Micro Econ Module 10

Economies with lower taxes _________ production and _________ available social surplus. One possible cost of such economies is that the gap between the rich and poor may ____________

1. encourage 2. increase 3. increase

Refer to the table. If Maxine earns​ $40,000, which of the following would be her marginal tax rate and her average tax​ rate?

25% about 14%

Government increases taxes as a result of a budget deficit.

Correcting market failures and externalities.

Suppose a country has a flat income tax of 24 percent. John has earnings of ​$100,000 and Maria has earnings of $40,000.

John's average tax rate is 24 Maria's average tax rate is 24

The incidence of the tax falls entirely on producers because​ ____________.

consumers are infinitely price sensitive.

In competitive​ markets, tax​ incidence, as well as the​ equilibrium, is independent of whether the tax is imposed on consumers or sellers​ because:

if it is imposed on the​ seller, the seller will raise the price and pass it to the consumer.

Economists toward the paternalistic end of the spectrum would probably say that some mistakes result from the fact​ that:

individuals are not used to making decisions of a certain type.

Educational grants afforded to poorer developing countries are​ often:

ineffective because government officials often misuse the funds.

This​ lump-sum income tax is a __________ tax

regressive

Which of the following is not a factor that influences government taxation and spending​ decisions?

Correcting​ post-tax income distribution

Government increases taxes in order to pay the salary of the doctors working in government owned hospitals.

Financing operations.

Criminals spend vast resources trying to avoid taxes and​ regulations, break​ laws, and undermine bans​ and, in​ turn, authorities spend resources to catch criminals. What does this​ reflect?

Problems generated by the underground economy.

Based on the income tax brackets in the table​ beside, an individual with an income of $105,000 would pay $22,470.57 in income taxes. In this case the​ individual's average tax rate is ________ their marginal tax rate.

lower than

Which of the following could influence the relationship between inequality and social surplus and move an economy from Point A to Point B on the​ curve?

raising marginal corporate taxes

The tax paid while purchasing a cocktail at a bar is levied by

the federal government.

When tax rates​ increase, the deadweight loss of taxation increases by ______________ This implies​ that, all else being​ equal, it is better to have __________ rather than ______________

1. a greater amount 2. many small tax resources 3. than one large source

A price floor placed below the equilibrium price would __________ the market. If the price floor was set above the equilibrium price it would ___________ the market. A price floor reallocates surplus to ___________.

1. have no effect on 2. create a surplus 3. producers

There will be an ________ in the income tax paid by Ray in the year 2015 as compared to the year 2014 by $

1. increase 2. 13605.24

In an economy with an​ equity-efficiency trade-off, the newly elected government implements proportional taxes and plans to have a lesser hold on consumer choice. This will lead to _______ in efficiency and _________ in social inequality compared to the existing level of social inequality in the economy.

1. increase 2. increase

Consider the tax burden on consumers and producers of a​ $1 per-unit tax to be paid by producers when demand is perfectly elastic and supply is perfectly inelastic. The burden of the tax on producers is ______ percent

100

Which of the following is an example of the opportunity cost of government​ bureaucracies?

A tax collector who was qualified to produce motherboards

Country A has a proportional tax system that is applicable to all citizens. As a result of this tax​ system, there is significant corruption that has led to various market inefficiencies. Referring to the​ graph, which point best represents the situation described​ above?

C

Government issues bonds for the construction of a new plant that treats the waste products emitted from the big factories.

Raising revenues.

Government provides health services to individuals who are incapable of paying for it.

Redistributing funds via transfer payments.

In an​ economy, there is a high level of social inequality. This causes the government to implement a wealth tax on its citizens who earn a high level of income​ and, therefore, are capable of holding assets. Which of the following is not a result of the implementation of the wealth​ tax?

The increase in consumer surplus and decrease in social inequality.

Which of the following statements is not true regarding the concepts of corruption and the underground​ economy?

There is an increase in deadweight loss.

Suppose the Social Security tax rate is 6.2 percent of earnings up to a maximum of ​$117,000​ beyond which there is no additional tax. Zia has earnings of ​$140,000 and Paul has earnings of $60,000.

Zia 5.18% Paul 6.20% Regressive tax

There is an increase in the quality of the education system in an economy at low costs. The government also announces unemployment benefits and pension programs. These changes made by the government will lead to

a trade-off between equity and efficiency.

If government tax revenues are $6.4 trillion and government spending is ​$6.2 trillion, the government is running a _________

budget surplus

The two most important goals for government policy involve a​ trade-off between ________ and ________

equity; efficiency.

Suppose the government levies tax on a good which has price elasticity of demand of 3.25 and price elasticity of supply of​ 0.7, then the tax incidence will fall more on

sellers

ABC​ Ltd., is an international company that pays taxes every year on its profits. This particular tax is levied by

the federal, state, and/or local governments.

Dereck sold his shop to Jazz who wants to open a new salon. Dereck had to pay taxes on the sale of his shop. This tax is levied by

the state and local governments.

FDA regulations aimed at ensuring that new drugs that are marketed​ do, in​ fact, have the functions they are supposed to have are necessary​ because

verification by each consumer would be extremely inefficient.

Consider the market illustrated in the figure on the​ right, where demand is perfectly inelastic. If the government levies a tax on​ consumers, what will be the tax​ incidence? Producers will bear _____ percent of the tax burden

zero