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Stayer Eco 450 Week 8 Quiz 6 Ch 11 and 12

  • Date Submitted: 03/28/2016 10:52 PM
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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 marĀ¬ginal social cost of service.
4.   Assuming that the income effects are negligible and that beer is sold in a competitive market, a 10 cent 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 conĀ¬sumers 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.
11.   A lump-sum tax only results in income effects.


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