Question 1

The imposition of ________ shifts the labor demand curve downward.

Accepted Answer

The answer of The imposition of ________ shifts the labor...

Question 2

-The figure above shows the impact of an income tax.The revenue collected by the government equals area

Accepted Answer

The revenue collected by the government from an income tax is represented by the rectangle formed by the tax rate and the quantity of income taxed. None of the provided options correctly represents a rectangle that could depict this scenario, as they either form triangles or do not align with the typical representation of tax revenue on such graphs.

Question 3

Which of the following is true?
I∙A tax on buyers has the same effect as the same sized tax on sellers.
Ii∙The more elastic the demand, the larger is the share of the tax paid by the buyers.
Iii∙The U.S.income tax is regressive.

Accepted Answer

The answer of Which of the following is true?
I∙A tax...

Question 4

If neither the demand nor the supply for goods or labor is perfectly inelastic, then a sales tax on a good ________ a deadweight loss and an income tax ________ a deadweight loss.

Accepted Answer

When neither the demand nor supply for a good or labor is perfectly inelastic, a sales tax will distort the market leading to a deadweight loss. Similarly, an income tax will also cause a deadweight loss as it reduces the incentive to work and produce goods.

Question 5

A sales tax on cigarettes would likely decrease the quantity demanded by a smaller amount

Accepted Answer

Smokers who view cigarettes as a necessity are likely to have a relatively inelastic demand for cigarettes, which means that a sales tax on cigarettes would have a smaller impact on their quantity demanded compared to smokers who view cigarettes as a luxury or who are not addicted.

Question 6

When a tax is imposed on a good, the resulting rise in the equilibrium price is usually less than the amount of the tax itself.Why doesn't the equilibrium price rise by the full amount of the tax?

Accepted Answer

The answer of When a tax is imposed on a...

Question 7

________ tax is progressive if the ________.

Accepted Answer

A tax is considered progressive if the average tax rate increases with income. This means that as someone earns higher income, they pay a higher proportion of their income in taxes.

Question 8

Which would be a better source of tax revenue for the government, a good with elastic or a good with an inelastic demand? Explain your reasoning.

Accepted Answer

The answer of Which would be a better source of...

Question 9

The phrase "tax incidence" refers to

Accepted Answer

Tax incidence refers to who actually bears the burden of paying the tax. It is important to understand who bears the burden of a tax, as it can affect incentives and behavior. For example, if a tax is placed on producers, they may pass on the cost to consumers by increasing the price of their products. Alternatively, if a tax is placed on consumers, they may choose to buy fewer of the taxed products.

Question 10

To levy a tax based on the benefits principle to pay for a bridge, the government

Accepted Answer

The benefits principle suggests that those who benefit from a service or good should bear the burden of paying for it. Therefore, to levy a tax based on the benefits principle to pay for a bridge, the government would need to know each person's benefit from the bridge in order to determine the appropriate amount of tax to impose on each beneficiary.

Question 11

Which of the following taxes guarantees vertical equity?
i. income tax
ii. social security tax on workers
iii. social security tax on employers

Accepted Answer

The answer of Which of the following taxes guarantees vertical...

Question 12

If the demand curve for hamburgers is downward sloping and the supply curve for hamburgers is upward sloping, then a tax imposed on hamburgers ________ the price paid by buyers and ________ the price received by sellers.

Accepted Answer

When a tax is imposed on hamburgers, the price paid by buyers will increase (raise) as they will have to pay the original price of the hamburger plus the tax. On the other hand, the price received by sellers will decrease (lower) as they will have to sell the hamburger at the original price minus the tax. This is because sellers will try to pass on the burden of the tax to buyers by increasing the price, but they cannot increase it by the full amount of the tax, as buyers will not be willing to pay such a high price. Thus, the price paid by buyers will increase, and the price received by sellers will decrease, resulting in a higher equilibrium price than before the tax was imposed.

Question 13

Suppose the demand for saline solution is perfectly inelastic for contact lens wearers.If the government imposes a tax on saline solution, what occurs? Be sure to tell what happens to the price paid by the buyers and discuss the incidence of the tax.

Accepted Answer

The answer of Suppose the demand for saline solution is...

Question 14

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

Accepted Answer

The answer of Explain under what conditions a sales tax...

Question 15

-The figure above shows the impact of an income tax.The deadweight loss created by the income tax equals area

Accepted Answer

Deadweight loss refers to the loss of economic efficiency when the equilibrium outcome is not achievable or not achieved. In the context of an income tax, it represents the reduction in the amount of trade or economic activity due to the imposition of the tax. The area bce typically illustrates this concept by showing the economic activities that are no longer occurring due to the tax. This area represents the transactions that would have happened in the absence of the tax but are not happening due to the tax, hence the loss in efficiency or deadweight loss.

Question 16

Which of the following is true?
I∙If supply is perfectly inelastic, the tax creates no deadweight loss.
Ii∙The elasticities of supply and demand, not Congress, determine who pays the income tax.
Iii∙A tax is progressive if the average tax rate falls with income.

Accepted Answer

- Statement (i) is true, as when supply is perfectly inelastic, producers cannot adjust their output in response to the tax, and thus, the tax burden falls entirely on them, and there is no deadweight loss.
- Statement (ii) is also true, as the relative elasticities of supply and demand determine how the tax burden is shared between consumers and producers, not Congress.
- Statement (iii) is false, as a tax is progressive if the average tax rate increases with income, not falls.

Question 17

We can see the inefficiencies created by a sales tax because

Accepted Answer

Both answers A and B are correct. A sales tax creates a deadweight loss or an inefficiency in the market because it leads to a reduction in the quantity sold and bought due to the increase in prices. This reduction in output results in an excess burden, which is the reduction in consumer and producer surplus that exceeds the revenue generated by the tax. Therefore, both answers A and B are correct. Answer C is not applicable as it is a statement about marginal benefit and cost, which is not directly related to the effects of a sales tax.

Question 18

Suppose the government decides to tax salt.The demand for salt is inelastic and the supply is quite elastic.Who bears most of the tax incidence and pays most of this tax?

Accepted Answer

The answer of Suppose the government decides to tax salt.The...

Question 19

How does the elasticity of demand affect the incidence of a tax?

Accepted Answer

The answer of How does the elasticity of demand affect...

Question 20

Which of the following is true?
I∙If demand is perfectly elastic, the tax creates no deadweight loss.
Ii∙The more elastic the supply of a factor of production, the greater is the deadweight loss from an income tax.
Iii∙A tax is regressive if the average tax rate rises with income.

Accepted Answer

The answer of Which of the following is true?
I∙If demand...

Quiz 8: Taxes

The imposition of ________ shifts the labor demand curve downward.

-The figure above shows the impact of an income tax.The revenue collected by the government equals area

Which of the following is true? I∙A tax on buyers has the same effect as the same sized tax on sellers. Ii∙The more elastic the demand, the larger is the share of the tax paid by the buyers. Iii∙The U.S.income tax is regressive.

If neither the demand nor the supply for goods or labor is perfectly inelastic, then a sales tax on a good a deadweight loss and an income tax a deadweight loss.

A sales tax on cigarettes would likely decrease the quantity demanded by a smaller amount

When a tax is imposed on a good, the resulting rise in the equilibrium price is usually less than the amount of the tax itself.Why doesn't the equilibrium price rise by the full amount of the tax?

tax is progressive if the .

Which would be a better source of tax revenue for the government, a good with elastic or a good with an inelastic demand? Explain your reasoning.

The phrase "tax incidence" refers to

To levy a tax based on the benefits principle to pay for a bridge, the government

Which of the following taxes guarantees vertical equity? i. income tax ii. social security tax on workers iii. social security tax on employers

If the demand curve for hamburgers is downward sloping and the supply curve for hamburgers is upward sloping, then a tax imposed on hamburgers the price paid by buyers and the price received by sellers.