quiz 6
A $0.30 per unit tax is imposed on a good that reduces the quantity supplied and demanded by 1000 units. What is the deadweight loss (ignore price elasticities)?
$150.00
The current price of compact discs, which are traded in perfectly competitive markets, is $10. A $1 per unit tax is levied on the discs. Annual record sales decline from five million to four million as a result of the tax. Assuming that the income effect of the tax-induced price change is negligible, the excess burden of the tax will be
$500,000 per year
If the average tax rate under a progressive tax rate structure is 35%, a possible marginal tax rate is:
42%
Which of the following is true about a lump-sum tax
It causes income effects
If the price elasticity of supply of labor is equal to 0.5 and the price elasticity of demand for labor is -2, then which of the following is likely to result from a tax on labor earnings
Some of the tax will be shifted to employers as market equilibrium wages increase
Which of the following countries has the highest average tax rate relative to GDP?
Sweden
Which of the following is true about the federal government budget balance in the United States?
The federal budget had a surplus from 1998 until 2001
If the federal government runs a surplus consistently, then which of the following is likely to occur
The gross federal debt will decrease
Housing construction is generally believed to be an industry of constant costs. In the long run, which of the following is true if a $10 per square foot tax on housing construction is collected directly from builders?
The tax will be fully shifted to buyers of new construction
A government prints money to finance its expenditures. As a result
Two answers b and c inflation will occur consumers will give up private goods to finance the increased government expenditures
Which of the following can contribute to a decrease in national saving?
a federal budget deficit
A 5-percent retail sales tax on all consumer purchases in a state is imposed. The sales tax is:
a flat-rate tax
Tax avoidance is
a means of decreasing taxes paid by adjusting behavior
A bond that is backed by the tolls collected from a bridge to be constructed from the proceeds of the bond is an example of
a revenue bond
What is an example of a normative criterion that a government must trade-off in its method of taxation
a. all of the above
Taxes are likely to affect
all of the above
A proportional income tax has an average tax rate that
always equals the marginal tax rate
Taxes
are compulsory payments associated with certain activities
The market supply of labor is perfectly inelastic. However, the income effect of tax-induced wage changes are believed to be substantial. Then it follows that a tax on labor income will
both (b) and (c have positive excess burden be paid entirely by workers as a reduction in net wages
The elasticity of supply of land is zero. A tax on land results only in an income effect to landlords. Then it follows that a 10-percent tax on land rents will
both (c) and (d be paid entirely by landlords. have zero excess burden
A lump-sum tax
can result in price changes but does not prevent prices from simultaneously being equal to MSB and MSC
Most studies show that the price elasticity of demand for gasoline is -0.2. If the price elasticity of supply is 2, then a tax on gasoline will
cause the net price received by sellers to fall.
A government's internal debt is
debt owed to its citizens
Marginal tax rates were reduced in 2001. Other things being equal, this is likely to
decrease tax evasion
Suppose an economy is comprised of only two markets: one for food and the other for housing. A tax on food used to finance transfer payments is likely to
decrease the price of housing
The outstanding federal debt will decline in value if
either (b) or (c) the government runs a budget surplus. the market rate of interest increases
Government borrowing will
eliminate taxes
The debt of state and local governments is mostly
external
The federal budget has been in deficit
for every year between 1970 and 1997
The largest portion of the net federal debt outstanding is owed to
foreigners
As a result of government borrowing to cover deficits, citizens increase the supply of savings to provide themselves with funds to pay anticipated increases in future taxes. Then it follows that increased government borrowing will
have no effect of private investment
The federal government, its agencies, and the Federal Reserve System
hold about 30 percent of the outstanding federal debt
Currently, a 10-cent per gallon tax is levied on gasoline consumption. The tax is increased to 20 cents per gallon. The excess burden of the tax will
increase four times
An increase in government borrowing has no effect on the willingness of citizens to save or on the demand for credit. Increased borrowing to cover deficits will therefore
increase interest rates
Other things being equal, a government budget surplus
increases the supply of loanable funds
The high employment deficit is estimated at $100 billion. Assuming that the economy is operating below full employment and that it will not overheat during the year,
increasing GDP will not eliminate the deficit
If horizontal equity is achieved in taxation
individuals of equal economic capacity will pay equal taxes
The tax base of a payroll tax is
labor income
Viewed from origin a price distorting tax creates a new budget line with a ______ slope relative to the budget line without the tax
more steep
The demand for medical care is very inelastic. If a 10-percent tax is levied on the sale of medical services and is collected from medical-care providers, then
most of the tax is likely to be shifted to those who purchase medical care
The total dollar value of the federal debt outstanding as of 2011 is
nearly 75 percent of GDP
The National Income and Product Accounts budget balance reflects
new debt resulting from a federal budget deficit
A bridge becomes congested after 100 vehicles per hour use it on any day. To achieve efficiency, a toll
on all users should be imposed, if more than 100 users per hour are expected
Differential tax incidence measures the effect
on the distribution of income of substituting one tax for another while holding the size and composition of the budget fixed
Evidence of "crowding out" in the market for loanable funds at a rate of 8% could be
private investors who will borrow only at a rate lower than 8%
The marginal tax rate will eventually exceed the average tax rate for a
progressive tax
A payroll tax taxes a worker's wages at 14 percent until the worker earns $60,000 per year. All labor earnings in excess of $60,000 are not subject to tax. The tax rate structure of the payroll tax is therefore
regressive
If a lump-sum tax is imposed, the slope of the new budget line relative to the budget line prior to the tax
remains unchanged
An excise tax is a:
selective consumption tax
A tax on the value of real estate holdings is a:
selective tax on wealth.
A tax on real estate is a
selective wealth tax
If the marginal tax rate is 20% under a proportional tax rate structure, the average tax rate
should be 20%.
Most studies of tax incidence assume that taxes on labor income and other input services are borne entirely by the workers and other input owners that supply the services. This implies that the
supply of those input services is perfectly inelastic
High-employment deficit or surplus is
the amount of deficit or surplus available when employment is at its approximately full capacity
The efficiency-loss ratio relative to tax is
the excess burden divided by the tax revenue
Other things being equal, the more inelastic the demand for a taxed good,
the greater the portion of the tax paid by buyers
The supply of new cars is perfectly elastic. A $400 per car tax is levied on buyers. As a result of the tax, the price received by sellers will fall by $400
the price paid by buyers, including the tax, will increase by $400
According to the benefit principle,
user charges are an ideal source of finance for government goods and services.
General obligation bonds of state and local governments are
usually used to finance capital expenditures
If a per unit tax is imposed, but the quantity supplied and demanded does not change then
All of the above
