Question 1

In what way is raising tax on food a good way and bad way to raise revenue?

Accepted Answer

Since the demand for food is price inela...

Question 2

Why do experts disagree about whether labour taxes have small or large deadweight losses?

Accepted Answer

Experts disagree about whether labour ta...

Question 3

Since the supply of undeveloped land is relatively inelastic, a tax on undeveloped land would generate

Accepted Answer

A)   a small deadweight loss and the burden of the tax would fall on the renter.
B)   a large deadweight loss and the burden of the tax would fall on the landlord.
C)   a large deadweight loss and the burden of the tax would fall on the renter.
D)   a small deadweight loss and the burden of the tax would fall on the landlord.E) All of the above
F) C) and D) D

Question 4

A larger tax always generates a larger deadweight loss.

Accepted Answer

A) True 
 B)False  True

Question 5

Refer to the table below. The average tax rate for a taxpayer earning €40,000 (rounded up)  is

Accepted Answer

A)   0 per cent.
B)   5 per cent
C)   7 per cent
D)   12 per cent
E)   14 per centF) C) and D)
G) A) and D)

Question 6

A per-unit tax on a good creates deadweight loss because

Accepted Answer

A)   it makes demand more price inelastic.
B)   it makes supply more price elastic.
C)   by increasing the price consumers pay, and reducing the price sellers receive, it prevents some mutually beneficial trades.
D)   the government wastes the tax revenues it receives.E) All of the above
F) A) and C)

Question 7

If a tax on a good is doubled, the deadweight loss from the tax

Accepted Answer

A)   doubles.
B)   stays the same.
C)   increases by a factor of four.
D)   could rise or fall.E) B) and D)
F) B) and C)

Question 8

The ability-to-pay principle of taxation suggests that if a tax system is to be vertically equitable, it should be

Accepted Answer

A)   efficient.
B)   progressive.
C)   regressive.
D)   proportional.
E)   lump-sum.F) B) and D)
G) A) and B)

Question 9

John has been gardening for Sally once a week for €20. John's opportunity cost is €15, and Sally would be willing to pay €25 for the gardening tasks. What is the maximum tax the government could impose on gardening without discouraging John and Sally from continuing their mutually beneficial arrangement?

Accepted Answer

If the tax is less than €10, there will ...

Question 10

Use the following graph shown to fill in the table that follows.  $\begin{array}{|l|l|l|l|}
\hline & \text { WITHOUT TAX } & \text { WITH TAX } & \text { CHANGE } \
\hline \text { Consumer surplus } & & & \
\hline \text { Producer surplus } & & & \
\hline \text { Tax revenue } & & & \
\hline \text { Total surplus } & & & \
\hline
\end{array}$

Accepted Answer

None...

Question 11

A tax system with a low marginal tax rate generates less deadweight loss and is more efficient than a similar tax system with a higher marginal tax rate.

Accepted Answer

A) True 
 B)False  True

Question 12

The marginal tax rate is

Accepted Answer

A)   the taxes paid by the marginal worker.
B)   total income divided by total taxes paid.
C)   the extra taxes paid on an additional unit of income.
D)   total taxes paid divided by total income.E) A) and C)
F) All of the above

Question 13

Which of the following taxes is the most efficient tax?

Accepted Answer

A)   a consumption tax
B)   a lump-sum tax
C)   a progressive income tax
D)   a proportional income taxE) A) and D)
F) A) and C)

Question 14

When a tax is placed on a good, the revenue the government collects is exactly equal to the loss of consumer and producer surplus from the tax.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is true with regard to a tax on labour income? Taxes on labour income tend to encourage

Accepted Answer

A)   the unscrupulous to enter the underground economy.
B)   the elderly to retire early.
C)   all of the things described in these answers.
D)   second earners to stay home.
E)   workers to work fewer hours.F) None of the above
G) B) and C)

Question 16

Lump-sum taxes are equitable but not efficient.

Accepted Answer

A) True 
 B)False

Question 17

Why do some economists advocate taxing consumption rather than income?

Accepted Answer

Some economists advocate taxing consumpt...

Question 18

An efficient tax is one that generates minimal deadweight losses and minimal administrative burdens.

Accepted Answer

A) True 
 B)False

Question 19

A tax is __________ if it takes a smaller fraction of income as income rises.

Accepted Answer

A)   regressive
B)   proportional
C)   progressive
D)   aggressiveE) A) and B)
F) All of the above

Question 20

A government raises €100m through a €0.05 tax on widgets. It raises another €100m through a €0.10 tax on gadgets. It decides to eliminate the tax on gadgets and double the tax on widgets. Would it raise more, les or the same amount of money in tax revenue? Explain your answer.

Accepted Answer

Since the tax on gadgets was eliminated,...

Exam 9: The Tax System

In what way is raising tax on food a good way and bad way to raise revenue?

Correct Answer
verified
Since the demand for food is price inela...
View Answer

Why do experts disagree about whether labour taxes have small or large deadweight losses?

Correct Answer
verified
Experts disagree about whether labour ta...
View Answer

Since the supply of undeveloped land is relatively inelastic, a tax on undeveloped land would generate

Correct Answer
verified
D

A larger tax always generates a larger deadweight loss.

Correct Answer
verified
True

Refer to the table below. The average tax rate for a taxpayer earning €40,000 (rounded up) is

Correct Answer
verified

A per-unit tax on a good creates deadweight loss because

Correct Answer
verified

If a tax on a good is doubled, the deadweight loss from the tax

Correct Answer
verified

The ability-to-pay principle of taxation suggests that if a tax system is to be vertically equitable, it should be

Correct Answer
verified

Correct Answer
verified
If the tax is less than €10, there will ...
View Answer

Correct Answer
verified
None...
View Answer

A tax system with a low marginal tax rate generates less deadweight loss and is more efficient than a similar tax system with a higher marginal tax rate.

Correct Answer
verified
True

The marginal tax rate is

Correct Answer
verified

Which of the following taxes is the most efficient tax?

Correct Answer
verified

When a tax is placed on a good, the revenue the government collects is exactly equal to the loss of consumer and producer surplus from the tax.

Correct Answer
verified

Which of the following is true with regard to a tax on labour income? Taxes on labour income tend to encourage

Correct Answer
verified

Lump-sum taxes are equitable but not efficient.

Correct Answer
verified

Why do some economists advocate taxing consumption rather than income?

Correct Answer
verified
Some economists advocate taxing consumpt...
View Answer

An efficient tax is one that generates minimal deadweight losses and minimal administrative burdens.

Correct Answer
verified

A tax is __________ if it takes a smaller fraction of income as income rises.

Correct Answer
verified

A government raises €100m through a €0.05 tax on widgets. It raises another €100m through a €0.10 tax on gadgets. It decides to eliminate the tax on gadgets and double the tax on widgets. Would it raise more, les or the same amount of money in tax revenue? Explain your answer.

Correct Answer
verified
Since the tax on gadgets was eliminated,...
View Answer

Exam 9: The Tax System

In what way is raising tax on food a good way and bad way to raise revenue?

Correct AnswerverifiedSince the demand for food is price inela...View AnswerShow Answer

Why do experts disagree about whether labour taxes have small or large deadweight losses?

Correct AnswerverifiedExperts disagree about whether labour ta...View AnswerShow Answer

Since the supply of undeveloped land is relatively inelastic, a tax on undeveloped land would generate

Correct AnswerverifiedD

A larger tax always generates a larger deadweight loss.

Correct AnswerverifiedTrue

Refer to the table below. The average tax rate for a taxpayer earning €40,000 (rounded up) is

Correct AnswerverifiedShow Answer

A per-unit tax on a good creates deadweight loss because

Correct AnswerverifiedShow Answer

If a tax on a good is doubled, the deadweight loss from the tax

Correct AnswerverifiedShow Answer

The ability-to-pay principle of taxation suggests that if a tax system is to be vertically equitable, it should be

Correct AnswerverifiedShow Answer

Correct AnswerverifiedIf the tax is less than €10, there will ...View AnswerShow Answer

Correct AnswerverifiedNone...View AnswerShow Answer

A tax system with a low marginal tax rate generates less deadweight loss and is more efficient than a similar tax system with a higher marginal tax rate.

Correct AnswerverifiedTrue

The marginal tax rate is

Correct AnswerverifiedShow Answer

Which of the following taxes is the most efficient tax?

Correct AnswerverifiedShow Answer

When a tax is placed on a good, the revenue the government collects is exactly equal to the loss of consumer and producer surplus from the tax.

Correct AnswerverifiedShow Answer

Which of the following is true with regard to a tax on labour income? Taxes on labour income tend to encourage

Correct AnswerverifiedShow Answer

Lump-sum taxes are equitable but not efficient.

Correct AnswerverifiedShow Answer

Why do some economists advocate taxing consumption rather than income?

Correct AnswerverifiedSome economists advocate taxing consumpt...View AnswerShow Answer

An efficient tax is one that generates minimal deadweight losses and minimal administrative burdens.

Correct AnswerverifiedShow Answer

A tax is __________ if it takes a smaller fraction of income as income rises.

Correct AnswerverifiedShow Answer

A government raises €100m through a €0.05 tax on widgets. It raises another €100m through a €0.10 tax on gadgets. It decides to eliminate the tax on gadgets and double the tax on widgets. Would it raise more, les or the same amount of money in tax revenue? Explain your answer.

Correct AnswerverifiedSince the tax on gadgets was eliminated,...View AnswerShow Answer

Correct Answer
verified
Since the demand for food is price inela...
View Answer

Correct Answer
verified
Experts disagree about whether labour ta...
View Answer

Correct Answer
verified
D

Correct Answer
verified
True

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
If the tax is less than €10, there will ...
View Answer

Correct Answer
verified
None...
View Answer

Correct Answer
verified
True

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Some economists advocate taxing consumpt...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Since the tax on gadgets was eliminated,...
View Answer