Economics Module 8 Flashcards
Adam Smith opposed government taxation and spending.
False
Compare the five countries represented in Figure 8.4. Which of the five countries allocated the largest percentage of its budget toward health and education expenditures?
United States of America
Compare the five countries represented in Figure 8.4. Which of the five countries allocated the largest percentage of its budget to general public services?
El Salvador
In Figure 8.5, of the items listed below, on average the single largest expenditure item for state and local governments across the U.S. is _________.
education
According to Figure 8.7, the largest single source of state and local government tax revenue in the U.S. is _______.
the property tax
According to Figure 8.6, the largest single source of federal government tax revenue in the U.S. is _____________.
taxes on income, profits, and capital gains
Compare the five countries represented in Figure 8.6. Which of the five countries received the largest percentage of its tax revenue from taxes on goods and services (sales taxes)?
El Salvador
Compare the five countries represented in Figure 8.6. Which of the five countries receives the largest percentage of its tax revenue from taxes on income, corporate profits, and capital gains?
United States of America
According to Figures 8.8 and 8.9, what is the largest source of personal income for residents of the U.S.?
Wages and salaries
In 2020, a person in the U.S. who earns $25,000 pays a marginal tax rate of ______________% into the Social Security Program, while a person who earns $140,000 pays a marginal tax rate of ______________% into the Social Security Program.
6.2, 0
Sales taxes are which of the following?
An important source of revenue for state and local governments but not very important for the federal government in the U.S.
In the U.S. in 2020, an individual who earns $225,000 a year (after standard deductions and exemptions) faces a marginal tax rate of ______________.
35%
In the U.S. in 2020, an individual who earns $225,000 a year (after standard deductions and exemptions) faces an average tax rate of ______________.
24%
The market equilibrium quantity without the $4 excise tax is ______________ units. The market equilibrium quantity with the $4 excise tax is ______________ units. The change in equilibrium quantity due to the $4 excise tax is ______________ units.
60, 50, -10
The equilibrium price consumers pay for the product without the $4 excise tax is ______________. The equilibrium price consumers pay with the $4 excise tax is ______________. The change in equilibrium price due to the $4 excise tax is ______________.
$12, $14, $2
The market equilibrium quantity without the 40% sales tax is ______________ units. The market equilibrium quantity with the 40% sales tax is ______________ units. The change in equilibrium quantity due to the 40% sales tax is ______________ units.
60, 50, -10
The equilibrium price consumers pay for the product without the 40% sales tax is ______________. The equilibrium price consumers pay with the 40% excise tax is ______________. The change in equilibrium price due to the 40% sales tax is ______________.
$12, $14, $2
Two facets of taxes that economists often use to compare taxes are _________.
efficiency and fairness
What happens to the total amount of consumer surplus in a market if the cost of production rises? The total amount of consumer surplus:
decreases
What happens to the total amount of producer surplus in a market if the demand for the product increases? The total amount of producer surplus:
increases
Compare the effects of a given tax on goods with elastic demands and inelastic demands in terms of amount of revenues raised from the taxes. With an elastic demand, ______ revenue will be raised than with an inelastic demand.
less
With an elastic demand, there will be a ____________ in allocative efficiency then there will be with an inelastic demand.
greater decrease
As the elasticity of demand increases, all other things being equal, the impact of a tax on the change in the
equilibrium quantity does which of the following?
Gets larger
Economists have estimated the elasticity of demand for the following (fairly) common goods:
If the same excise tax were imposed on the sale of each item, which market would experience the largest deadweight loss?
Fresh tomatoes
Economists have estimated the elasticity of demand for the following (fairly) common goods:
If the same excise tax were imposed on the sale of each item, which market would experience the smallest deadweight loss?
Toothpicks
In which of the following situations would the idea of vertical equity be violated?
Marcus earns $50,000 in income and $20,000 worth of benefits each year. He pays $15,000 in taxes each year. Claudia earns $60,000 running her own business. She receives no additional non-monetary benefits. She pays $18,000 in taxes each year.
A criticism of the current Social Security program (in the U.S.) that focuses on its equity implications is that it is which of the following?
Is funded by a regressive tax
Which of the following taxes is regressive?
A tax of 25% on the first $100,000 of income and of 20% on any additional income
Which of the following taxes is proportional?
An equal percentage tax on all consumption and saving.
Flat tax proposals generally fail to be truly proportional because which of the following is true?
They offer exemptions or deductions which create increasing average tax rates
Which of the following taxes is progressive?
A tax of 20% on the first $100,000 of income and 30% on any additional income
Which of the following would increase the efficiency loss of a progressive income tax?
Labor supply gets more elastic as income rises
Using Table 8.3 from the text demonstrating the impact of a $4 excise tax, what is the original equilibrium price and equilibrium quantity in this market before the tax is imposed?
Equilibrium price of $12 at an equilibrium quantity of 60 units.
Using Table 8.3 from the text demonstrating the impact of a $4 excise tax, what is the equilibrium price and equilibrium quantity in this market after the tax is imposed?
Equilibrium price of $14 at an equilibrium quantity of 50 units.
Using Table 8.3 from the text demonstrating the impact of a $4 excise tax, was this tax efficient?
Yes.
Using the edited figure from the text, on whom is the tax imposed—buyers or sellers?
Sellers
Using the edited figure from the text, on whom is the incidence (the burden) of the tax greater—buyers or sellers?
Buyers
Using the edited figure from the text, on whom is the tax imposed—buyers or sellers?
Sellers
Using the edited figure from the text, on whom is the incidence (the burden) of the tax greater—buyers or sellers?
Sellers
When will the tax incidence (the burden) of the tax be greater for buyers? Select all that apply.
a
When demand is more elastic than supply
c
When demand is more inelastic than supply
A property tax is most likely to do which of the following?
Encourage homeowners to consume less than the allocatively efficient amount of housing.
A highway paid with entry fees (tolls) may be considered ______ fair based on the benefit principle but ______ equitable based on the ability to pay principle compared to an income tax used for the same purpose.
more; less
To pay for a public good that not everyone uses, the most equitable tax for most people is likely one that is based on _____________.
the benefit principle
A progressive income tax is likely to do which of the following?
Increase the percentage of income taxed as income rises
A tax on a good and a tax on income will result in which of the following effects on allocative efficiency? ______________ of the good will be produced for allocative efficiency. ______________ labor will be provided in the market.
not enough; not enough
Most observers would claim that a regressive income tax will ________ equity.
decrease
A sales tax is normally viewed as a __________.
regressive tax
Which of the following taxes is most likely to be regressive?
Sales tax on food
A flat tax that exempts the first $20,000 of income and taxes all income above $20,000 at a 15% rate is _________.
progressive
In general, why do governments raise tax revenue? Select all that apply.
a
To provide public goods
b
To fund government operations
c
To transfer wealth from some individuals to other individuals
One difference between state spending and local government spending is which of the following?
According to the figure below, which of the following countries receives the largest portion of its tax revenue from taxes on income, profits, and capital gains?
According to the figure below, which of the following countries receives the largest portion of its tax revenue from taxes on income, profits, and capital gains?
Australia
Which of the following countries receives the largest portion of its tax revenue from taxes on the sales of goods and services?
Israel
Which of the following countries receives the largest portion of its tax revenue from taxes on international trade?
Bangladesh
According to the figure above, which of the following countries spent the largest percent of its budget on health and education?
Turkey
According to the figure below, which of the following countries spent the largest percent of its budget on general public services?
Russian Federation
The income of a person who owns a small unincorporated business is ________.
proprietor’s income
Income of a corporation after expenses is ________.
corporate profits
In the U.S. in 2018, an individual who earns $25,000 a year (after standard deductions and exemptions) faces a marginal tax rate of ______________.
12%
In the U.S. in 2018, an individual who earns $25,000 a year (after standard deductions and exemptions) faces an average tax rate of ______________.
11%
A person in the U.S. who earns $75,000 pays a marginal tax rate of ______________% into the Social Security Program while a person who earns $200,000 pays a marginal tax rate of ______________% into the Social Security Program.
6.2; 0
A value-added tax is most like __________.
a sales tax
The market equilibrium quantity without the $1.50 excise tax is ______________ units. The market equilibrium quantity with the $1.50 excise tax is ______________ units. The change in equilibrium quantity due to the $1.50 excise tax is ______________ units.
130; 110; -20
The equilibrium price consumers pay for the product without the $1.50 excise tax is ______________. The equilibrium price consumers pay with the $1.50 excise tax is ______________. The change in equilibrium price due to the $1.50 excise tax is ______________.
$3.50; $4.50; $1.00
The market equilibrium quantity without the 14% sales tax is ______________ units. The market equilibrium quantity with the 14% sales tax is ______________ units. The change in equilibrium quantity due to the 14% sales tax is ______________ units.
130; 120; -10
The equilibrium price consumers pay for the product without the 14% sales tax is ______________. The equilibrium price consumers pay with the 14% per sales tax is ______________. The change in equilibrium price due to the 14% sales tax is ______________.
$3.50; $4.00; +$0.50
As the elasticity of supply decreases, all other things being equal, the impact of a tax on equilibrium quantity does what?
Gets smaller
Economists have estimated the elasticity of demand for the following (fairly) common goods:
If the same excise tax were imposed on the sale of each item, which market would experience the largest dead weight loss?
Fresh green peas
Economists have estimated the elasticity of demand for the following (fairly) common goods:
If the same excise tax were imposed on the sale of each item, which market would experience the smallest dead weight loss?
Salt
In which of the following situations would the idea of horizontal equity be violated?
Omar earns $30,000 per year and gets free health care valued at $10,000 per year. He pays $4,500 per year in taxes. Kerry earns $40,000 per year and pays $6,000 in taxes.
Which of the following taxes is regressive?
A tax on generic grocery items
Which of the following taxes is proportional?
A tax on all forms of income of 20%
Which of the following taxes is progressive?
A tax of 50% on inheritances of more than $4 million only
An income tax that taxes all income at the same rate is often considered to be more fair than a sales tax that taxes all sales of goods and services at the same rate because which of the following is true?
People who earn more income tend to consume with a smaller proportion and save with a larger proportion of their income.
Consider a tax on producers. Under which of the following circumstances would the tax cause the least effect on economic efficiency?
If the supply of the product is inelastic.
Consider a tax paid by consumers. Under which of the following circumstances would the tax cause the least effect on economic efficiency?
If the demand for the product is inelastic.
A tax on producers would cause the market price to _______ and the market quantity to _______.
increase; decrease
A tax on consumers would case the market price to _______ and the market quantity to _______.
decrease; decrease
Assume that the municipality decides to place a tax on individual incomes. Suppose that the tax is a fixed sum for everyone regardless of income. Explain how you might describe the tax. Select all that apply.
a
Regressive.
c
Would tax a larger percentage of smaller incomes.
Now assume that the municipality decides to tax the same percentage of income for everyone regardless of income. Describe the tax in terms of the opportunity costs for individuals.
Individuals with a lower income will give up higher marginal utilities than those with higher incomes.
The goal of a local government is to raise the most income in order to provide the best possible education for residents. Several different types of taxes are being considered. In order to raise the most funds for a given tax level, the taxes should be placed on goods, services, or activities:
that have the most inelastic demands.
If the goal of a local government is to have the least effect on spending patters of taxpayers, the taxes should be placed on goods, services, or activities:
that have the most inelastic demands.
The largest single source of state and local government tax revenue in the U.S. is:
The property tax.
The largest single source of federal government tax revenue in the U.S. is:
Taxes on income, profits, and capital gains.
Economists have estimated the elasticity of demand for the following (fairly) common goods. If the same excise tax were imposed on the sale of each item, which market would experience the largest deadweight loss compared to the tax revenue generated?
Fresh tomatoes
Economists have estimated the elasticity of demand for the following (fairly) common goods. If the same excise tax were imposed on the sale of each item, which market would experience the smallest deadweight loss?
Toothpicks
Which of the following taxes is regressive?
A tax of 25% on the first $100,000 of income and of 20% on any additional income.
Which of the following taxes is progressive?
A tax of 20% on the first $100,000 of income and 30% on any additional income.
