Question 1

State governments levy excise taxes on cigarettes because:

Accepted Answer

Excise taxes on cigarettes are levied to discourage smoking and raise tax revenue. It is a common practice among state governments to impose taxes on cigarettes as they are considered to be harmful to individuals' health. Additionally, the revenue generated from these taxes can be used for various social welfare and developmental programs.

Question 2

When a worker earns income, she and her employer pay equal portions of FICA (the Federal Insurance Contributions Act).Which of the following statements is true?
A.The worker and the employer each bear half of the burden (incidence) of the tax.
B.The employer bears almost all of the burden (incidence) of the tax.
C.The worker bears almost all of the burden (incidence) of the tax
D.It's impossible to determine who bears the burden (incidence) of the tax.

Accepted Answer

The answer of When a worker earns income, she and...

Question 3

Determining who pays the burden of the tax is a 1. about:
A.tax incidence.
B.externality analysis.
C.public interest theory.
D.public choice theory.

Accepted Answer

The answer of Determining who pays the burden of the...

Question 4

The price elasticity of demand for a particular cancer drug is equal to zero and the price elasticity of supply is equal to 0.50.If a $1 excise tax is levied on producers, how much of this tax will eventually be paid by consumers?
A.$0
B.$1
C.$0.50
D.$1.50

Accepted Answer

The answer of The price elasticity of demand for a...

Question 5

If the demand curve is downward sloping and supply is perfectly elastic, then the burden of an excise tax is:
A.borne entirely by consumers.
B.borne entirely by producers.
C.shared by consumers and producers, with the burden falling mainly on consumers.
D.shared by consumers and producers, with the burden falling mainly on producers.

Accepted Answer

When supply is perfectly elastic, any increase in price results in a decrease in quantity supplied as producers are willing and able to supply any amount at the same price. Therefore, the entire burden of the excise tax falls on consumers, who will demand less at the higher price. Producers will continue to supply the same amount at the same price, unaffected by the tax.

Question 6

Economic analysis shows that workers pay of the FICA.
A.exactly half
B.very little
C.most
D.none

Accepted Answer

Economic analysis shows that most of the FICA tax is paid by workers rather than employers. The employer portion of the tax is considered as part of the overall cost of labor and is reflected in lower wages, while the worker portion is deducted from their paycheck. Therefore, workers bear the majority of the burden of FICA tax.

Question 7

Figure: The Shrimp Market
(Figure: The Shrimp Market) Look at the figure The Shrimp Market.If the government wants to limit shrimp sales to 500 pounds, it can impose a excise tax on sellers, and the total
tax revenue generated will be _.
A.$5; $2,500
B.$7.50; $7,500
C.$10; $2,500
D.The answer cannot be determined from the information provided.

Accepted Answer

The answer of Figure: The Shrimp Market
(Figure: The Shrimp Market)...

Question 8

The demand for food is very inelastic, so if a tax is levied on the consumers of food, the tax incidence:
A.is typically on consumers more than producers.
B.is typically on producers more than consumers.
C.is typically split equally between consumers and producers.
D.cannot be determined without more information.

Accepted Answer

The answer of The demand for food is very inelastic,...

Question 9

Taxes paid on the purchase of specific items such as gasoline, cigarettes, or alcoholic beverages are called:
A.personal income taxes.
B.excise taxes.
C.property taxes.
D.sales taxes.

Accepted Answer

The answer of Taxes paid on the purchase of specific...

Question 10

Suppose the government imposes a $10 per month tax on cell phone service.If the demand curve for cell phone service is perfectly inelastic and the supply curve is upward sloping, the price that consumers each month pay for cell phone service will increase by:
A.$5.
B.less than $10.
C.$10.
D.$0.

Accepted Answer

The answer of Suppose the government imposes a $10 per...

Question 11

As part of an antiobesity program, the government levies an excise tax on high-fat foods.We would expect consumers to pay almost all of this tax if demand is:
A.inelastic and supply is inelastic.
B.inelastic and supply is elastic.
C.elastic and supply is elastic.
D.elastic and supply is inelastic.

Accepted Answer

The answer of As part of an antiobesity program, the...

Question 12

Tax incidence analysis seeks to determine:
A.who actually sends the tax payment to the government.
B.who actually pays the extra cost imposed by a tax.
C.who ultimately gets the tax revenue.
D.whether a tax is in the benefits-received category or the ability-to-pay category.

Accepted Answer

The answer of Tax incidence analysis seeks to determine:
A.who actually...

Question 13

The elasticity of demand for Gala apples is relatively elastic, so if a tax is levied on the consumers of Gala apples, the tax incidence:
A.is typically on consumers more than producers.
B.is typically on producers more than consumers.
C.is typically split equally between consumers and producers.
D.cannot be determined without more information.

Accepted Answer

The answer of The elasticity of demand for Gala apples...

Question 14

Figure: Market for Hotel Rooms
   (Figure: The Market for Hotel Rooms) Look at the figure The Market for Hotel Rooms.Suppose the equilibrium price is $110 and the equilibrium quantity is 250.If the local government levies a tax of $30 per night on each hotel room rented, the new equilibrium price will equal ________ and the new equilibrium quantity will equal _. 
A.$140; 100
B.$130; 150
C.$120; 200
D.$110; 250

Accepted Answer

The answer of Figure: Market for Hotel Rooms
  ...

Question 15

Suppose the government imposes a $4 per month excise tax on cable TV.If the demand for cable TV is relatively inelastic and the supply curve is relatively elastic, then the price of cable TV will:
A.increase by more than $4.
B.increase by exactly $4.
C.increase by less than $4.
D.remain constant.

Accepted Answer

The answer of Suppose the government imposes a $4 per...

Question 16

If an excise tax is levied on suppliers, then the incidence of the tax:
A.is typically on the consumer more than the producer.
B.is typically on the producer more than the consumer.
C.is typically split equally between the producer and the consumer.
D.cannot be determined without more information.

Accepted Answer

The answer of If an excise tax is levied on...

Question 17

Suppose the government imposes a $4 per month excise tax on cable TV.If the demand for cable TV is perfectly inelastic and the supply curve is elastic, then the price of cable TV will:
A.increase by more than $4.
B.increase by exactly $4.
C.increase by less than $4.
D.remain constant.

Accepted Answer

The answer of Suppose the government imposes a $4 per...

Question 18

The burden of a tax imposed on a good falls at least partially on consumers if:

Accepted Answer

When a tax is imposed on a good, the price paid by consumers for the good increases. This is because the producer may pass on part of the tax burden to the consumers by increasing the price of the good. Therefore, the burden of the tax falls at least partially on consumers. However, it is important to note that the ultimate distribution of the tax burden between consumers and producers depends on the price elasticity of demand and supply for the good.

Question 19

Determining who actually pays the extra cost imposed by a tax is the study of:

Accepted Answer

Tax incidence refers to the analysis of how the burden of a tax is divided between consumers and producers. It determines who ultimately bears the burden of the tax through changes in market prices, production decisions, and consumer behavior.

Question 20

If demand is perfectly inelastic and the supply curve is upward sloping, then the burden of an excise tax is:
A.borne entirely by consumers.
B.borne entirely by producers.
C.shared by consumers and producers, with the burden falling mainly on consumers.
D.shared by consumers and producers, with the burden falling mainly on producers.

Accepted Answer

When demand is perfectly inelastic, consumers are willing to pay any price for a product, meaning they will bear the entire burden of an excise tax, regardless of the supply curve's slope.

Quiz 7: Taxes

State governments levy excise taxes on cigarettes because:

Determining who pays the burden of the tax is a 1. about: A.tax incidence. B.externality analysis. C.public interest theory. D.public choice theory.

The price elasticity of demand for a particular cancer drug is equal to zero and the price elasticity of supply is equal to 0.50.If a $1 excise tax is levied on producers, how much of this tax will eventually be paid by consumers? A.$0 B.$1 C.$0.50 D.$1.50

Economic analysis shows that workers pay of the FICA. A.exactly half B.very little C.most D.none

Taxes paid on the purchase of specific items such as gasoline, cigarettes, or alcoholic beverages are called: A.personal income taxes. B.excise taxes. C.property taxes. D.sales taxes.

Suppose the government imposes a $10 per month tax on cell phone service.If the demand curve for cell phone service is perfectly inelastic and the supply curve is upward sloping, the price that consumers each month pay for cell phone service will increase by: A.$5. B.less than $10. C.$10. D.$0.

As part of an antiobesity program, the government levies an excise tax on high-fat foods.We would expect consumers to pay almost all of this tax if demand is: A.inelastic and supply is inelastic. B.inelastic and supply is elastic. C.elastic and supply is elastic. D.elastic and supply is inelastic.

Tax incidence analysis seeks to determine: A.who actually sends the tax payment to the government. B.who actually pays the extra cost imposed by a tax. C.who ultimately gets the tax revenue. D.whether a tax is in the benefits-received category or the ability-to-pay category.

Suppose the government imposes a $4 per month excise tax on cable TV.If the demand for cable TV is relatively inelastic and the supply curve is relatively elastic, then the price of cable TV will: A.increase by more than $4. B.increase by exactly $4. C.increase by less than $4. D.remain constant.

If an excise tax is levied on suppliers, then the incidence of the tax: A.is typically on the consumer more than the producer. B.is typically on the producer more than the consumer. C.is typically split equally between the producer and the consumer. D.cannot be determined without more information.

Suppose the government imposes a $4 per month excise tax on cable TV.If the demand for cable TV is perfectly inelastic and the supply curve is elastic, then the price of cable TV will: A.increase by more than $4. B.increase by exactly $4. C.increase by less than $4. D.remain constant.

The burden of a tax imposed on a good falls at least partially on consumers if:

Determining who actually pays the extra cost imposed by a tax is the study of: