Question 1

Figure 4-25
 
-Refer to Figure 4-25.The price that sellers receive after the tax is imposed is

Accepted Answer

A)  P₁.
B)  P₂.
C)  P₃.
D)  impossible to determine from the figure.E) A) and B)
F) A) and C)

Question 2

An income tax is defined as regressive if

Accepted Answer

A)  the tax liability of those with higher incomes exceeds the tax liability of those with low incomes.
B)  the tax liability of those with higher incomes is less than the tax liability of those with low incomes.
C)  those with higher incomes pay a higher percentage of their incomes in taxes than those with low incomes.
D)  those with higher incomes pay a lower percentage of their incomes in taxes than those with low incomes.E) All of the above
F) A) and C)

Question 3

During the Prohibition period (when the production and sale of alcohol was illegal) ,

Accepted Answer

A)  the quality of alcohol sold became less reliable.
B)  the murder rate increased.
C)  gangsters dominated the alcohol trade.
D)  all of the above occurred.E) C) and D)
F) B) and D)

Question 4

A payment the government makes to either the buyer or seller,usually on a per-unit basis,when a good or service is purchased or sold is called a

Accepted Answer

A)  black market.
B)  interest rate.
C)  subsidy.
D)  tax.E) None of the above
F) All of the above

Question 5

A tax for which the average tax rate decreases with income is defined as a

Accepted Answer

A)  regressive tax.
B)  proportional tax.
C)  neutral tax.
D)  progressive tax.E) B) and C)
F) All of the above

Question 6

A tax for which the average tax rate rises with income is defined as a

Accepted Answer

A)  regressive tax.
B)  proportional tax.
C)  neutral tax.
D)  progressive tax.E) A) and B)
F) All of the above

Question 7

Figure 4-25
 
-Refer to Figure 4-25.The tax causes a reduction in producer surplus that is represented by area

Accepted Answer

A)  A.
B)  B + C.
C)  D + E.
D)  F.E) None of the above
F) B) and C)

Question 8

Use the table below to choose the correct answer.

For the income range illustrated,the tax shown here is

Accepted Answer

A)  regressive.
B)  proportional.
C)  progressive.
D)  progressive up to $20,000 but regressive beyond that.E) A) and B)
F) All of the above

Question 9

The deadweight loss (or excess burden) resulting from levying a tax on an economic activity is the

Accepted Answer

A)  tax revenue raised by the government as the result of the tax.
B)  loss of potential gains from trade from activities forgone because of the tax.
C)  increase in the price of an activity as the result of the tax levied on it.
D)  marginal benefits derived from the expansion in government activities made possible by the increase in tax revenues.E) A) and C)
F) A) and B)

Question 10

The benefit of a subsidy will go primarily to sellers when the

Accepted Answer

A)  demand for the product is highly inelastic and supply is relatively elastic.
B)  demand for the product is highly elastic and the supply is relatively inelastic.
C)  subsidy is legally (statutorily) granted to the seller of the product.
D)  subsidy is legally (statutorily) granted to the buyer of the product.E) A) and B)
F) A) and C)

Question 11

A tax is levied on products A and B,both of which have the same price elasticity of supply.The demand for A is more inelastic than is the demand for B.Other things constant,how will this affect the incidence of an excise tax on these products?

Accepted Answer

A)  Producers will bear a smaller share (and consumers a larger share) of the tax burden on A than B.
B)  Consumers will bear a smaller share (and producers a larger share) of the tax burden on A than B.
C)  The deadweight loss (or excess burden) will be larger for good A than B.
D)  All of the above are true.E) C) and D)
F) B) and C)

Question 12

A regressive tax

Accepted Answer

A)  taxes individuals with higher incomes at a higher rate than individuals with lower incomes.
B)  takes a similar percentage of income at all income levels.
C)  takes a higher percentage of the income of those with lower incomes than for those with higher incomes.
D)  taxes savings at a higher rate than consumption.E) B) and D)
F) A) and D)

Question 13

The revenue generated by the tax illustrated in Figure 4-6 is given by the area

Accepted Answer

A)  ACLH.
B)  BEKM.
C)  ACFG.
D)  0AGJ.E) A) and D)
F) B) and C)

Question 14

Both price floors and price ceilings,when effective,lead to

Accepted Answer

A)  shortages.
B)  surpluses.
C)  an increase in the quantity traded.
D)  a reduction in the quantity traded.E) B) and D)
F) A) and C)

Question 15

Use the figure below illustrating the impact of an excise tax to answer the following question(s) .
Figure 4-6
 
-Refer to Figure 4-6.The amount of the excise tax I is

Accepted Answer

A)  $.50.
B)  $1.50.
C)  $1.00.
D)  $2.00.E) None of the above
F) A) and B)

Question 16

Use the figure below to answer the following question(s) .
Figure 4-7
 
-Refer to Figure 4-7.The supply curve S₁ and the demand curve D indicate initial conditions in the market for gasoline.A $.60-per-gallon excise tax on gasoline is levied.How much revenue does the $.60-per-gallon tax generate for the government?

Accepted Answer

A)  $40 billion
B)  $48 billion
C)  $50 billion
D)  $60 billionE) All of the above
F) B) and C)

Question 17

If a $300 subsidy is legally (statutorily) granted to the buyers of computers and as a result the selling price of computers rises by $200,the actual benefit of the subsidy

Accepted Answer

A)  goes completely to the buyers of computers.
B)  goes completely to the sellers of computers.
C)  is $100 to computer buyers and $200 to computer sellers.
D)  is $200 to computer buyers and $100 to computer sellers.E) B) and C)
F) All of the above

Question 18

Figure 4-22
 
-Refer to Figure 4-22.Sellers pay how much of the tax per unit?

Accepted Answer

A)  $1.00.
B)  $1.50.
C)  $2.50.
D)  $3.00.E) A) and C)
F) None of the above

Question 19

If a household has $40,000 in taxable income and its tax liability is $10,000,the household's average tax rate is

Accepted Answer

A)  10 percent.
B)  25 percent.
C)  40 percent.
D)  50 percentE) A) and B)
F) A) and D)

Question 20

If the federal government placed a 50 cent per pack excise tax on cigarette manufacturers,and if as a result,the price to consumers of a pack of cigarettes went up by 40 cents,the

Accepted Answer

A)  actual burden of this tax falls mostly on consumers.
B)  actual burden of this tax falls mostly on manufacturers.
C)  actual burden of the tax would be shared equally by producers and consumers.
D)  tax would clearly be a progressive tax.E) None of the above
F) A) and B)

Exam 4: Asupply and Demand: Applications and Extensions

Use the figure below illustrating the impact of an excise tax to answer the following question(s) . Figure 4-6 -Refer to Figure 4-6.The amount of the excise tax I is

Correct Answer
verified

If a household has $40,000 in taxable income and its tax liability is $10,000,the household's average tax rate is

Correct Answer
verified

Correct Answer
verified

Both price floors and price ceilings,when effective,lead to

Correct Answer
verified

Figure 4-22 -Refer to Figure 4-22.Sellers pay how much of the tax per unit?

Correct Answer
verified

A tax is levied on products A and B,both of which have the same price elasticity of supply.The demand for A is more inelastic than is the demand for B.Other things constant,how will this affect the incidence of an excise tax on these products?

Correct Answer
verified

If the federal government placed a 50 cent per pack excise tax on cigarette manufacturers,and if as a result,the price to consumers of a pack of cigarettes went up by 40 cents,the

Correct Answer
verified

During the Prohibition period (when the production and sale of alcohol was illegal) ,

Correct Answer
verified

Figure 4-25 -Refer to Figure 4-25.The tax causes a reduction in producer surplus that is represented by area

Correct Answer
verified

A payment the government makes to either the buyer or seller,usually on a per-unit basis,when a good or service is purchased or sold is called a

Correct Answer
verified

A tax for which the average tax rate rises with income is defined as a

Correct Answer
verified

Figure 4-25 -Refer to Figure 4-25.The price that sellers receive after the tax is imposed is

Correct Answer
verified

Use the table below to choose the correct answer. For the income range illustrated,the tax shown here is

Correct Answer
verified

The deadweight loss (or excess burden) resulting from levying a tax on an economic activity is the

Correct Answer
verified

A regressive tax

Correct Answer
verified

The revenue generated by the tax illustrated in Figure 4-6 is given by the area

Correct Answer
verified

The benefit of a subsidy will go primarily to sellers when the

Correct Answer
verified

A tax for which the average tax rate decreases with income is defined as a

Correct Answer
verified

If a $300 subsidy is legally (statutorily) granted to the buyers of computers and as a result the selling price of computers rises by $200,the actual benefit of the subsidy

Correct Answer
verified

An income tax is defined as regressive if

Correct Answer
verified

Exam 4: Asupply and Demand: Applications and Extensions

Use the figure below illustrating the impact of an excise tax to answer the following question(s) . Figure 4-6 -Refer to Figure 4-6.The amount of the excise tax I is

Correct AnswerverifiedShow Answer

If a household has $40,000 in taxable income and its tax liability is $10,000,the household's average tax rate is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Both price floors and price ceilings,when effective,lead to

Correct AnswerverifiedShow Answer

Figure 4-22 -Refer to Figure 4-22.Sellers pay how much of the tax per unit?

Correct AnswerverifiedShow Answer

A tax is levied on products A and B,both of which have the same price elasticity of supply.The demand for A is more inelastic than is the demand for B.Other things constant,how will this affect the incidence of an excise tax on these products?

Correct AnswerverifiedShow Answer

If the federal government placed a 50 cent per pack excise tax on cigarette manufacturers,and if as a result,the price to consumers of a pack of cigarettes went up by 40 cents,the

Correct AnswerverifiedShow Answer

During the Prohibition period (when the production and sale of alcohol was illegal) ,

Correct AnswerverifiedShow Answer

Figure 4-25 -Refer to Figure 4-25.The tax causes a reduction in producer surplus that is represented by area

Correct AnswerverifiedShow Answer

A payment the government makes to either the buyer or seller,usually on a per-unit basis,when a good or service is purchased or sold is called a

Correct AnswerverifiedShow Answer

A tax for which the average tax rate rises with income is defined as a

Correct AnswerverifiedShow Answer

Figure 4-25 -Refer to Figure 4-25.The price that sellers receive after the tax is imposed is

Correct AnswerverifiedShow Answer

Use the table below to choose the correct answer. For the income range illustrated,the tax shown here is

Correct AnswerverifiedShow Answer

The deadweight loss (or excess burden) resulting from levying a tax on an economic activity is the

Correct AnswerverifiedShow Answer

A regressive tax

Correct AnswerverifiedShow Answer

The revenue generated by the tax illustrated in Figure 4-6 is given by the area

Correct AnswerverifiedShow Answer

The benefit of a subsidy will go primarily to sellers when the

Correct AnswerverifiedShow Answer

A tax for which the average tax rate decreases with income is defined as a

Correct AnswerverifiedShow Answer

If a $300 subsidy is legally (statutorily) granted to the buyers of computers and as a result the selling price of computers rises by $200,the actual benefit of the subsidy

Correct AnswerverifiedShow Answer

An income tax is defined as regressive if

Correct AnswerverifiedShow Answer

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