question
B. the demand curve to decrease.
answer
When an excise tax is imposed on consumers, this will cause
A. the supply curve to shift upward.
B. the demand curve to decrease.
C. the demand curve to increase.
D. the supply curve to shift downward.
A. the supply curve to shift upward.
B. the demand curve to decrease.
C. the demand curve to increase.
D. the supply curve to shift downward.
question
A. The price falls from $75 to $50.
answer
The figure shows a market in which a $40 excise tax has been imposed on consumers, causing the demand curve to shift from D1 to D2. By how much does the price change in response?
A. The price falls from $75 to $50.
B. The price remains unchanged.
C. The price falls from $90 to $75.
D. The price falls from $90 to $50.
A. The price falls from $75 to $50.
B. The price remains unchanged.
C. The price falls from $90 to $75.
D. The price falls from $90 to $50.
question
C. $775.0 million
answer
Suppose that a $2.50 excise tax is imposed on printer ink cartridges. If the total number of ink cartridges sold per year falls from 325 million to 310 million in response to the tax, how much tax revenue will be collected?
A. $500.0 million
B. $37.5 million
C. $775.0 million
D. $812.5 million
A. $500.0 million
B. $37.5 million
C. $775.0 million
D. $812.5 million
question
A. Triangle acd
answer
The figure shows a market in which an $8 excise tax has been imposed. What is the amount of deadweight loss generated by the tax?
A. Triangle acd
B. Zero
C. Triangle abd
D. Triangle cbd
A. Triangle acd
B. Zero
C. Triangle abd
D. Triangle cbd
question
B. $ 800
answer
The figure shows a market in which an $8 excise tax has been imposed. How much revenue is collected by the tax?
A. $1,000
B. $ 800
C. $1,500
D. $1,600
A. $1,000
B. $ 800
C. $1,500
D. $1,600
question
D. the relative elasticities of supply and demand.
answer
The incidence of an excise tax is determined by
A. who officially pays the tax.
B. whether the good is normal or inferior.
C. how many consumers are in the market for the good.
D. the relative elasticities of supply and demand.
A. who officially pays the tax.
B. whether the good is normal or inferior.
C. how many consumers are in the market for the good.
D. the relative elasticities of supply and demand.
question
The tax results in a decrease in demand. You should draw a new demand curve that lies to the left of the original demand curve. Producers will receive a price of $5, but consumers will pay a price of $7. Review Chapter 7; Section: The Economics of Taxes: A Preliminary View.
answer
The following diagram illustrates the market for hamburgers. Suppose an excise tax of $2 per hamburger is imposed on the consumers of hamburgers.
Part 1: Use a line drawing tool to show the effect of this tax on either the supply or demand for hamburgers. Label the new curve either D2 or S2.
Part 2: Use a drop line tool to identify the price that consumers pay (Pc) after the tax is imposed.
Part 3: Use a drop line tool to identify the price producers receive (Pp) after the tax is imposed.
Part 1: Use a line drawing tool to show the effect of this tax on either the supply or demand for hamburgers. Label the new curve either D2 or S2.
Part 2: Use a drop line tool to identify the price that consumers pay (Pc) after the tax is imposed.
Part 3: Use a drop line tool to identify the price producers receive (Pp) after the tax is imposed.
question
A. $4
answer
The figure shows a market in which a $12 excise tax has been imposed on producers, causing the supply curve to shift from S1 to S2. How much of the tax is actually paid by producers?
A. $4
B. $22
C. $12
D. $14
A. $4
B. $22
C. $12
D. $14
question
According to the benefits principle,
A. each taxpayer should be able to decide for himself or herself how much to contribute toward public spending.
B. the people with the highest incomes should bear the largest share of the tax burden.
C. the people who benefit the most from public spending should bear the largest share of the burden of paying for it.
D. everyone should pay the same amount in taxes.
A. each taxpayer should be able to decide for himself or herself how much to contribute toward public spending.
B. the people with the highest incomes should bear the largest share of the tax burden.
C. the people who benefit the most from public spending should bear the largest share of the burden of paying for it.
D. everyone should pay the same amount in taxes.
answer
C. the people who benefit the most from public spending should bear the largest share of the burden of paying for it.
question
The figure shows a market in which a $12 excise tax has been imposed on producers, causing the supply curve to shift from S1 to S2. The imposition of the tax has caused the equilibrium price to rise
A. from $10 to $14.
B. from $14 to $22.
C. from $0 to $14.
D. from $10 to $22.
A. from $10 to $14.
B. from $14 to $22.
C. from $0 to $14.
D. from $10 to $22.
answer
B. from $14 to $22.
question
An excise tax is
A. a tax intended to make markets more efficient.
B. a tax charged on each unit of a good or service sold.
C. a tax charged only on necessities.
D. a tax charged only on luxury items.
A. a tax intended to make markets more efficient.
B. a tax charged on each unit of a good or service sold.
C. a tax charged only on necessities.
D. a tax charged only on luxury items.
answer
B. a tax charged on each unit of a good or service sold.
question
An excise tax will cause a deadweight loss because
A. it results in an inefficiently high quality of a good.
B. it results in an inefficiently high quantity of a good.
C. it prevents mutually beneficial transactions.
D. it causes consumers to purchase an inefficiently high quantity of the good.
A. it results in an inefficiently high quality of a good.
B. it results in an inefficiently high quantity of a good.
C. it prevents mutually beneficial transactions.
D. it causes consumers to purchase an inefficiently high quantity of the good.
answer
C. it prevents mutually beneficial transactions.
question
Under a progressive tax,
A. all taxpayers pay the same portion of their income.
B. high-income taxpayers pay a larger portion of their income than do low-income taxpayers.
C. low-income taxpayers pay a larger portion of their income than do high-income taxpayers.
D. all taxpayers pay the same amount, regardless of income.
A. all taxpayers pay the same portion of their income.
B. high-income taxpayers pay a larger portion of their income than do low-income taxpayers.
C. low-income taxpayers pay a larger portion of their income than do high-income taxpayers.
D. all taxpayers pay the same amount, regardless of income.
answer
B. high-income taxpayers pay a larger portion of their income than do low-income taxpayers.
question
Suppose that, in response to a $3 excise tax being imposed on firms providing car washes, the price of a car wash rises from $13 to $15. How much of the tax is actually paid by consumers?
A. $2
B. $1
C. $3
D. $6
A. $2
B. $1
C. $3
D. $6
answer
A. $2
question
Time spent filling out income tax forms is most accurately called
A. an administrative cost of a tax.
B. a loss of producer surplus due to a tax.
C. a transaction cost of a tax.
D. a loss of consumer surplus due to a tax.
A. an administrative cost of a tax.
B. a loss of producer surplus due to a tax.
C. a transaction cost of a tax.
D. a loss of consumer surplus due to a tax.
answer
A. an administrative cost of a tax.
question
The figure shows a market in which a $40 excise tax has been imposed on consumers, causing the demand curve to shift from D1 to D2. How much of the tax is actually paid by producers?
A. $25
B. $15
C. $75
D. $50
A. $25
B. $15
C. $75
D. $50
answer
A. $25
question
The figure shows a market in which an $8 excise tax has been imposed. How much of the tax is paid by producers?
A. $10
B. $3
C. $5
D. $8
A. $10
B. $3
C. $5
D. $8
answer
B. $3
question
The burden of an excise tax falls mainly on consumers
A. when the price elasticity of demand is high and the price elasticity of supply is low.
B. when both the price elasticity of demand and the price elasticity of supply are low.
C. when the price elasticity of demand is low and the price elasticity of supply is high.
D. when both the price elasticity of demand and the price elasticity of supply are high.
A. when the price elasticity of demand is high and the price elasticity of supply is low.
B. when both the price elasticity of demand and the price elasticity of supply are low.
C. when the price elasticity of demand is low and the price elasticity of supply is high.
D. when both the price elasticity of demand and the price elasticity of supply are high.
answer
C. when the price elasticity of demand is low and the price elasticity of supply is high.
question
Which of the following would result in a larger deadweight loss from a given tax?
A. A relatively elastic supply
B. A relatively steep supply curve
C. A relatively inelastic demand
D. A relatively steep demand curve
A. A relatively elastic supply
B. A relatively steep supply curve
C. A relatively inelastic demand
D. A relatively steep demand curve
answer
A. A relatively elastic supply
question
The following diagram describes the market for coffee, where demand is perfectly inelastic. Suppose a $2 per pound excise tax is levied on the coffee suppliers.
Part 1: Use a line drawing tool to show the effect of this tax on either the supply or demand for coffee. Label the new curve either D2 or S2.
Part 2: Use an area tool to illustrate the total revenue that will be collected with the tax. Label the area TR.
Part 1: Use a line drawing tool to show the effect of this tax on either the supply or demand for coffee. Label the new curve either D2 or S2.
Part 2: Use an area tool to illustrate the total revenue that will be collected with the tax. Label the area TR.
answer
The tax represents an added cost to producers and so results in a decrease in supply. You should draw a new supply curve that lies to the left of the original supply curve (above the original supply curve by the amount of the tax). The new equilibrium price will be $6 and, because demand is perfectly inelastic, the same quantity of 5 pounds will be sold. The total revenue from the tax is $2 per pound times 5 pounds or $10, shown as the rectangle whose height is from $4 to $6 and whose length is 5. For further review, go to Chapter 7; Section: The Economics of Taxes: A Preliminary View.
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