Public Econ 17-20

Which of the following is not true of the deadweight loss from a small commodity tax?

As the tax rate is increased, the deadweight loss also increases, but at a slower rate.

A Pareto efficient tax structure

could be consistent with either a Rawlsian or a utilitarian social welfare function.

Commodity taxes are most likely to be a useful part of an optimal tax system if there are major consumption goods that are price

inelastic and income elastic.

A flat-rate income tax is progressive if its

assigns a negative tax to people with very low incomes.

A tax system is called progressive if

average tax rates increase with income.

The idea that people should be taxed according to the benefits they receive from government expenditures is called

benefit taxation.

Ramsey taxation deals with

commodity taxes.

In assessing the trade-off between consumption now and consumption in the future, the relative price of consumption now is

1 plus the rate of return on savings.

the personal income tax and payroll taxes.

A head tax

In the United States, the progressivity of the entire tax system is reduced by all but which of the following?

The higher marginal tax rates levied on higher incomes

An optimal tax structure will depend on

all of the above.

If the supply curve for labor is backward bending and a specific tax is imposed,

all of the above.

The idea that people should be taxed on what they take out of the economy rather than what they put in is an argument for

all of the above: a consumption tax. a sales tax. a value-added tax.

A tax on interest income that is not accompanied by tax deductibility of interest payments on loans will

discourage saving for some people but not for others.

If the indifference curves between two goods are linear, then a tax on one good will lead to a substitution effect that is

either zero or very large, but you cannot generally tell which without more information.

Another term sometimes used for deadweight loss is

excess burden.

A simple Ramsey tax system would tend to tax

food more heavily than perfume.

When a tax has implications for markets other than the one in which it is imposed, these are called

general equilibrium effects.

The precept that people who are equals in all relevant ways should be taxed equally is known as

horizontal equity.

When supply curves are perfectly elastic, Ramsey rules dictate that commodity tax rates should be proportional to the

inverse of the price elasticity of demand.

A tax on intermediate goods

is distortionary because it upsets product mix efficiency.

If a tax is levied on the output of a competitive firm, the firm acts as though

its marginal cost has increased at all output levels by the amount of the tax.

A lump-sum tax causes

no substitution effect.

In a competitive market, consider supply and demand elasticities at the point at which supply equals demand. (You may think of these curves as linear and measure slopes and elasticities in absolute values.) The formulas for elasticities of supply and demand suggest that the steeper curve will be

the one with the smaller elasticity

If a tax is imposed on an industry's output and the price of the output responds by rising by more than the amount of the tax,

the output market may be monopolized.

The largest single source of federal revenue is

the personal income tax and payroll taxes.

If married women have greater labor supply elasticities than single women, efficiency considerations might suggest that an income tax be imposed on

the single women at higher marginal rates.

When economists observe a backward-bending supply curve for labor,

they know that leisure is a normal good.

The effect of a lump-sum tax on a budget constraint is

to cause a parallel shift.

The precept that people in a position to pay greater taxes should do so is called

vertical equity.