Deck 14: Taxation and Income Distribution

Question 1

A tax on suppliers will cause the supply curve to shift

A) up.
B) down.
C) right.
D) left.

Answer 1

left.

Question 2

A monopoly has ______ seller(s)in the market.

A) 0
B) 1
C) 3
D) many

Answer 2

1

Question 3

A demand curve that is perfectly inelastic is

A) horizontal.
B) vertical.
C) at a 45 degree angle.
D) parallel to the X-axis.

Answer 3

vertical.

Question 4

An industry where the capital-labor ratio is relatively high is characterized as

A) capital intensive.
B) labor intensive.
C) income intensive.
D) market intensive.

Question 5

Partial equilibrium is

A) exactly like general equilibrium.
B) studying only the supply side of the market.
C) studying individual markets.
D) examining the demand side of the market.

Question 6

Taxes

A) are mandatory payments.
B) are necessary for financing government expenditures.
C) do not directly relate to the benefit of government goods and services received.
D) all of these answer options are correct.

Question 7

Marginal and average taxes are

A) calculated using the same methodology.
B) not used in modern tax analysis.
C) not calculated using the same methodology.
D) all of these answer options are correct.

Question 8

When marginal tax rates are constant,

A) the change in taxes paid is the same as the change in income.
B) the change in taxes paid is greater than the change in income.
C) the change in taxes paid is less than the change in income.
D) there are no taxes.
E) none of these answer options are correct.

Question 9

General equilibrium refers to

A) examining markets without specific information.
B) finding equilibrium from general information.
C) pricing goods at their shadow price.
D) all of these answer options are correct.
E) none of these answer options are correct.

Question 10

In 2009,the top 1% of all income earners paid _________ percent of federal taxes.

A) 1.0
B) 4.1
C) 15.6
D) 22.3

Question 11

Demand for cigarettes is

A) relatively elastic.
B) relatively inelastic.
C) increasing in the U.S.
D) greater among wealthier people.

Question 12

The tax-induced difference between the price paid by consumers and the price received by producers is

A) the tax difference.
B) the tax wedge.
C) the statutory incidence.
D) the supply side effect.

Question 13

General equilibrium refers to

A) examining markets without specific information.
B) finding equilibrium from general information.
C) pricing goods at their shadow price.
D) all of these.
E) none of these answer options are correct.

Question 14

An oligopoly has ______ sellers in the market.

A) 0
B) 1
C) 3
D) many

Question 15

The economic incidence of a unit tax is

A) generally borne by the buyers.
B) generally borne by sellers.
C) generally borne by the government.
D) independent of the statutory incidence for the tax.

Question 16

Partial equilibrium is

A) exactly like general equilibrium.
B) studying only the supply side of the market.
C) studying individual markets.
D) examining the demand side of the market.

Question 17

An ad valorem tax is

A) given as a proportion of the price.
B) Latin for "buyer beware."
C) identical to a unit tax.
D) computed using the "inverse taxation rule."

Question 18

A tax wedge causes

A) consumer prices to equal producer prices.
B) producer prices to rise above consumer prices.
C) consumer prices to separate from producer prices.
D) all prices to fall.

Question 19

A tax on consumers will cause the demand curve to shift

A) right.
B) left.
C) up.
D) down.

Question 20

Statutory incidence of a tax deals with

A) the amount of revenue left over after taxes.
B) the amount of taxes paid after accounting for inflation.
C) the person(s)legally responsible for paying the tax.
D) the amount of tax revenue generated after a tax is imposed.

Question 21

Why is it the case that a commodity tax on goods like food and shelter is sometimes seen as being regressive?

Question 22

A lump sum tax is one for which the individual's liability does not depend on behavior.

A) True
B) False
C) Uncertain

Question 23

Unit taxes vary along with the price of the taxed commodity.

A) True
B) False
C) Uncertain

Question 24

In the press,there has been a considerable amount of attention given to the notion of corporations being taxed.Explain how it is that a tax on a business could be borne entirely by consumers.

Question 25

A unit tax is a fixed amount per unit of a commodity sold.

A) True
B) False
C) Uncertain

Question 26

Tax wedge is the difference between tax induced price paid by customer and the tax amount

A) True
B) False
C) Uncertain

Question 27

Why is it the case that taxes in one market can have impacts on supply and demand in others and should policy makers take this into account when setting taxes?

Question 28

Ad valorem taxes create tax wedges just like unit taxes.

A) True
B) False
C) Uncertain

Question 29

Suppose that demand is perfectly inelastic.Supply is normal and upward sloping.What is the economic incidence of a unit tax placed on suppliers? Illustrate this with an appropriate diagram.

Question 30

Regressive tax systems are bad.

A) True
B) False
C) Uncertain

Question 31

Due to capitalization,the burden of future taxes may be borne by current owners of an inelastically-supplied,durable commodity such as land.

A) True
B) False
C) Uncertain

Question 32

Partial factor taxes are levied on an input in only some of its uses.

A) True
B) False
C) Uncertain

Question 33

In a general equilibrium model,a tax on a single factor in its use only in a particular sector can affect returns to all factors in all sectors.

A) True
B) False
C) Uncertain

Question 34

Consider a monopolist who has a total cost curve of: TC = 7X + (1/2)X2.The market demand equation is X_d = 386 - (1/2)P.

A)What are the equilibrium quantity,equilibrium price,and profits in this market?
B)Suppose that a unit tax of $1 is placed on the monopolist.What happens to the equilibrium quantity,equilibrium price,and profits? How much tax revenue does the government generate?
C)Suppose that the same unit tax of $1 is placed on consumers.What happens to the equilibrium quantity,equilibrium price,and profits? How much tax revenue does the government generate?
D)What can be said about the taxes?

Question 35

Regardless of income level,when the ratio of taxes paid to income is constant then it is called

A) lump sum tax.
B) marginal tax.
C) progressive tax.
D) proportional tax.

Question 36

Marginal tax rates supply reliable measures of tax progressiveness.

A) True
B) False
C) Uncertain

Question 37

Suppose there is a market that has market demand characterized as X = 30 - P/3.
Suppose further that market supply can be written as X = P/2 - 2.
(A)Find the equilibrium price and quantity in this market.
(B)If a unit tax of $16 is imposed on good X,what are the equilibrium price,quantity,and tax revenue in the market?
(C)Suppose an ad valorem tax of 30 percent is imposed on good X.The after-tax demand equation would be X = 30 - P/2.Now find the equilibrium price,quantity,and tax revenue in the market.
(D)What can be said about the amount of tax revenue generated under each taxing scheme,and why?

Question 38

Even with a tax,the price that consumers pay will be higher than what producers receive.

A) True
B) False
C) Uncertain

Question 39

After a price change,the substitution effect will be the same as the income effect.

A) True
B) False
C) Uncertain

Question 40

Unit taxes cause shifts,while ad valorem taxes cause pivots.

A) True
B) False
C) Uncertain