Part one

If personal income up to and including $25,000 is not taxed, income of $25,001 to $50,000 is taxed at 10%, and income over $50,000 is taxed at 20%, then a family earning an income of $75,000 will pay ________ in personal taxes

$7,500

Income tax rates are such that Mr. R. Hood earns $35,000 per year and pays $7,000 in taxes, while Mr. G. Gisbourne earns $1 million per year and pays $200,000 in taxes. This tax is

. proportional.

A tax that rises less than in proportion to income is described as

. regressive.

Suppose the government imposes a $10 excise tax on the sale of sweaters by charging suppliers $10 for each sweater sold. Using economic analysis, we would predict that: A. the price of sweaters will increase by $10. B. consumers of sweaters will bear the entire burden of the tax. C. the price of sweaters will decrease by $10. D. the price of sweaters will increase but by less than $10.

. the price of sweaters will increase but by less than $10.

Suppose Governor Meridias decides to initiate a state-level income tax. The first $50,000 of household income is tax-free, while any income above $50,000 is taxed at 10%. A household earning $50,000 has a marginal tax rate of ________ and an average tax rate of ________.

0%; 0%

Prior to any taxes, the equilibrium price of gasoline is $3 per gallon. Then a $1 tax is levied on each gallon of gas. As a result, the price of gasoline rises to $3.75 per gallon. The incidence of the $1 tax is:

0.75 paid by consumers, $0.25 paid by producers.

At the point at which it is currently producing, Britain must give up the production of 75 hats to produce 25 additional sweaters. The opportunity cost of producing 3 hats is ________ sweaters.

1

If Japan, at the point where it is currently producing, must give up the production of 75 computers to produce 25 additional cellular telephones, the opportunity cost of producing 4 cellular telephones is ________ computers.

12

In 2008, the Social Security tax was levied on incomes only up to $102,000. Which of the following statements about this tax is correct?

A worker with an annual income of $200,000 and one with an annual income of $102,000 would pay the same dollar amount of payroll tax.

In a single year, Argentina can raise 100 tons of beef or produce 1,000 boxes of tulips. In the same growing season, Venezuela can raise 50 tons of beef or produce 750 boxes of tulips. When the two countries begin trading beef for tulips, we would expect the price of beef in Argentina: A. to rise from the autarky price. B. to be 10 boxes of tulips. C. to remain at the autarky price. D. to fall from the autarky price.

A. to rise from the autarky price

Which of the following trade patterns is best explained by increasing returns?

Japan exports cars to the United States and the United States exports airplanes to Japan.

If the government removed the excise tax on gasoline, which of the following would not occur?

Producer surplus would decrease.

If labor is abundant in South Africa but capital is scarce, when South Africa opens to trade:

The price of labor will rise and the price of capital will fall.

Figure: The Market for Roses Reference: Ref 8-10 (Figure: The Market for Roses) Look at the figure The Market for Roses. In the figure, producer surplus without international trade would be area or areas:

X + Y.

If demand is perfectly inelastic and the supply curve is upward sloping, then the burden of an excise tax is:

borne entirely by consumers.

If the demand curve is downward sloping and supply is perfectly elastic, then the burden of an excise tax is:

borne entirely by consumers.

When the government imposes an excise tax in a market:

consumer surplus falls, producer surplus falls, and a deadweight loss is created

An excise tax causes inefficiency because the number of transactions in a market is reduced. Because the tax discourages mutually beneficial transactions, there is a(n)________ from a tax.

deadweight loss

Since the United States imports a large quantity of textiles from Asia, the overall wages of U.S. textile workers has ________, while the price of textiles in the United States has ________.

decreased; decrease

A higher tax rate is more likely to increase tax revenue collected if the price elasticity of:

demand and supply are both low.

If a country's price for wood furniture in the absence of trade is lower than the price with trade, the country will likely:

export wooden furniture.

Over the past 40 years in the United States, as a percentage of gross domestic product:

exports and imports have grown.

Suppose the government imposes a $4 per month excise tax on cable TV. If the demand for cable TV is perfectly inelastic and the supply curve is elastic, then the price of cable TV will:

increase by exactly $4.

Assuming a normal upward-sloping supply curve and downward-sloping demand curve, if the government imposes a $5 excise tax on leather shoes and collects the tax from the suppliers, the price of leather shoes will:

increase by less than $5.

The effect of international trade on U.S. factor markets is to:

increase the wage of highly educated workers.

In a single year, the Netherlands can raise 100 tons of beef or produce 1,000 boxes of tulips. In the same growing season, Belgium can raise 50 tons of beef or produce 750 boxes of tulips. In autarky the price of beef:

is lower in the Netherlands than in Belgium.

The demand for food is very inelastic, so if a tax is levied on the consumers of food, the tax incidence:

is typically on consumers more than producers

The elasticity of demand for Gala apples is relatively elastic, so if a tax is levied on the consumers of Gala apples, the tax incidence:

is typically on producers more than consumers.

Sri Lanka's comparative advantage over the United States in textiles can be explained by its

labor abundance.

Chile has a comparative advantage over the United States in copper. Which of the following is a source of this comparative advantage?

large deposits of copper ore

Saudi Arabia has a tremendous comparative advantage in petroleum. Which of the following is a source of this comparative advantage?

large reserves of crude oil

Economic analysis shows that workers pay ________ of the FICA.

most

The burden of a tax that is imposed on a good is said to fall completely on the consumers if the:

price paid by consumers for the good increases by the amount of the tax

If a country has the comparative advantage in producing wooden furniture, then with free trade:

producer surplus in the market for wooden furniture will increase.

Suppose a government imposes an income tax that taxes 0% of the first $1,000, 10% of the next $10,000, and 20% of the remainder of earnings. This type of tax can be described as:

progressive.

U.S. federal taxes are generally ________, while state and local taxes are generally ________.

progressive; regressive

Annual taxes paid on the value of a home are called

property tax

The incidence of a tax:

refers to how much of the tax is actually paid by consumers and producers.

Sales taxes are considered to be

regressive.

Look at the figure The Domestic Market for Digital Cameras. Total surplus after international trade ________ by the area ________.

rises; D + E

If an excise tax is imposed on beer and collected from the producers, the ________ curve will shift ________ by the amount of the tax.

supply; upward

China, which is labor-abundant, has a comparative advantage in clothing production, which is labor-intensive. Which of the following models explains this pattern of comparative advantage?

the Heckscher-Ohlin model

Which model states that nations that are abundant in a factor will have a comparative advantage in a good whose production is intensive in that factor?

the Heckscher-Ohlin model

The two principles of tax fairness are

the benefits principle and the ability-to-pay principle.

France and England both produce wine and clothing under conditions of constant opportunity costs. France will have a comparative advantage in wine production if:

the opportunity cost of wine production is lower in France than in England.

If the government wants to minimize the deadweight loss from taxes, it should impose taxes on goods for which:

the price elasticity of demand is low.

The burden of a tax imposed on a good falls at least partially on consumers if:

the price paid by consumers for the good increases.

Mexico can produce lettuce domestically, but lettuce can also be imported from other nations. If Mexico imports some lettuce from other nations, it must be the case that:

the world price of lettuce is lower than the domestic price of lettuce.

The 1990 "yacht tax" caused a large deadweight loss, because demand for luxury yachts made in the United States is:

very elastic.