Question 1

When a tax is levied on a good, the revenue the government collects is exactly equal to the loss of consumer and producer surplus from the tax.

Accepted Answer

A) True 
 B)False

Question 2

A tax collected from buyers generates a smaller deadweight loss than a tax collected from sellers.

Accepted Answer

A) True 
 B)False

Question 3

If a tax on a good is doubled, the deadweight loss from the tax

Accepted Answer

A)   doubles.
B)   stays the same.
C)   increases by a factor of four.
D)   could rise or fall.E) A) and B)
F) None of the above

Question 4

When a tax distorts incentives to buyers and sellers so that fewer goods are produced and sold than otherwise, the tax has

Accepted Answer

A)   caused a deadweight loss.
B)   decreased equity.
C)   generated no tax revenue.
D)   increased efficiency.E) B) and D)
F) B) and C)

Question 5

In what way is raising tax on food a good way and bad way to raise revenue?

Accepted Answer

Since the demand for food is price inela...

Question 6

The ability-to-pay principle of taxation suggests that if a tax system is to be vertically equitable, it should be

Accepted Answer

A)   efficient.
B)   progressive.
C)   regressive.
D)   proportional.
E)   lump-sum.F) A) and D)
G) None of the above

Question 7

The appropriate tax rate to consider to judge the vertical equity of a tax system is the

Accepted Answer

A)   marginal tax rate.
B)   average tax rate.
C)   horizontal tax rate.
D)   proportional tax rate.E) B) and C)
F) A) and B)

Question 8

When a tax on a good starts small and is gradually increased, tax revenue will

Accepted Answer

A)   fall.
B)   rise.
C)   first rise and then fall.
D)   first fall and then rise.
E)   not change at all.F) None of the above
G) B) and C)

Question 9

A tax system is regarded as horizontally equitable if

Accepted Answer

A)   all taxpayers pay the same amount of tax.
B)   taxes on all goods are levied at the same rate.
C)   taxes are as low as possible.
D)   the system comprises only lump sum taxes.
E)   taxpayers with similar abilities to pay taxes pay the same amount.F) A) and E)
G) All of the above

Question 10

Which of the following taxes is the most efficient tax?

Accepted Answer

A)   A consumption tax.
B)   A lump-sum tax.
C)   A progressive income tax.
D)   A proportional income tax.E) B) and C)
F) A) and B)

Question 11

In general, a tax raises the price the buyers pay, lowers the price the sellers receive, and reduces the quantity sold.

Accepted Answer

A) True 
 B)False

Question 12

If a tax is levied on a good in a market where supply is perfectly inelastic, there is no deadweight loss and the sellers bear the entire burden of the tax.

Accepted Answer

A) True 
 B)False

Question 13

A per unit tax on a good creates deadweight loss because

Accepted Answer

A)   it makes demand more price inelastic.
B)   it makes supply more price elastic.
C)   by increasing the price consumers pay, and reducing the price sellers receive, it prevents some mutually beneficial trades.
D)   the government wastes the tax revenues it receives.E) A) and B)
F) A) and C)

Question 14

Why do experts disagree about whether labour taxes have small or large deadweight losses?

Accepted Answer

Experts disagree about whether labour ta...

Question 15

In choosing the form of a tax, there is a trade-off between

Accepted Answer

A)   allocative and productive efficiency.
B)   profits and revenues.
C)   efficiency and equity.
D)   equity and profits.E) B) and D)
F) A) and B)

Question 16

Use the following graph shown to fill in the table that follows.
  $$\begin{array} { | l | l | l | l | } 
\hline & \text { WITHOUT TAX } & \text { WITH TAX } & \text { CHANGE } \
\hline \text { Consumer surplus } & & & \
\hline \text { Producer surplus } & & & \
\hline \text { Tax revenue } & & & \
\hline \text { Total surplus } & & & \
\hline
\end{array}$$

Accepted Answer

\[\begin{array} { | l | l | l | l | }
\...

Question 17

A tax is __________ if it takes a smaller fraction of income as income rises.

Accepted Answer

A)   regressive
B)   proportional
C)   progressive
D)   aggressiveE) None of the above
F) A) and D)

Question 18

An individual's marginal tax rate equals

Accepted Answer

A)   total tax payments divided by the average tax rate.
B)   the increase in taxes the individual would pay when income rises, expressed as a percentage of the rise in income.
C)   total tax payments divided by income.
D)   the increase in taxes the individual would pay if the average tax rate were to rise 1%.E) None of the above
F) A) and B)

Question 19

Using demand and supply diagrams, show the difference in deadweight loss between (a) a market with inelastic demand and supply and (b) a market with elastic demand and supply.

Accepted Answer

The answer of Using demand and supply diagrams, show the...

Question 20

An individual's tax total tax payments divided by income is called the

Accepted Answer

A)   marginal social tax rate.
B)   marginal private tax rate.
C)   marginal tax rate.
D)   average tax rate.E) B) and D)
F) A) and B)

Exam 9: The Tax System

When a tax distorts incentives to buyers and sellers so that fewer goods are produced and sold than otherwise, the tax has

Correct Answer
verified

A tax collected from buyers generates a smaller deadweight loss than a tax collected from sellers.

Correct Answer
verified

Why do experts disagree about whether labour taxes have small or large deadweight losses?

Correct Answer
verified
Experts disagree about whether labour ta...
View Answer

An individual's marginal tax rate equals

Correct Answer
verified

If a tax on a good is doubled, the deadweight loss from the tax

Correct Answer
verified

In what way is raising tax on food a good way and bad way to raise revenue?

Correct Answer
verified
Since the demand for food is price inela...
View Answer

Using demand and supply diagrams, show the difference in deadweight loss between (a) a market with inelastic demand and supply and (b) a market with elastic demand and supply.

Correct Answer
verified

When a tax on a good starts small and is gradually increased, tax revenue will

Correct Answer
verified

A per unit tax on a good creates deadweight loss because

Correct Answer
verified

An individual's tax total tax payments divided by income is called the

Correct Answer
verified

A tax is __________ if it takes a smaller fraction of income as income rises.

Correct Answer
verified

The appropriate tax rate to consider to judge the vertical equity of a tax system is the

Correct Answer
verified

Which of the following taxes is the most efficient tax?

Correct Answer
verified

Correct Answer
verified
\[\begin{array} { | l | l | l | l | }
\...
View Answer

A tax system is regarded as horizontally equitable if

Correct Answer
verified

If a tax is levied on a good in a market where supply is perfectly inelastic, there is no deadweight loss and the sellers bear the entire burden of the tax.

Correct Answer
verified

In general, a tax raises the price the buyers pay, lowers the price the sellers receive, and reduces the quantity sold.

Correct Answer
verified

When a tax is levied on a good, the revenue the government collects is exactly equal to the loss of consumer and producer surplus from the tax.

Correct Answer
verified

The ability-to-pay principle of taxation suggests that if a tax system is to be vertically equitable, it should be

Correct Answer
verified

In choosing the form of a tax, there is a trade-off between

Correct Answer
verified

Exam 9: The Tax System

When a tax distorts incentives to buyers and sellers so that fewer goods are produced and sold than otherwise, the tax has

Correct AnswerverifiedShow Answer

A tax collected from buyers generates a smaller deadweight loss than a tax collected from sellers.

Correct AnswerverifiedShow Answer

Why do experts disagree about whether labour taxes have small or large deadweight losses?

Correct AnswerverifiedExperts disagree about whether labour ta...View AnswerShow Answer

An individual's marginal tax rate equals

Correct AnswerverifiedShow Answer

If a tax on a good is doubled, the deadweight loss from the tax

Correct AnswerverifiedShow Answer

In what way is raising tax on food a good way and bad way to raise revenue?

Correct AnswerverifiedSince the demand for food is price inela...View AnswerShow Answer

Using demand and supply diagrams, show the difference in deadweight loss between (a) a market with inelastic demand and supply and (b) a market with elastic demand and supply.

Correct AnswerverifiedShow Answer

When a tax on a good starts small and is gradually increased, tax revenue will

Correct AnswerverifiedShow Answer

A per unit tax on a good creates deadweight loss because

Correct AnswerverifiedShow Answer

An individual's tax total tax payments divided by income is called the

Correct AnswerverifiedShow Answer

A tax is __________ if it takes a smaller fraction of income as income rises.

Correct AnswerverifiedShow Answer

The appropriate tax rate to consider to judge the vertical equity of a tax system is the

Correct AnswerverifiedShow Answer

Which of the following taxes is the most efficient tax?

Correct AnswerverifiedShow Answer

Correct Answerverified\[\begin{array} { | l | l | l | l | } \...View AnswerShow Answer

A tax system is regarded as horizontally equitable if

Correct AnswerverifiedShow Answer

If a tax is levied on a good in a market where supply is perfectly inelastic, there is no deadweight loss and the sellers bear the entire burden of the tax.

Correct AnswerverifiedShow Answer

In general, a tax raises the price the buyers pay, lowers the price the sellers receive, and reduces the quantity sold.

Correct AnswerverifiedShow Answer

When a tax is levied on a good, the revenue the government collects is exactly equal to the loss of consumer and producer surplus from the tax.

Correct AnswerverifiedShow Answer

The ability-to-pay principle of taxation suggests that if a tax system is to be vertically equitable, it should be

Correct AnswerverifiedShow Answer

In choosing the form of a tax, there is a trade-off between

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Experts disagree about whether labour ta...
View Answer

Correct Answer
verified

Correct Answer
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Since the demand for food is price inela...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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\[\begin{array} { | l | l | l | l | }
\...
View Answer

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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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