51
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41) The above figure shows the labor market for land surveyors. Dave is a land surveyor. What
is the tax incidence for this income tax?
A) Though the employer pays some of the tax, Dave pays more of the income tax than his
employer.
B) Dave pays the same amount of the income tax as his employer.
C) While Dave pays some of tax, Dave pays less of the income tax than his employer.
D) Dave does not pay any tax.
E) Dave’s employer does not pay any tax.
Skill: Level 3: Using models
Section: Checkpoint 8.2
Author: KG
AACSB: Analytical reasoning
42) The above figure shows the labor market for land surveyors. Dave is a land surveyor. What
is the total income tax Dave pays each year?
A) $1,500
B) $4,500
C) $3,000
D) $40,500
E) $45,000
Skill: Level 4: Applying models
Section: Checkpoint 8.2
Author: KG
AACSB: Analytical reasoning
52
Copyright © 2011 Pearson Education, Inc.
43) The above figure shows the labor market for land surveyors. Dave is a land surveyor. If
there was no income tax, Dave would work ________ hours per year and the wage rate would be
________ per hour.
A) 2000; $28
B) 1500; $28
C) 1500; $27
D) 2000; $30
E) 1500; $30
Skill: Level 3: Using models
Section: Checkpoint 8.2
Author: KG
AACSB: Analytical reasoning
44) The above figure shows the labor market for land surveyors. Dave is a land surveyor. With
the income tax, Dave works ________ hours per year and his after-tax wage rate is ________ per
hour.
A) 2000; $28
B) 1500; $28
C) 2000; $30
D) 1500; $30
E) 1500; $27
Skill: Level 3: Using models
Section: Checkpoint 8.2
Author: KG
AACSB: Analytical reasoning
53
Copyright © 2011 Pearson Education, Inc.
45) The above figure shows the labor market for land surveyors. Dave is a land surveyor. The
total tax paid by Dave’s employer is equal to
A) area D + area F.
B) area D + area G.
C) area B + area C + area E + area F.
D) area B + area C.
E) area A.
Skill: Level 3: Using models
Section: Checkpoint 8.2
Author: KG
AACSB: Analytical reasoning
46) The above figure shows the labor market for land surveyors. Dave is a land surveyor. The
total tax paid by Dave is equal to
A) area B + area C.
B) area B + area C + area E + area F.
C) area E + area F.
D) area D + area G.
E) area A.
Skill: Level 3: Using models
Section: Checkpoint 8.2
Author: KG
AACSB: Analytical reasoning
54
Copyright © 2011 Pearson Education, Inc.
47) The above figure shows the labor market for land surveyors. The deadweight loss from the
tax is equal to
A) area D + area F.
B) area D + area G.
C) area B + area C.
D) area B + area C + area E + area F.
E) area A.
Skill: Level 3: Using models
Section: Checkpoint 8.2
Author: KG
AACSB: Analytical reasoning
48) The above figure shows the labor market for land surveyors. The total amount collected as
taxes equals
A) area B + area C + area E + area F.
B) area D + area G.
C) area D + area F.
D) area B + area C.
E) area A.
Skill: Level 3: Using models
Section: Checkpoint 8.2
Author: KG
AACSB: Analytical reasoning
49) Because the supply of capital is highly elastic, taxing the income from capital results in
i. firms that demand capital paying the greater share of the tax.
ii. a decrease in the equilibrium quantity of capital.
iii. a deadweight loss.
A) i only
B) ii only
C) i and iii
D) ii and iii
E) i, ii, and iii
Skill: Level 3: Using models
Section: Checkpoint 8.2
Author: SB
AACSB: Reflective thinking
55
Copyright © 2011 Pearson Education, Inc.
50) If the supply of capital is perfectly ________ end up paying the tax on capital income.
A) elastic, lenders
B) elastic, firms that demand capital
C) inelastic, lenders
D) inelastic, firms that demand capital
E) unit elastic, firms that demand capital
Skill: Level 3: Using models
Section: Checkpoint 8.2
Author: CD
AACSB: Reflective thinking
51) If the supply of capital is perfectly elastic, a tax on capital income results in
A) a deadweight loss and lenders pay all of the tax.
B) a deadweight loss and borrowers (firms) pay all of the tax.
C) no deadweight loss and borrowers (firms) and lenders split the tax.
D) no deadweight loss and lenders pay all of the tax.
E) no deadweight loss and borrowers (firms) pay all of the tax.
Skill: Level 3: Using models
Section: Checkpoint 8.2
Author: CD
AACSB: Reflective thinking
52) As a result of the tax on capital, labor productivity
A) increases.
B) decreases.
C) fluctuates.
D) does not change.
E) might change but whether it increases, decreases, or does not change depends on the
magnitude of the tax.
Skill: Level 1: Definition
Section: Checkpoint 8.2
Author: JC
AACSB: Reflective thinking
56
Copyright © 2011 Pearson Education, Inc.
53) The elasticity of supply of capital is larger than the elasticity of supply of land, so a tax on
capital has ________ deadweight loss and a ________ effect on the equilibrium quantity than
does an equal tax on land.
A) a larger; larger
B) a larger; smaller
C) a smaller; larger
D) a smaller; smaller
E) no; smaller
Skill: Level 3: Using models
Section: Checkpoint 8.2
Author: SA
AACSB: Reflective thinking
54) The above figure shows the market for capital. Without a tax on capital income, the interest
rate is ________ and firms use ________ million of capital.
A) 4 percent; $1,000
B) 3 percent; $2,000
C) 4 percent; $1,000
D) 2 percent; $1,000
E) 2 percent; $2,000
Skill: Level 3: Using models
Section: Checkpoint 8.2
Author: KG
AACSB: Analytical reasoning
57
Copyright © 2011 Pearson Education, Inc.
55) The above figure shows the market for capital. With the tax on capital income, the interest
rate is ________ and firms use ________ million of capital.
A) 2 percent; $2,000
B) 3 percent; $2000
C) 6 percent; $1,000
D) 4 percent; $1,000
E) 2 percent; $1,000
Skill: Level 3: Using models
Section: Checkpoint 8.2
Author: KG
AACSB: Analytical reasoning
56) The above figure shows the market for capital. With the tax on capital income, the
deadweight loss is equal to
A) area A + area B + area C.
B) area C + area D + area G.
C) area C.
D) area B + area F.
E) area D.
Skill: Level 3: Using models
Section: Checkpoint 8.2
Author: KG
AACSB: Analytical reasoning
57) The above figure shows the market for capital. With the tax on capital income, the total tax
paid is equal to
A) area C.
B) area B.
C) area A + area B + area C.
D) area C + area D + area G.
E) area B + area F.
Skill: Level 3: Using models
Section: Checkpoint 8.2
Author: KG
AACSB: Analytical reasoning
58
Copyright © 2011 Pearson Education, Inc.
58) Which resource has the least elastic supply?
A) labor
B) capital
C) land
D) money
E) taxes
Skill: Level 3: Using models
Section: Checkpoint 8.2
Author: SB
AACSB: Reflective thinking
59) A tax imposed on a resource’s income is paid by both the resource’s owners and the
resource’s employers, except for a tax
A) on labor income.
B) on the income of capital.
C) on land rent.
D) that is imposed on employers.
E) that is imposed on employees.
Skill: Level 2: Using definitions
Section: Checkpoint 8.2
Author: TS
AACSB: Reflective thinking
60) If highly paid entertainers prefer to perform and would do so even if their pay were much
lower, a tax of half of the entertainers’ incomes would do which of the following?
A) Decrease the amount of entertaining done by moving along a given labor supply curve.
B) Decrease the entertainers’ supply of performances.
C) Collect no taxes at all.
D) Not change the quantity supplied of performances.
E) Would increase the entertainers’ supply of performances as they work more to make up the
income they lose in taxes.
Skill: Level 3: Using models
Section: Checkpoint 8.2
Author: TS
AACSB: Reflective thinking
59
Copyright © 2011 Pearson Education, Inc.
61) Because the supply of land is perfectly inelastic, a tax on land income is
A) paid entirely by the suppliers.
B) paid entirely by the demanders.
C) shared equally between the suppliers and the demanders.
D) shared, but not equally, between the suppliers and the demanders.
E) creates a deadweight loss.
Skill: Level 3: Using models
Section: Checkpoint 8.2
Author: SB
AACSB: Reflective thinking
62) A tax on land or other resource with a perfectly inelastic supply
A) is efficient because it does not decrease the equilibrium quantity.
B) has no deadweight loss.
C) is paid entirely by the owner.
D) Only answers A and B are correct.
E) Answers A, B, and C are correct.
Skill: Level 3: Using models
Section: Checkpoint 8.2
Author: SA
AACSB: Reflective thinking
63) Because the supply of land is perfectly inelastic, when governments tax land, the tax
A) creates a deadweight loss because the supply is fixed.
B) decreases both the demand for and the supply of land.
C) creates no deadweight loss because the equilibrium quantity is the same as without the tax.
D) increases the supply of land because the landlord pays all of the tax.
E) decreases the supply of land because the landlord pays all of the tax.
Skill: Level 3: Using models
Section: Checkpoint 8.2
Author: WM
AACSB: Reflective thinking
60
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64) From the standpoint of efficiency, imposing a tax on what type of resource is best because it
creates the least inefficiency?
A) a resource with a perfectly elastic supply
B) a resource with a perfectly elastic demand
C) a resource that earns a high reward
D) a resource with a fixed supply
E) a resource that earns a low reward.
Skill: Level 3: Using models
Section: Checkpoint 8.2
Author: TS
AACSB: Reflective thinking
65) If the social security tax imposed on employers increases, then
A) firms’ demand for labor increases.
B) workers’ supply of labor increases.
C) firms’ demand for labor decreases.
D) firms’ demand for labor does not change.
E) the equilibrium quantity of employment increases.
Skill: Level 2: Using definitions
Section: Checkpoint 8.2
Author: JC
AACSB: Reflective thinking
66) Suppose the government increases the social security tax imposed on employers by 25
percent. This tax leads to
A) an increase in the supply of labor.
B) a decrease in the supply of labor.
C) a decrease in the demand for labor.
D) no change in the demand for labor.
E) a decrease in the supply of labor and an increase in the demand for labor.
Skill: Level 3: Using models
Section: Checkpoint 8.2
Author: JC
AACSB: Reflective thinking