ECO 450 Week 8 Quiz – Strayer Click on the Link Below to Purchase A+ Graded Course Material Taxation, Prices, Efficiency, and the Distribution of Income True/False Questions

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Concepts & Trends

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  ECO 450 Week 8 Quiz – StrayerClick on the Link Below to Purchase ! "ra#e# Course $aterialhtt%&''(u#a%%)net'ECO*450*Week*8*Quiz*Strayer*+85)ht,Quiz - Cha%ter .. an# ./ CHAPTER 11 a1ation2 Prices2 E33iciency2an# the istri(ution o3 nco,e 67E ' LSE  Q 7ESO9S .) A lump-sum tax results in both income and substitution effects. /) A consumer currently pays $!! a year retail sales taxes. "he #ould be  better off if she paid the same amount annually as a lump-sum tax. +) Clothin is sold in perfectly competiti%e mar&ets #here no externalities  pre%ail. An excise tax on clothin #ill result in a mar&et price for clothin that e'uals the marinal social benefit and marinal social cost of ser%ice. 4) Assumin that the income effects are neliible and that beer is sold in a competiti%e mar&et( a 1!-cent per can tax on beer that causes a 1!(!!! can  per month decline in sales #ill result in an excess burden of $1(!!! per month. 5) A tax on land results in an income effect on landlords but no substitution effect. Then it follo#s that the excess burden of a tax on land #ill be )ero. -) The excess burden of a tax on interest income is $ billion per year. Total interest income per year is $! billion. The tax currently collects $1 billionin re%enue per year. The efficiency-loss ratio of the tax is therefore !.**. :) A payroll tax results in a difference bet#een the ross #aes paid by employers and the net #aes recei%ed by #or&ers. 8) +f the mar&et supply of labor ser%ices is perfectly inelastic( a tax on labor income #ill reduce the net #aes recei%ed by #or&ers by the full amount of the tax per labor hour. ;) +f a $1! per unit tax is le%ied on the output of a monopolist( more of that tax#ill be shifted to consumers than #ould be the case if the same ood #ere  produced by a competiti%e industry.  .0) A study indicates that taxes in the ,nited "tates reduce the ini coefficient for the nation by 1! percent. This implies that taxes ma&e the income distribution more e'ual. ..) A lump-sum tax only results in income effects. ./) An income tax is an example of a price-distortin tax. .+) The more price-elastic the demand of a taxed item( the lo#er the excess  burden of a tax on the sale of that item. .4) +f the tax on the sale of asoline is doubled from ! cents per allon to /! cents per allon( the excess burden of the tax #ill 'uadruple. .5) +f the compensated elasticity of supply of labor is )ero( then a tax on labor earnins #ill ha%e )ero excess burden. .-) 0ump-sum taxes do not pre%ent prices from e'ualin the marinal social cost and benefit of any oods and ser%ices. .:) 0ump-sum taxes can %ary in amount based on income le%el. .8) A lump-sum tax can distort prices and affect consumption beha%ior. $ 7LPLE  C <OCE  Q 7ESO9S .) A lump-sum taxa.distorts mar&et prices so that they do not simultaneously e'ual 2"3 and2"C. b.can result in price chanes but does not pre%ent prices from simultaneously bein e'ual to 2"3 and 2"C.c.results in substitution effects that chane prices.d.results in both substitution effects and income effects that chane prices. /) The current price of compact discs( #hich are traded in perfectly competiti%e mar&ets( is $1!. A $1 per unit tax is le%ied on the discs. Annualrecord sales decline from fi%e million to four million as a result of the tax. Assumin that the income effect of the tax-induced price chane is neliible( the excess burden of the tax #ill bea.$!!(!!! per year. b.$1 million per year.c.$ million per year.d.$. million per year. +) The elasticity of supply of land is )ero. A tax on land results only in an income effect to landlords. Then it follo#s that a 1!-percent tax on land rents #illa.ha%e a positi%e excess burden. shifted for#ard to paid entirely by landlords.d.ha%e )ero excess burden.  e.both 4c5 and 4d5 4) Currently( a 1!-cent per allon tax is le%ied on asoline consumption. The taxis increased to ! cents per allon. The excess burden of the tax #illa.remain the same. b.double.c.increase four times.d.decline.  5) The supply of ne# cars is perfectly elastic. A $/!! per car tax is le%ied on  buyers. As a result of the tax(a.the price recei%ed by sellers #ill fall by $/!!. b.the price paid by buyers( includin the tax( #ill increase by $/!!.c.the 'uantity of cars sold per year #ill be unchaned.d.the excess burden of the tax #ill be )ero.e.both 4c5 and 4d5 -) 6ther thins bein e'ual( the more inelastic the demand for a taxed ood(a.the reater the portion of the tax paid by sellers. b.the reater the excess burden of the tax.c.the reater the portion of the tax paid by buyers.d.the less the portion of a tax on sellers that can be shifted to buyers. :) The mar&et supply of labor is perfectly inelastic. Ho#e%er( the income effect of tax-induced #ae chanes are belie%ed to be substantial. Then it follo#s that a tax on labor income #illa.ha%e )ero excess burden. b.ha%e positi%e excess paid entirely by #or&ers as a reduction in net #aes.d.both 4a5 and 4c5e.both 4b5 and 4c5 8) "uppose an economy is comprised of only t#o mar&ets one for food and the other for housin. A tax on food used to finance transfer payments is li&ely toa.decrease the price of food. b.increase the price of housin.c.decrease the price of housin.d.ha%e no effect on either the price of food or housin. ;) 7ifferential tax incidence measures the effecta.that a tax and the expenditures it finances ha%e on the distribution of income. b.that one tax alone has on the distribution of income.c.on the distribution of income of substitutin one tax for another #hile holdin the si)e and composition of the budet fixed.d.on the distribution of income of substitutin one tax for another #hile chanin the &inds of o%ernment ser%ices financed. .0) 2ost studies of tax incidence assume that taxes on labor income and other input ser%ices are borne entirely by the #or&ers and other input o#ners that supply the ser%ices. This implies that the of those input ser%ices is %ery elastic. of those input ser%ices is of unitary of those input ser%ices is perfectly inelastic.d.demand for those input ser%ices is perfectly elastic.  ..) 2ost studies sho# that the price elasticity of demand for asoline is 8!.. +f the price elasticity of supply is ( then a tax on asoline #illa.ha%e no effect on the mar&et e'uilibrium price of asoline. b.cause the mar&et e'uilibrium price of asoline to fall.c.cause the mar&et e'uilibrium price paid by buyers to rise.d.cause the net price recei%ed by sellers to fall.e.both 4c5 and 4d5 ./) The demand for medical care is %ery inelastic. +f a 1!-percent tax is le%ied on the sale of medical ser%ices and is collected from medical-care pro%iders(thena.the incidence of the tax is li&ely to be borne entirely by medical-care  pro%iders. b.most of the tax is li&ely to be shifted to those #ho purchase medical care.c.the mar&et e'uilibrium price of medical care #ill fall.d.the excess burden of the tax is li&ely to be %ery hih. .+) 9hich of the follo#in is true about a lump-sum tax:a.+t pre%ents efficiency from bein attained in competiti%e mar&ets. b.+t causes substitution effects.c.+t causes income effects.d.+t causes both income effects and substitution effects. .4) Housin construction is enerally belie%ed to be an industry of constant costs. +n the lon run( #hich of the follo#in is true if a $1! per s'uare foottax on housin construction is collected directly from builders:a.The incidence of the tax #ill be borne by builders. b.The excess burden of the tax #ill be )ero.c.The 'uantity of ne# construction supplied #ill be unaffected.d.The tax #ill be fully shifted to buyers of ne# construction. .5) +f the price elasticity of supply of labor is e'ual to !. and the price elasticity of demand for labor is 8( then #hich of the follo#in is li&ely to result from a tax on labor earnins:a.The tax #ill be fully borne by #or&ers. b."ome of the tax #ill be shifted to employers as mar&et e'uilibrium #aes increase.c.2ar&et e'uilibrium #aes #ill decline.d.There #ill be no effect on mar&et e'uilibrium #aes. .-) +f a lump-sum tax is imposed( the slope of the ne# budet line relati%e to the budet line prior to the taxa.remains unchaned. b.increases.c.decrease.d.can increase and decrease in different reions.
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