Question 1

The assertion that people with the same ability to pay taxes should pay the same amount in taxes best represents the idea of

Accepted Answer

A)   horizontal equity.
B)   vertical equity.
C)   the benefits principle of tax fairness.
D)   fairness principle of taxation.
E)   benefits paid principle of taxation.F) B) and C)
G) All of the above

Question 2

If the supply of automobiles becomes more inelastic,then a tax on automobiles is

Accepted Answer

A)   paid more by the buyers after the change than before.
B)   paid more by the sellers after the change than before.
C)   always split evenly between the buyers and the sellers.
D)   paid more by the government after the change than before.
E)   always paid entirely by the buyers.F) A) and D)
G) None of the above

Question 3

For the United States,which tax is the single biggest source of tax revenue?

Accepted Answer

A)   Social Security tax
B)   sales tax
C)   property tax
D)   personal income tax
E)   corporation income taxF) C) and D)
G) None of the above

Question 4

Which resource has the least elastic supply?

Accepted Answer

A)   labor
B)   capital
C)   land
D)   money
E)   taxesF) All of the above
G) A) and B)

Question 5

If Congress wanted to change the social security tax so that firms paid most of the tax,they would need to

Accepted Answer

A)   change the tax laws so that all of the social security tax was imposed on firms.
B)   change the tax laws so that all of the social security tax was imposed on workers.
C)   change the tax laws so that more than 50 percent of the social security tax was imposed on firms.
D)   change the tax laws so that more than 50 percent of the social security tax was imposed on workers.
E)   None of the above because the incidence of the social security tax does not depend on the tax laws but instead depends on the elasticities of the demand for labor and the supply of labor.F) B) and C)
G) C) and D)

Question 6

Vertical equity implies that
i.tax rates should be equal for all tax payers.
ii.people with higher income should pay more in taxes.
iii.people with higher incomes should pay a lower average tax rate.

Accepted Answer

A)   i only
B)   ii only
C)   iii only
D)   i and ii
E)   ii and iiiF) A) and D)
G) A) and E)

Question 7

Taxes on labor income ________ a deadweight loss and ________ the supply of labor.

Accepted Answer

A)   create; decrease
B)   do not create; increase
C)   create; increase
D)   do not create; decrease
E)   create; do not changeF) B) and E)
G) C) and D)

Question 8

If neither the demand nor the supply for goods or labor is perfectly inelastic,then a sales tax on a good ________ a deadweight loss and an income tax ________ a deadweight loss.

Accepted Answer

A)   creates; creates
B)   creates; does not create
C)   does not create; create
D)   does not create; does not create
E)   might create; might createF) A) and B)
G) None of the above

Question 9

For a given supply elasticity,the more inelastic the demand for a good,the larger the share of the tax paid by the

Accepted Answer

A)   buyers.
B)   sellers.
C)   participants other than the buyers and sellers.
D)   government.
E)   None of the above answers is correct.F) A) and C)
G) C) and D)

Question 10

The ability-to-pay principle of tax fairness is equivalent to which of the following?

Accepted Answer

A)   collect taxes from those who benefit the most from provision of public services
B)   more taxes should be collected from people who can more easily bear the burden
C)   a regressive income tax structure
D)   a proportional income tax structure
E)   concern about only horizontal equity and no concern about vertical equityF) A) and B)
G) None of the above

Question 11

If the average tax rate increases as income increases,then the

Accepted Answer

A)   tax is regressive tax.
B)   tax is a progressive tax.
C)   tax is a proportional tax.
D)   income is tax exempt so that no tax needs to be paid on it.
E)   marginal tax rate must be falling as income increases.F) B) and D)
G) B) and E)

Question 12

Tax incidence is the

Accepted Answer

A)   dollar amount of a tax, expressed as a percentage of the purchase price.
B)   dollar amount of a tax per unit sold.
C)   division of a tax burden between the buyer and seller.
D)   amount of revenue collected by government on a specific good.
E)   deadweight loss from the tax.F) C) and D)
G) A) and D)

Question 13

Suppose everybody paid the same total amount of tax regardless of their income.This type of tax system would be

Accepted Answer

A)   regressive.
B)   proportional.
C)   progressive.
D)   marginal.
E)   efficient.F) D) and E)
G) C) and D)

Question 14

The idea that taxpayers with the same ability to pay a tax should pay the same taxes is called

Accepted Answer

A)   progressive taxes.
B)   regressive taxes.
C)   horizontal equity.
D)   vertical equity.
E)   fair-incidence principle.F) B) and E)
G) B) and C)

Question 15

If the supply of capital is perfectly ________ end up paying the tax on capital income.

Accepted Answer

A)   elastic, lenders
B)   elastic, firms that demand capital
C)   inelastic, lenders
D)   inelastic, firms that demand capital
E)   unit elastic, firms that demand capitalF) C) and D)
G) A) and E)

Question 16

What are the similarities and differences between horizontal and vertical equity?

Accepted Answer

Both horizontal and vertical equity invo...

Question 17

The proposition that people should pay taxes according to how easily they can bear the burden is known as the ________ principle.

Accepted Answer

A)   regressive tax
B)   benefits
C)   ability-to-pay
D)   fairness
E)   incidence of fairnessF) A) and B)
G) All of the above

Question 18

The figure above shows the market for MP3 players, where S is the supply curve and D is the demand curve before any tax is imposed. The government imposes a $10 per unit tax on sellers of MP3 players.
-Based on the figure above,the burden of the tax

Accepted Answer

A)   is split equally between the buyer and the seller.
B)   falls mostly on buyers.
C)   falls mostly on sellers.
D)   falls entirely on buyers.
E)   falls entirely on sellers.F) C) and D)
G) A) and E)

Question 19

Because the supply of land is perfectly inelastic,a tax on land income

Accepted Answer

A)   is paid entirely by the suppliers.
B)   is paid entirely by the demanders.
C)   is shared equally between the suppliers and the demanders.
D)   is shared, but not equally, between the suppliers and the demanders.
E)   creates a deadweight loss.F) A) and C)
G) B) and C)

Question 20

Which of the following taxes best illustrate the ability-to-pay principle of tax fairness?

Accepted Answer

A)   Roads and highways are built and maintained through a tax on gasoline.
B)   The local library is funded through a flat $10 tax levied on all homeowners.
C)   A sales tax on food pays for local police and fire protection.
D)   The WIC program provides food to low income mothers and is funded through the progressive federal income tax.
E)   State parks are maintained through the state lottery.F) B) and C)
G) A) and E)

Exam 8: Taxes

Which of the following taxes best illustrate the ability-to-pay principle of tax fairness?

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Tax incidence is the

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If neither the demand nor the supply for goods or labor is perfectly inelastic,then a sales tax on a good ________ a deadweight loss and an income tax ________ a deadweight loss.

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The ability-to-pay principle of tax fairness is equivalent to which of the following?

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If the average tax rate increases as income increases,then the

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Because the supply of land is perfectly inelastic,a tax on land income

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If the supply of automobiles becomes more inelastic,then a tax on automobiles is

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The assertion that people with the same ability to pay taxes should pay the same amount in taxes best represents the idea of

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The idea that taxpayers with the same ability to pay a tax should pay the same taxes is called

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For the United States,which tax is the single biggest source of tax revenue?

Correct AnswerverifiedShow Answer

What are the similarities and differences between horizontal and vertical equity?

Correct AnswerverifiedBoth horizontal and vertical equity invo...View AnswerShow Answer

If Congress wanted to change the social security tax so that firms paid most of the tax,they would need to

Correct AnswerverifiedShow Answer

Suppose everybody paid the same total amount of tax regardless of their income.This type of tax system would be

Correct AnswerverifiedShow Answer

Taxes on labor income ________ a deadweight loss and ________ the supply of labor.

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The proposition that people should pay taxes according to how easily they can bear the burden is known as the ________ principle.

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Vertical equity implies that i.tax rates should be equal for all tax payers. ii.people with higher income should pay more in taxes. iii.people with higher incomes should pay a lower average tax rate.

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The figure above shows the market for MP3 players, where S is the supply curve and D is the demand curve before any tax is imposed. The government imposes a $10 per unit tax on sellers of MP3 players. -Based on the figure above,the burden of the tax

Correct AnswerverifiedShow Answer

Which resource has the least elastic supply?

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If the supply of capital is perfectly ________ end up paying the tax on capital income.

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For a given supply elasticity,the more inelastic the demand for a good,the larger the share of the tax paid by the

Correct AnswerverifiedShow Answer

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If neither the demand nor the supply for goods or labor is perfectly inelastic,then a sales tax on a good a deadweight loss and an income tax a deadweight loss.

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Both horizontal and vertical equity invo...
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Taxes on labor income a deadweight loss and the supply of labor.

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