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Name: ________________________ Class: ___________________ Date: __________
ID: A
CH 8
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____
1. Tax incidence is the
a. burden buyers have to absorb from a tax on goods and services.
b. burden sellers have to absorb from a tax on goods and services.
c. lost revenue the government endures from goods and services that are not taxed.
d. division of the burden of a tax between the buyer and the seller.
e. deadweight loss created by a tax.
____
2. Suppose the government imposes a $1 per gallon per gallon tax on sellers of gasoline. As a result, the
a. supply curve shifts leftward
b. supply curve shifts rightward
c. demand curve shifts leftward
d. demand curve shifts rightward
e. demand and supply curves both shift leftward.
____
3. Neither the demand nor the supply of sugar is perfectly elastic or inelastic. If the government imposes a 5
percent tax on sugar, the
a. price of sugar falls by 5 percent.
b. price of sugar increases by less then 5 percent.
c. price of sugar does not change.
d. quantity of sugar increases.
e. price of sugar rises by 5 percent.
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Name: ________________________
____
ID: A
4. In the figure above, suppose that the government imposes a tax of $4 per pizza. Then, the
a. buyers and sellers equally share the incidence of the tax.
b. shaded area is the deadweight loss from the tax.
c. shaded area is the tax revenue from the tax.
d. Both answers A and B are correct.
e. Both answers A and C are correct.
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Name: ________________________
ID: A
____
5. The figure above shows the market for tires. The figure shows that the government has imposed a tax of ____
per tire.
a. $10
b. $30
c. $40
d. $60
e. None of the above answers is correct.
____
6. The figure above shows the market for tires. The government has imposed a tax on tires, and the sellers pay
____ of the tax.
a. $10
b. $20.
c. $50.
d. $60.
e. $30
____
7. The figure above shows the market for tires. According to the figure, the price elasticity of demand is ____
the price elasticity of supply.
a. greater than
b. equal to
c. less than
d. not comparable to
e. More information is needed to determine if the price elasticity of demand is greater than,
equal to, less than, or comparable to the price elasticity of supply.
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Name: ________________________
ID: A
____
8. For a given supply elasticity, the more inelastic the demand for a good, the larger the share of the tax paid by
the
a. buyers.
b. sellers.
c. participants other than the buyers and sellers.
d. government.
e. None of the above answers is correct.
____
9. Suppose the price elasticity of demand for Oklahoma-Nebraska football tickets is extremely price inelastic. If
the state of Oklahoma imposes a tax of $20 per ticket, then ticket
a. sellers pay the entire tax and when the equilibrium is reached, a shortage of tickets
occurs.
b. buyers pay the larger share of the tax and when the equilibrium is reached, a surplus of
tickets occurs.
c. buyers pay the larger share of the tax and when the equilibrium is reached, there is
neither a surplus nor a shortage of tickets.
d. sellers pay the smaller share of the tax and when the equilibrium is reached, a surplus of
tickets occurs.
e. sellers pay the larger share of the tax and when the equilibrium is reached, there is neither
a surplus nor a shortage of tickets.
____ 10. Suppose the demand for specialty car license plates is perfectly inelastic and the supply curve for specialty
license plates is upward sloping. A tax is imposed on specialty license plates. Which of the following is true?
a. Drivers pay the smallest share of the tax.
b. Drivers pay none of the tax.
c. Drivers pay all of the tax.
d. The government pays all of the tax.
e. The government collects nothing in tax revenues.
____ 11. Suppose the demand for Georgia peaches is perfectly elastic. If the supply curve is upward sloping and a tax
is imposed on Georgia peaches, then
a. peach sellers pay all of the tax.
b. peach buyers pay all of the tax.
c. peach buyers and sellers evenly split the tax.
d. the government does not collect any revenue from the tax.
e. the tax does not change the equilibrium quantity of peaches.
____ 12. If the supply of automobiles becomes more inelastic, then a tax on automobiles is
a. paid more by the buyers after the change than before.
b. paid more by the sellers after the change than before.
c. always split evenly between the buyers and the sellers.
d. paid more by the government after the change than before.
e. always paid entirely by the buyers.
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Name: ________________________
ID: A
____ 13. When a tax is imposed on a good or a service, the marginal benefit of the last unit bought ____ the marginal
cost of the last unit.
a. is equal to
b. is greater than
c. is less than
d. None of the above answers is correct because there is no consistent relationship between
the marginal benefit of the last unit and its marginal cost.
e. is not able to be compared to
____ 14. When a product is taxed,
a. part of the initial consumer surplus goes to the government as revenue.
b. part of the initial consumer surplus becomes a deadweight loss.
c. the producer surplus never changes because consumers pay taxes, not producers.
d. Both answers A and B are correct.
e. Both answers B and C are correct.
____ 15. The excess burden of a tax refers to the fact that
a. the benefits from a tax exceed the tax revenue.
b. the deadweight loss from a tax exceeds the remaining consumer surplus.
c. marginal cost is greater than marginal benefit after the tax.
d. a tax creates a deadweight loss.
e. taxes are split between buyers and sellers.
____ 16. The deadweight loss from a tax
a. is the tax revenue the government collects when people die.
b. is the split of a tax between the amount paid and the amount collected.
c. equals the amount collected as revenue from the tax.
d. is called the excess burden of the tax.
e. equals the amount collected as revenue from the tax plus the excess burden of the tax.
____ 17. Taxes on corporate profit are a type of ____ tax.
a. sales
b. property
c. income
d. regressive
e. selling
____ 18. Income taxes are taxes
a. paid only by private individuals who earn income.
b. paid on personal income and corporate profits.
c. paid when we make purchases at a store.
d. that include taxes paid to register a car.
e. paid only by people on their personal incomes.
____ 19. Taxable income
a. is the total income on which the tax is paid.
b. equals total income minus the marginal tax rate.
c. equals income minus the average tax rate.
d. equals total income plus the standard deduction.
e. equals the total amount paid as taxes multiplied by the marginal tax rate.
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Name: ________________________
ID: A
____ 20. The marginal tax rate equals 100 ×
a. (total tax) ÷ (change in income).
b. (change in tax) ÷ (total income).
c. (total tax) ÷ (total income).
d. (change in tax) ÷ (change in income).
e. (average tax rate) × (total income)
____ 21. The marginal tax rate is the
a. average amount paid as taxes.
b. percentage of total income that is paid in tax.
c. percentage of an additional dollar of income paid in tax.
d. total amount of tax paid as a percentage of total income earned.
e. same as the average tax rate for a progressive tax.
____ 22. ____ tax rate equals ____.
a. A marginal; the percentage of total income that is paid in tax
b. A progressive; the percentage of an additional dollar of income that is paid in tax
c. An average; the percentage of total income that is paid in tax
d. A regressive; the percentage of an additional dollar of income that is paid in tax
e. A proportional; the percentage of total income that is paid in tax
____ 23. If the average tax rate increases as income increases, then the
a. tax is regressive tax.
b. tax is a progressive tax.
c. tax is a proportional tax.
d. income is tax exempt so that no tax needs to be paid on it.
e. marginal tax rate must be falling as income increases.
____ 24. If the average tax rate increases as income increases, the tax is a
a. progressive tax.
b. regressive tax.
c. proportional tax.
d. marginal tax.
e. production-efficient tax.
____ 25. A tax that has the same average rate at all levels is
a. a proportional tax.
b. a regressive tax.
c. a marginal tax.
d. a sales tax.
e. an efficient-price tax.
____ 26. When each taxpayer pays the same average tax rate regardless of the taxpayer's income, the tax is
a. a regressive tax.
b. a progressive tax.
c. an estate tax.
d. a proportional tax.
e. an efficient-price tax.
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Name: ________________________
ID: A
____ 27. If the average tax rate ____ as income increases, then the tax is a ____ tax.
a. does not change; proportional
b. does not change; regressive
c. decreases; progressive
d. decreases; proportional
e. increases; regressive
____ 28. A tax for which the average tax rate decreases as income increases is defined as
a. a proportional tax.
b. a regressive tax.
c. a progressive tax.
d. a sales tax.
e. an efficient-quantity tax.
____ 29. The deadweight loss of a tax on labor income is
a. larger for high-wage workers than for low-wage workers.
b. not part of the total burden of a tax.
c. not a burden workers do not pay that tax.
d. zero for all workers because the supply of labor is perfectly inelastic.
e. zero for low income workers and small for high income workers.
____ 30. The figure above shows the labor supply and labor demand curves for personal trainers in the state of Florida.
The initial equilibrium hourly wage is $10. Suppose the state of Florida institutes an income tax of $6 an hour
in order to buy voting machines for the next election. With the tax in place, the labor supply curve will
a. remain at LS.
b. shift to LS1.
c. shift to LS2.
d. change so that it becomes the same as LD.
e. None of the above answers is correct.
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Name: ________________________
ID: A
____ 31. The figure above shows the labor supply and labor demand curves for personal trainers in the state of Florida.
The initial equilibrium hourly wage is $10. Suppose the state of Florida institutes an income tax of $6 an hour
in order to buy voting machines for the next election. How much of the tax is paid by employers?
a. $0
b. $2
c. $4
d. $6
e. $600
____ 32. The figure above shows the labor supply and labor demand curves for personal trainers in the state of Florida.
The initial equilibrium hourly wage is $10. Suppose the state of Florida institutes an income tax of $6 an hour
in order to buy voting machines for the next election. How much of the tax is paid by employees?
a. $0
b. $2
c. $4
d. $6
e. $600
____ 33. The figure above shows the labor supply and labor demand curves for personal trainers in the state of Florida.
The initial equilibrium hourly wage is $10. Suppose the state of Florida institutes an income tax of $6 an hour
in order to buy voting machines for the next election. The deadweight loss from this tax equals the region
a. abe.
b. bce.
c. cef.
d. efg.
e. cdf.
____ 34. If people pay an income tax on dividend income they receive,
a. a tax on capital is the same as a tax on labor income.
b. the income tax rate on capital exceeds the tax rates on other sources of income.
c. the tax on capital has no deadweight loss.
d. the income tax rates on other sources of income exceeds the tax rate on dividends.
e. None of the above answers is correct.
____ 35. Because the supply of capital is perfectly ____ end up paying the tax on capital income.
a. elastic, lenders
b. elastic, firms that demand capital
c. inelastic, lenders.
d. inelastic, firms that demand capital
e. unit elastic, firms that demand capital
____ 36. The elasticity of supply of capital is larger than the elasticity of supply of land, so a tax on capital has ____
deadweight loss and a ____ effect on the equilibrium quantity than does an equal tax on land.
a. a larger; larger
b. a larger; smaller
c. a smaller; larger
d. a smaller; smaller
e. no; smaller
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Name: ________________________
ID: A
____ 37. A tax on land or other resource with a perfectly inelastic supply
a. is efficient because it does not decrease the equilibrium quantity.
b. has no deadweight loss.
c. is paid entirely by the owner.
d. Only answers A and B are correct.
e. Answers A, B, and C are correct.
____ 38. Suppose the supply of labor is more inelastic than the demand for labor. Then, a social security tax imposed
on employers
a. shifts the demand curve for labor leftward.
b. lowers the wage rate received by workers.
c. leads to the workers paying more of the tax than the employers.
d. Only answers B and C are correct.
e. Answers A, B, and C are correct.
____ 39. Consider a social security tax on workers versus a social security tax on employers. In comparing the
outcomes of each type of tax, we see that
a. workers receive a higher take-home wage when the tax is imposed on employers than
when the tax is imposed on workers.
b. workers receive the same take-home wage when the tax is imposed on workers as when
the tax is imposed on employers.
c. employers pay a lower total wage when the tax is imposed on workers.
d. employment decreases by more when the tax is imposed on employers than when the tax
is imposed on workers.
e. employment decreases by more when the tax is imposed on workers than when the tax is
imposed on employers.
____ 40. The proposition that people should pay taxes equal to the benefits they receive from public services is known
as the
a. ability-to-pay principle.
b. progressive tax principle.
c. fairness principle.
d. benefits principle.
e. "he or she who gets, pays" principle.
____ 41. The benefits principle of fair taxation
a. can be used to justify the progressive income tax.
b. can be used to justify high fuel taxes to pay for public schools.
c. is the proposition that people should pay taxes equal to the benefits they receive.
d. Both answers A and B are correct.
e. Both answers B and C are correct.
____ 42. Which of the following taxes best illustrates the ability to pay principle?
a. sales tax
b. state property tax
c. federal income tax
d. cigarette tax
e. marriage tax
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Name: ________________________
ID: A
____ 43. Suppose that Anthony and Melissa both earn $30,000 and are otherwise the same. If they both pay 10 percent
of their income as taxes, then
a. the income tax is regressive.
b. the benefits principle of fairness has been achieved.
c. horizontal equity has been achieved.
d. proportional equity has been achieved.
e. vertical equity has been achieved.
____ 44. The marriage tax problem in the United States is a
a. vertical equity problem because married people pay less than similar single people.
b. horizontal equity problem because married people pay more than similar single people.
c. benefits principle problem because who benefit more pay less.
d. vertical equity problem because married people pay more than similar single people.
e. horizontal equity problem because married people pay less than similar single people.
____ 45. If the demand curve is downward sloping and the supply curve is upward sloping, then a tax imposed on
hamburgers ____ the price paid by buyers and ____ the price received and kept by sellers.
a. raises; raises
b. raises; lowers
c. lowers; raises
d. lowers; lowers
e. does not change; does not change
____ 46. We can see the inefficiencies created by a sales tax in the fact that
a. a deadweight loss occurs.
b. the tax creates an excess burden.
c. at the quantity produced, marginal benefit equals marginal cost.
d. Both answers A and B are correct.
e. Both answers B and C are correct.
____ 47. 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. creates; creates
b. creates; does not create
c. does not create; create
d. does not create; does not create
e. might create; might create
____ 48. The imposition of ____ shifts the labor demand curve downward.
a. a sales tax
b. an income
c. a social security tax on workers
d. a social security tax on employers
e. Both answers C and D are correct.
____ 49. ____ tax is progressive if the ____
a. An income; average tax rate is constant as income increases.
b. An income; the average tax rate increases with income.
c. Any; the average tax rate is constant as income increases.
d. Any; the average tax rate decreases as income increases.
e. A social security; tax is imposed on employers rather than workers.
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Name: ________________________
ID: A
____ 50. Which of the following taxes guarantees vertical equity?
i.
income tax
ii. social security tax on workers
iii. social security tax on employers
a.
b.
c.
d.
e.
i only
i and ii
ii and iii
iii only
None of the above taxes guarantees vertical equity.
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ID: A
CH 8
Answer Section
MULTIPLE CHOICE
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D
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Checkpoint 8.1
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Checkpoint 8.1
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Checkpoint 8.1
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Checkpoint 8.1
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Checkpoint 8.1
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Checkpoint 8.1
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Checkpoint 8.1
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Checkpoint 8.1
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Checkpoint 8.1
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Checkpoint 8.1
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Checkpoint 8.1
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Checkpoint 8.1
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Checkpoint 8.1
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Checkpoint 8.1
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Level 1: Definition
Tax incidence
Level 3: Using models
Tax incidence
Level 3: Using models
Tax incidence
Level 4: Applying models
Tax incidence
Level 4: Applying models
Tax incidence
Level 4: Applying models
Tax incidence
Level 4: Applying models
Tax incidence and the elasticity of supply
Level 2: Using definitions
Tax incidence and the elasticity of demand
Level 3: Using models
Tax incidence and the elasticity of demand
Level 3: Using models
Tax incidence and the elasticity of demand
Level 3: Using models
Tax incidence and the elasticity of demand
Level 2: Using definitions
Tax incidence and the elasticity of supply
Level 3: Using models
Taxes | Deadweight loss
Level 2: Using definitions
Taxes | Deadweight loss
Level 2: Using definitions
Deadweight loss | Excess burden
Level 1: Definition
Deadweight loss | Excess burden
Level 1: Definition
Taxes
Level 1: Definition
Income taxes
Level 2: Using definitions
Taxable income
Level 2: Using definitions
Marginal tax rate
Level 1: Definition
Marginal tax rate
ID: A
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Checkpoint 8.2
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Checkpoint 8.2
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Checkpoint 8.2
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Checkpoint 8.2
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Checkpoint 8.2
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Checkpoint 8.2
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Checkpoint 8.2
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Checkpoint 8.3
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Checkpoint 8.3
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Checkpoint 8.3
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Checkpoint 8.3
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Checkpoint 8.3
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Integrative
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2
Level 1: Definition
Average tax rate
Level 2: Using definitions
Progressive tax
Level 1: Definition
Progressive tax
Level 1: Definition
Proportional tax
Level 2: Using definitions
Proportional tax
Level 2: Using definitions
Proportional tax
Level 1: Definition
Regressive tax
Level 2: Using definitions
Tax on labor income | Deadweight loss
Level 3: Using models
Tax on labor income
Level 3: Using models
Tax on labor income
Level 3: Using models
Tax on labor income
Level 3: Using models
Tax on labor income | Deadweight loss
Level 2: Using definitions
Tax on capital income
Level 3: Using models
Tax on capital income
Level 3: Using models
Tax on capital income
Level 3: Using models
Tax on land and unique resources
Level 4: Applying models
Payroll tax
Level 3: Using models
Social Security tax
Level 1: Definition
Benefits principle
Level 1: Definition
Benefits principle
Level 2: Using definitions
Ability-to-pay principle
Level 2: Using definitions
Horizontal equity
Level 2: Using definitions
Marriage tax problem
Level 2: Using definitions
ID: A
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Integrative
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Integrative
DIF: Level 2: Using definitions
DIF: Level 3: Using models
DIF: Level 2: Using definitions
DIF: Level 2: Using definitions
DIF: Level 3: Using models
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