01:220:102 Chapter Notes - Chapter 7: Excise, Tax Wedge, Proportional Tax

58 views4 pages

mauveporcupine901

8 Sep 2016

School

Department

Course

Professor

For unlimited access to Textbook Notes, a Class+ subscription is required.

chrisfive2005 and 37653 others unlocked

01:220:102 Full Course Notes

Verified Note

57 documents

Document Summary

Intro to microeconomics: 7. 1 the economics of taxes: a preliminary view. Excise tax - a tax on sales of a good or service pre-tax (before the tax is levied) post-tax (after the tax is levied) incidence (of tax) a measure of who really pays it. In fact, it doesn"t matter who officially pays the tax the outcome is the same. The incidence of an excise tax depends on the price elasticity of supply and the price elasticity of demand. When the price elasticity of demand is low and the price elasticity of supply is high, the burden of an excise tax falls mainly on consumers. When the price elasticity of demand is high and the price elasticity of supply is low, the burden of an excise tax falls mainly on producers. Post-tax supply curve shifts up by the amount of the tax compared to the pre-tax supply curve.

Related Questions

1.) An excise tax on a good typically reduces the net price received by the seller. (TRUE/FALSE)

2.) The burden of an excise tax on gasoline falls entirely on consumers of gasoline. (TRUE/FALSE)

3.) Rent controls are one of the few examples of a price floor in market economies. (TRUE/FALSE)

4.) Imposing a price ceiling below the equilibrium price of a good often leads to_____.

A) A greater supply of the good

B) A black market for the good

C) A rightward shift of the supply curve for the good.

D) A leftward shift of the demand curve for the good.

E) All of these

5.) Which of the following is true of price floors and ceilings?

A) Lead to the same price and quantity as in competitive market.

B) Lead to technical efficiency

C) Cause the demand curve to shift left

D) Usually result from government intervention

E) Cause the supply curve to shift right.

6.) Price ceilings often lead to black markets. (TRUE/FALSE)

7.) When minimum wage is above the equilibrium wage what occurs?

A) There will be a shortage of labor

B) There will be no effect on the number of people employed

C) There will be an increase in unemployment rate

D) There will be a decrease in unemployment rate

8.) An excise tax on a good typically reduces the price paid by the consumer (TRUE/FALSE)

9.) If a price ceiling is below the equilibrium price is imposed on a market, it will cause the quantity demanded to rise and the quantity supplied to fall. (TRUE/FALSE)

10.) Price floors often lead to black markets. (TRUE/FALSE)

11.) If an excise tax is imposed on restaurant meals what occurs?

A) Fewer meals will be produced and sold

B) More meals will be produced and sold

C) Market price of the meals will fall

D) Government tax revenue will fall.

mauveyellowjacket715

1) Which of the following explains the distribution of income?

Select one:

a. a positive externality

b. The person on which the final burden of a tax falls

c. An unintended result of taxation

d. The way that income is allocated to individuals, families, and other groups

2)Why can suppliers of goods can more easily shift the incidence of a tax to the consumer if the demand of the good is inelastic?

Select one:

a. Because markets that sell inelastic goods have so much competition, that a tax increase would not be noticed.

b. Because the tax would make marginal utility equal marginal benefit.

c. When taxes are levied, companies legally have to increase their prices.

d. Because the consumer needs the good regardless of the new price.

3)Where is the power to issue taxes granted to the federal government?

Select one:

a. The sixteenth amendment to the constitution

b. The bill or rights

c. The 20th amendment to the constitution

d. The declaration of independence

What are intergovernmental revenues generally used to do?

Select one:

a. Sanitation workersâ benefits

b. To create national parks

c. Educate and provide public welfare

d. Provide public transportation for all state employees

One of the noted advantages of a flat tax is

Select one:

a. all members of congress generally agree with issuing a flat tax

b. The flat tax offers a relatively simple tax process

c. There is a defined and agreed upon tax rate already in place.

d. The flat tax removes behavior incentives that are built into the tax code

6) Which of the following is TRUE regarding the âincidence of a taxâ.

Select one:

a. This is a tax paid by all people to establish social security payments

b. This refers to the individual(s) who take the final burden of the tax

c. This is a loophole designed to help the rich

d. This is a tax on individuals who run oligopolies

Person âAâ earns $10,000 a year and pays 10% of his income in taxes. Person âBâ earns $60,000 a year and pays 20% in taxes. Which kind of tax is being represented?

Select one:

a. A regressive tax

b. A progressive tax

c. A loophole tax

d. A flat tax

When demand for a good is very elastic, revenue ________ when the price falls.

(2)

An elasticity measure less than one means that demand is __________.

(3)

An elasticity measure greater than one means that demand is __________.

(4)

The Latin expression ceteris paribus means

	having made all other necessary changes.
	holding constant all other variables.
	assuming all households have similar incomes.
	given the level of income in the economy.

(5)

A variable measured in terms of money is called a ____________________.

	real variable
	nominal variable
	macroeconomic variable
	microeconomic variable

(6)

Which of the following is true about the importance of money in economics?

	Money is important in both macroeconomics and microeconomics.
	Money is important in macroeconomics but not microeconomics.
	Money is important in microeconomics but not macroeconomics.
	Money is not important in either microeconomics or macroeconomics.

(7)

What is the difference between normative and positive economics?

	Positive economics is descriptive and predictive; normative economics is prescriptive.
	Positive economics highlights the positive aspects of the economy; normative economics highlights the average features.
	Positive economics studies the actions of individuals; normative economics studies the actions of households.
	Positive economics is an applied social science; normative economics is a theoretical social science.

(8)

The slope of the demand curve is negative because

	the quantity of a good demanded decreases as income declines.
	the quantity of a good demanded increases as income declines.
	the quantity of a good demanded increases as the price declines.
	the quantity of a good demanded decreases as the price declines.

(9)

What is the result of an increase in the price of bread, a normal good?

	The demand curve shifts to the right.
	The demand curve shifts to the left.
	The quantity demanded increases.
	The quantity demanded decreases.

(10)

What is the effect on demand for bread when the price of bagels, a substitute for bread, rises?

	The demand curve for bread shifts to the right.
	The demand curve for bread shifts to the left.
	The quantity of bread demanded increases.
	The quantity of bread demanded decreases.

(11)

Which of the following would cause the supply curve for bread to shift inward?

	An increase in the price of bread
	An increase in the price of bagels
	A decrease in the price of bread
	An increase in the price of flour

(12)

An improvement in technology shifts the supply curve outward because

	at every price, firms find producing the good to be more profitable.
	the price of the good increases.
	at every price, firms find producing the good to be less profitable.
	the price of the good decreases.

(13)

Which of the following factors does not affect how much bread a baker is willing to produce?

	The price of bread
	The demand for bread
	The cost of inputs
	Technology

(14)

How do expectations of prices affect how much of a good producers are willing to sell?

	Expectations of prices affect only demand, not supply.
	Actual prices, not expectations of prices, affect supply.
	If producers expect prices to fall in the future, they supply less at every price.
	If producers expect prices to rise in the future, they supply less at every price.

(15)

When the price of a good is above equilibrium level,

	the quantity demanded exceeds the quantity supplied.
	the quantity supplied exceeds the quantity demanded.
	the supply curve shifts to the left.
	the supply curve shifts to the right.

(16)

At a price of P₀ in the diagram below, which of the following statements is true?

	Supply equals demand.
	There is excess demand.
	There is excess supply.
	There is scarcity.

(17)

If demand for bread increases at every price, the equilibrium price of bread will

	fall.
	rise.
	remain unchanged.
	depend on income.

(18)

If the demand for bread declines, then

	at the original equilibrium price, there is excess demand.
	at the original equilibrium price, there is excess supply.
	the supply curve shifts to the right.
	the supply curve shifts to the left.

(19)

Peanut butter and jelly are complementary goods. When the price of peanut butter rises, the demand for jelly ________ and the price of jelly ________.

	rises; falls
	rises; rises
	falls; rises
	falls; falls

(20)

The measure of elasticity that economists use is

	always a positive number.
	always a negative number.
	positive when demand is elastic and negative when demand is inelastic.
	negative when demand is elastic and positive when demand is inelastic.

(21)

Which of the following formulas is the correct expression for the slope of a line?

(22)

Graphically how would an increase in income affect the demand for hamburgers?

	The slope of the demand curve would increase.
	The slope of the demand curve would decrease.
	The demand curve would shift outward, parallel to the original demand curve.
	The demand curve would shift inward, parallel to the original demand curve.

(23)

Given the equation P = $6.00 ? $.40Q, where P is the price of the good and Q is the quantity of the good demanded, how many units will this consumer demand if the price is $3.60?

	1.44 units
	3 units
	3.6 units
	6 units

(24)

Which of the following is true about unit elasticity?

	Revenues remain unchanged when the price changes.
	Elasticity of demand increases as one moves down the demand curve.
	Elasticity of demand decreases as one moves down the demand curve.
	The elasticity of demand is greater than one at every point along the demand curve.

(25)

Which of the following could be a determinant of the quantity demanded of a good?

	The price of the good
	The price of related goods
	Income
	Expectations about the future price of the product
	All of the above

violethare488

01:220:102 Chapter Notes - Chapter 7: Excise, Tax Wedge, Proportional Tax

01:220:102 Full Course Notes

Document Summary

Get access

Related Documents

01:220:102 Lecture Notes - Lecture 17: Paternalism, Social Cost, Consumer Sovereignty

01:220:102 Chapter Notes - Chapter 8: Tax Rate, Clastic Rock, Standard Deduction

01:220:102 Chapter Notes - Chapter 6: Demand Curve, Social Cost, Economic Equilibrium

Related Questions