Eco 450 Wk 8 Quiz 6 Ch. 11 & 12 - All Possible Questions

ECO 450 WK 8 Quiz 6 Ch. 11 & 12 - All Possible Questions

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True/False Questions

  1.   A lump-sum tax results in both income and substitution effects. 

  2.   A consumer currently pays $500 a year retail sales taxes. She would be better off if she paid the same amount annually as a lump-sum tax. 

  3.   Clothing is sold in perfectly competitive markets where no externalities prevail. An excise tax on clothing will result in a market price for clothing that equals the marginal social benefit and marginal social cost of service. 

  4.   Assuming that the income effects are negligible and that beer is sold in a competitive market, a 10cent per can tax on beer that causes a 10,000 can per month decline in sales will result in an excess burden of $1,000 per month. 

  5.   A tax on land results in an income effect on landlords but no substitution effect. Then it follows that the excess burden of a tax on land will be zero. 

  6.   The excess burden of a tax on interest income is $5 billion per year. Total interest income per year is $50 billion. The tax currently collects $15 billion in revenue per year. The efficiency-loss ratio of the tax is therefore 0.33. 

  7.   A payroll tax results in a difference between the gross wages paid by employers and the net wages received by workers. 

  8.   If the market supply of labor services is perfectly inelastic, a tax on labor income will reduce the net wages received by workers by the full amount of the tax per labor hour. 

  9.   If a $10 per unit tax is levied on the output of a monopolist, more of that tax will be shifted to consumers than would be the case if the same good were produced by a competitive industry. 

10.   A study indicates that taxes in the United States reduce the Gini coefficient for the nation by 10 percent. This implies that taxes make the income distribution more equal. ...