chapter 8– eco 2023 – Flashcards

Which of the following scenarios is consistent with the Laffer curve? a. The tax rate is 1 percent, and tax revenue is very high. b. The tax rate is 99 percent, and tax revenue is very high. c. The tax rate is moderate (between very high and very low), and tax revenue is very low. d. The tax rate is 1 percent, and tax revenue is very low.

In the early 1980s, which of the following countries had a marginal tax rate of about 80 percent? a. United States b. Japan c. Sweden d. Canada

An increase in the size of a tax is most likely to increase tax revenue in a market with a. elastic demand and inelastic supply. b. elastic demand and elastic supply. c. inelastic demand and inelastic supply. d. inelastic demand and elastic supply.

Ronald Reagan believed that reducing income tax rates would a. do little, if anything, to encourage hard work. b. raise economic well-being and perhaps even tax revenue. c. result in large increases in deadweight losses. d. lower economic well-being, even though tax revenue could possibly increase.

As the size of a tax rises, the deadweight loss a. rises, and tax revenue first rises, then falls. b. rises as does tax revenue. c. falls, and tax revenue first rises, then falls. d. falls as does tax revenue.

Suppose the federal government doubles the gasoline tax. The deadweight loss associated with the tax a. quadruples. b. rises by a factor of 8. c. triples. d. also doubles.

Which of the following statements is true for markets in which the demand curve slopes downward and the supply curve slopes upward? a. As the size of the tax increases, tax revenue rises initially, but it eventually begins to fall; deadweight loss continually rises. b. As the size of the tax increases, tax revenue continually rises and deadweight loss continually falls. c. As the size of the tax increases, tax revenue and deadweight loss rise initially, but both eventually begin to fall. d. As the size of the tax increases, tax revenue rises initially, but it eventually begins to fall; deadweight loss falls initially, but eventually it begins to rise.

Suppose the tax on automobile tires is increased so that the tax goes from being a "medium" tax to being a "large" tax. As a result, it is likely that a. tax revenue increases, and the deadweight loss increases. b. tax revenue increases, and the deadweight loss decreases. c. tax revenue decreases, and the deadweight loss decreases. d. tax revenue decreases, and the deadweight loss increases.