Economics Ch20

One type of inefficiency of a tax---- is burden, which represents the effort to manage and collect----

-Administrative -taxes

Which three of the following concepts are particularly useful in evaluating the costs and benefits of alternative types of taxes?

-Efficiency -Incidence -Revenue

A tax on----- discourages people from working.

-Income

Under a -------tax, also everyone is taxed the same amount, regardless of their economic---- .

-Lump-sum/head -behavior

With the Federal income tax----, each tax is taxed at a ----tax rate, and those in higher tax pay a ----higher percentage of their income.

-bracket -different -brackets

The tax revenue collected is smaller in the market with price-demand, because the equilibrium quantity shrinks more than in a market with a price-demand.

-elastic -inelastic

How much is------ caused by income tax, and how much----- is raised by it, depends on how much workers will reduce the quantity----- of they will supply in response to a---- on wages

-inefficiency -revenue -labor -tax

All else equal, imposing taxes in markets where demand and supply are price----- not only causes less----- but also raises more----

-inelastic -inefficiency -revenue

In the United States, the sale of a house that was used as a primary residence is taxed at a---- rate than other real estate.

-lower

Calculating the revenue raised by a tax is simple: Multiply the---rate by the---of units of the thing being taxed.

-tax -quantity

In an efficient market, a ----- causes the demand curve to shift down by the amount of the----

-tax -tax

Suppose you earned $34,000 in 2010. Using the tax table, it can be said that your average tax rate was _____.

13.1%

Raising taxes means that the government gets more revenue per units sold (the ------ effect). But the higher tax rate causes fewer units to be sold (the ---effect).

Blank 1: price Blank 2: quantity

FICA is usually considered a regressive tax because of which of the following reasons?

Only earnings up to a cap are taxed It taxes only earned wage income

The more people earn, the larger the percentage of their total income they pay. This is consistent with which type of tax?

Progressive

---------incidence of the tax (i.e., who is legally obligated to pay the tax to the government) has no effect on the ------incidence of the tax (i.e., who actually loses surplus as a result of the tax).

Statutory -economic

Many_______ -funded programs, such as public schools and roads, are intended to increase surplus and stimulate ____ growth.

Tax Economic

Total revenue from a tax =

Tax per unit x Number of units.

________change behavior because they alter the incentives faced by market participants.

Taxes

True or false: Just because a tax creates inefficiency does not necessarily mean that the tax is bad.

True

True or false: Under a tax, fewer units are sold.

True- because the taxes raise prices and decrease quantity sold

Two types of inefficiencies associated with taxes are

administrative burden and deadweight loss.

Capital gains are taxed separately from other types of income, under the appropriately-named

capital gains tax.

---loss is the difference between the loss of surplus to taxpayers and the tax revenue collected.

deadweight

When a government spends more than it earns in revenue, we say that it has a budget

deficit

Raising taxes has returns to revenue.

diminishing

The net ------- effect of a tax is specific to each tax, and to each use of government proceeds from the tax.

efficiency

In an efficient market, a tax causes the demand curve to shift down by the amount of the tax because

he effective price paid by consumers is now higher at any given market price.

Forcing richer households to pay higher tax rates would be _____ if richer households respond by changing behaviors to lessen their tax burden. Multiple choice question.

inefficient

A payroll tax is deducted directly from your paycheck, and Multiple choice question.

is used to pay for Social Security and Medicare.

The tax rate corresponding to each tax bracket is a--- rate

marginal

The value of the surplus that is lost to buyers and sellers but converted into tax revenue

may be transferred to someone else through public policies, but it is not lost.

A -----tax is a tax on the wages paid to an employee.

payroll

The U.S. Federal individual income tax is

progressive

The benefits people receive from Social Security are

progressive

Economists and policymakers classify taxes in one of three categories. These three categories are which of the following?

proportional regressive progressive

Tax ------ allows governments to provide goods and services to citizens, from national defense to highway building.

revenue

Tax per unit x Number of units equal total---- from a tax

revenue

A non-specific tax based on the value of a good or service being purchased is called a

sales tax

In the United States, smaller corporations pay _____ percentage of their income compared to larger corporations. Multiple choice question.

smaller

The largest percentage of government spending for a standalone program is spent on

social security

Who is legally obligated to pay the tax to the government is the--- incidence of the tax.

statutory

When a government earns more than it spends, we say it has a budget

surplus

Deadweight loss is the difference between the loss of------- to taxpayers and the tax----- collected.

surplus revenue

The concept of ----- incidence describes how a tax burden is distributed among buyers and sellers, old people or young people, rich people or poor people, and so on.

tax

The surplus that is lost to buyers and sellers but converted into tax revenue is not considered a cost, because

the tax revenue funds public services.

The concept of incidence is used to describe

who bears the burden of any sort of tax.

On average, people with --- incomes spend a higher---- of their income, rather than saving or investing it.

-lower -proportion

As tax rates get higher, we can expect revenue to increase at a slower rate as the--- effect catches up with the-- effect.

-price -quantity

Under a---- , the consumer and producer surplus that is no longer generated is loss.

-tax -deadweight

To determine revenue from an income tax, multiply the ------- per dollar of income by the ---- of dollars of income

-tax -number