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31
Copyright © 2011 Pearson Education, Inc.
74) Neither the supply of nor demand for a good is perfectly elastic or perfectly inelastic. So,
imposing a tax on the good results in a ________ in the price received and kept by sellers and a
________ in the price paid by buyers.
A) rise; rise
B) rise; fall
C) fall; rise
D) fall; fall
E) no change; rise
Skill: Level 4: Applying models
Section: Checkpoint 8.1
Author: STUDY GUIDE
AACSB: Reflective thinking
75) Suppose the demand for barley is perfectly elastic. The supply curve of barley is upward
sloping. If a tax is imposed on barley,
A) barley sellers pay the entire tax.
B) barley buyers pay the entire tax.
C) the government pays the entire tax.
D) the tax is split evenly between barley buyers and sellers.
E) who pays the tax depends on whether the government imposes the tax on barley sellers or on
barley buyers.
Skill: Level 3: Using models
Section: Checkpoint 8.1
Author: STUDY GUIDE
AACSB: Reflective thinking
32
Copyright © 2011 Pearson Education, Inc.
76) The demand for apple pies is perfectly elastic. If the government taxes apple pies at $1 a pie,
then ________.
A) the seller pays the entire tax
B) the buyer pays the entire tax
C) the seller and the buyer split the tax evenly
D) the seller and the buyer split the tax but the seller pays more
E) who pays the tax depends on whether the government imposes the tax on pie buyers or on pie
sellers
Skill: Level 3: Using models
Section: Checkpoint 8.1
Author: MyEconLab Web Site
AACSB: Analytical reasoning
33
Copyright © 2011 Pearson Education, Inc.
77) At harvest time the supply of wheat is perfectly inelastic. If the government taxes wheat at $1
a bushel, then
A) the seller pays the entire tax.
B) the buyer pays the entire tax.
C) the seller and the buyer split the tax evenly.
D) the seller and the buyer split the tax but the seller pays more.
E) no one pays the tax because the wheat must be harvested or it will go to waste.
Skill: Level 3: Using models
Section: Checkpoint 8.1
Author: MyEconLab Web Site
AACSB: Analytical reasoning
78) To determine who bears the greater share of a tax, we compare the
A) number of buyers to the number of sellers.
B) elasticity of supply to the elasticity of demand.
C) size of the tax to the price of the good.
D) government tax revenue to the revenue collected by the suppliers.
E) pre-tax quantity to the post-tax quantity.
Skill: Level 2: Using definitions
Section: Checkpoint 8.1
Author: STUDY GUIDE
AACSB: Reflective thinking
34
Copyright © 2011 Pearson Education, Inc.
79) The supply of oil is more elastic than the demand for oil. If oil is taxed $10 per barrel, how
will the tax be divided between the buyer and seller?
A) The seller will pay more of the tax than the buyer pays.
B) The buyer will pay more of the tax than the seller pays.
C) The seller and buyer will split the tax evenly.
D) The seller will pay the entire tax.
E) The buyer will pay the entire tax.
Skill: Level 3: Using models
Section: Checkpoint 8.1
Author: MyEconLab Web Site
AACSB: Analytical reasoning
80) The buyer will pay the entire tax levied on a good when the demand for the good is
________ or when the supply of the good is ________.
A) perfectly elastic; perfectly inelastic
B) perfectly elastic; perfectly elastic
C) perfectly inelastic; perfectly inelastic
D) perfectly inelastic; perfectly elastic
E) unit elastic; unit elastic
Skill: Level 2: Using definitions
Section: Checkpoint 8.1
Author: MyEconLab Web Site
AACSB: Reflective thinking
81) A sales tax imposed on tires ________ consumer surplus and ________ producer surplus.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
E) does not change; does not change
Skill: Level 4: Applying models
Section: Checkpoint 8.1
Author: STUDY GUIDE
AACSB: Analytical reasoning
35
Copyright © 2011 Pearson Education, Inc.
82) If a tax is placed on tires, then
i. the equilibrium quantity of tires will decrease.
ii. a deadweight loss will be created.
iii. the producer surplus will decrease.
A) i only
B) ii only
C) i and iii
D) i and ii
E) i, ii, and iii
Skill: Level 3: Using models
Section: Checkpoint 8.1
Author: MyEconLab Web Site
AACSB: Reflective thinking
83) The deadweight loss from a tax is called the
A) marginal benefit of the tax.
B) marginal cost of the tax.
C) excess burden of the tax.
D) net gain from taxation.
E) net loss from taxation.
Skill: Level 1: Definition
Section: Checkpoint 8.1
Author: STUDY GUIDE
AACSB: Reflective thinking
36
Copyright © 2011 Pearson Education, Inc.
84) The graph shows the market for cell phones. The government imposes a sales tax on cell
phones at $10 a cell phone. The excess burden of the sales tax on cell phones is ________.
A) $20,000
B) $15,000
C) $35,000
D) $7,500
E) $30,000
Skill: Level 3: Using models
Section: Checkpoint 8.1
Author: MyEconLab Web Site
AACSB: Analytical reasoning
85) A sales tax creates a deadweight loss because
A) there is some paperwork opportunity cost of sellers paying the sales tax.
B) demand and supply both decrease.
C) less is produced and consumed.
D) citizens value government goods less than private goods.
E) the government spends the tax revenue it collects.
Skill: Level 4: Applying models
Section: Checkpoint 8.1
Author: STUDY GUIDE
AACSB: Reflective thinking
37
Copyright © 2011 Pearson Education, Inc.
8.2 Income Tax and Social Security Tax
1) If we look at the percentage of total tax revenue collected by different taxes in the United
States, we see that
A) personal income taxes are the largest.
B) Social Security taxes are the largest.
C) excise taxes, while not the largest, are second only to Social Security taxes.
D) sales taxes are the smallest.
E) corporate income taxes are by far the largest.
Skill: Level 1: Definition
Section: Checkpoint 8.2
Author: WM
AACSB: Reflective thinking
2) The largest percentage of the government's tax revenue received comes from
A) personal income taxes.
B) property taxes.
C) social security taxes.
D) sales taxes.
E) excise taxes.
Skill: Level 1: Definition
Section: Checkpoint 8.2
Author: JC
AACSB: Reflective thinking
3) Which of the following types of taxes generates the most revenue for governments in the
United States?
A) Social Security tax
B) personal income tax
C) property tax
D) sales tax
E) excise tax
Skill: Level 1: Definition
Section: Checkpoint 8.2
Author: TS
AACSB: Reflective thinking
38
Copyright © 2011 Pearson Education, Inc.
4) For the United States, which tax is the single biggest source of tax revenue?
A) Social Security tax
B) sales tax
C) property tax
D) personal income tax
E) corporation income tax
Skill: Level 1: Definition
Section: Checkpoint 8.2
Author: SB
AACSB: Reflective thinking
5) Taxes on corporate profit are a type of ________ tax.
A) sales
B) property
C) income
D) regressive
E) selling
Skill: Level 1: Definition
Section: Checkpoint 8.2
Author: JC
AACSB: Reflective thinking
6) Income taxes are taxes
A) paid only by private individuals who earn income.
B) paid on personal income and corporate profits.
C) paid when we make purchases at a store.
D) that include taxes paid to register a car.
E) paid only by people on their personal incomes.
Skill: Level 1: Definition
Section: Checkpoint 8.2
Author: WM
AACSB: Reflective thinking
39
Copyright © 2011 Pearson Education, Inc.
7) The percentage of an additional dollar that is paid in tax is called
A) the average tax rate.
B) the marginal tax rate.
C) a proportional tax.
D) a progressive tax.
E) a regressive tax.
Skill: Level 1: Definition
Section: Checkpoint 8.2
Author: SB
AACSB: Reflective thinking
8) The marginal tax rate equals 100 ×
A) (total tax ÷ change in income).
B) (change in tax ÷ total income).
C) (total tax ÷ total income).
D) (change in tax ÷ change in income).
E) (average tax rate × total income)
Skill: Level 3: Using models
Section: Checkpoint 8.2
Author: PH
AACSB: Reflective thinking
9) The marginal tax rate is the
A) average amount paid as taxes.
B) percentage of total income that is paid in tax.
C) percentage of an additional dollar of income paid in tax.
D) total amount of tax paid as a percentage of total income earned.
E) same as the average tax rate for a progressive tax.
Skill: Level 1: Definition
Section: Checkpoint 8.2
Author: WM
AACSB: Reflective thinking
40
Copyright © 2011 Pearson Education, Inc.
10) Which of the following is correct?
A) If your income is $20,000 and you are paying $2,000 in taxes, your marginal tax rate is 10
percent.
B) If your income is $20,000 and you are paying $2,000 in income taxes, the income tax you are
paying is progressive.
C) If you paid $0.39 as tax from an additional dollar you earned, your marginal tax rate is 39
percent.
D) If your marginal tax rate falls as your income increases, the tax is progressive.
E) If your income is $20,000 and you are paying $2,000 in income taxes, the income tax you are
paying is proportional.
Skill: Level 3: Using models
Section: Checkpoint 8.2
Author: SA
AACSB: Reflective thinking
11) ________ tax rate equals ________.
A) A marginal; the percentage of total income that is paid in tax
B) A progressive; the percentage of an additional dollar of income that is paid in tax
C) An average; the percentage of total income that is paid in tax
D) A regressive; the percentage of an additional dollar of income that is paid in tax
E) A proportional; the percentage of total income that is paid in tax
Skill: Level 1: Definition
Section: Checkpoint 8.2
Author: CD
AACSB: Reflective thinking
12) The average tax rate is the
A) percentage of an additional dollar of income paid in tax.
B) percentage of income paid in tax.
C) total amount of taxes paid by an individual.
D) average of the rates at which income and taxes increase.
E) same as the marginal tax rate for a progressive tax.
Skill: Level 1: Definition
Section: Checkpoint 8.2
Author: WM
AACSB: Reflective thinking
