transaction taxes
B)to harmonize tax structures among nations
C)to make taxes more equitable
D)all of the above
E)a and b

Question 22

One advantage of a value added tax over a sales tax is _____.

A)that it does not require that retail and wholesale purchases be distinguishable
B)it is easier to compute
C)it is easier for taxpayers to see and compute
D)it is easier to collect

Question 23

Excise taxes constitute a large source of government revenue.

Question 24

A tax on a specific good or service is called an ad valorem tax.

Question 25

User charges are identical to market prices.

Question 26

A majority of federal revenue once came from tariffs.

Question 27

From what viewpoint is a sales tax most likely to be considered regressive?

A)If one considers lifetime consumption as equal to income.
B)If one considers that many goods consume by low-income individuals are exempt from taxation.
C)If one considers it as a consumption tax on current income.
D)If one considers it as equal to a tax on wealth.

Question 28

When the government produces and sells water,some of the revenues earned represent taxation.

Question 29

Import taxes are levied to generate revenue and encourage imports.

Question 30

Why might a VAT be more popular politically than a retail sales tax?

A)Its transparency appeals to voters.
B)Its lack of transparency makes it easier to misunderstand its effects.
C)It is more efficient per dollar raised.
D)It is more consistent with the benefit principle of taxation.

Question 31

A tax that is based on the value of a good or service is an excise tax.

Question 32

Compared to a sales tax,a value-added tax is _____.

A)easier to calculate
B)harder to collect
C)easier to apply to investment goods
D)easier to monitor

Question 33

We cannot be certain that a general sales tax will decrease labor supply because _____.

A)of the effect of lower income on labor supply
B)of the effect of higher tax revenue on consumption
C)of the effect of the sales tax on labor supply
D)we do not know about labor demand

Question 34

Value added taxes _____.

A)have the same tax base as a consumption tax
B)have the same tax base as an estate tax
C)have the same tax base as a retail sales tax
D)have the same tax bas as an income tax

Question 35

Turnover taxes are inefficient because _____.

A)they are easy to avoid
B)they violate the ability-to-pay principle
C)they violate the benefit principle
D)they tax the same good multiple times

Question 36

Which of the following countries does not employ a value-added tax at the national level?

A)France
B)German
C)United States
D)Canada

Question 37

An advantage of a unit tax is that the relative price changes have no effect on the tax per unit.

Question 38

Compared to a valued added tax,a sales tax is _____.

A)easier to monitor
B)easier to apply to investment goods
C)harder to collect
D)all of the above
E)a and b

Question 39

Which state has a value-added tax?

A)Ohio
B)Texas
C)New York
D)Michigan

Question 40

Which of the following is a way to tax leisure?

A)Tax complements to leisure.
B)Subsidize substitutes to leisure.
C)Increase income taxes.
D)Tax unearned income.

Question 41

Make an argument for user charges being both efficient and equitable.What information can user charges provide us that free provision can not?

Question 42

If a general sales tax is enacted,we can predict with certainty that individuals will work less.

Question 43

Compare and contrast a general retail sales tax with a value added tax.

Question 44

A general sales tax is a unit tax placed on all retail sales.

Question 45

The tax base of the value added tax and a turnover tax are the same.

Question 46

Assume the United States is considering either a tariff or a quota to protect motorcycles.For each of the following groups,list whether they should prefer either the tariff or the quota,or be indifferent between the two: importer of motorcycles,taxpayers,foreign producer of motorcycles.

Question 47

Consider a situation where a government is deciding between two different taxes on beer.The first tax is $2.88 per case and the second is a tax of one cent per ounce placed on beer.Both are paid by the supplier.Assume both will raise the same amount of revenue this period.Pretend you are an advisor to the government and explain to them which tax they should enact.

Question 48

Explain why tariffs are a primary revenue source for less-developed countries but not for developed countries.

Question 49

Tariff revenues are an important generator of revenue in less-developed countries.

Question 50

In the context of sales taxation,SSTP stands for Simplified Sales Tax Project.

Question 51

Over a period of years,many European countries replaced their transaction taxes with a value added tax.Give two reasons why this was done.

Question 52

Trade agreements help to lower barriers to trade.