Question 1

The appropriate tax rate to consider to gauge how much the tax system distorts incentives and decision-making is the

Accepted Answer

A)   proportional tax rate.
B)   average tax rate.
C)   marginal tax rate.
D)   vertical tax rate.
E)   horizontal tax rate.F) All of the above
G) C) and E)

Question 2

An efficient tax is one that generates minimal deadweight losses and minimal administrative burdens.

Accepted Answer

A) True 
 B)False

Question 3

Corporate taxes are levied on companies

Accepted Answer

A)   and the burden of corporate taxes falls only on companies' owners and workers.
B)   but the burden of corporate taxes falls solely on customers.
C)   but the burden of corporate taxes falls on the workers and customers as well as on the owners of companies.
D)   but governments generally try to avoid taxing companies.E) C) and D)
F) B) and C)

Question 4

Deadweight loss is greatest when

Accepted Answer

A)   supply is elastic and demand is perfectly inelastic.
B)   demand is elastic and supply is perfectly inelastic.
C)   both supply and demand are relatively inelastic.
D)   both supply and demand are relatively elastic.E) B) and C)
F) A) and B)

Question 5

A government raises R100m through a R0.05 tax on widgets. It raises another R100m through a R0.10 tax on gadgets. It decides to eliminate the tax on gadgets and double the tax on widgets. Would it raise more, less or the same amount of money in tax revenue? Explain your answer.

Accepted Answer

Since the tax on gadgets was eliminated,...

Question 6

An efficient tax

Accepted Answer

A)   minimises the administrative burden from the tax.
B)   does all of the things described in these answers.
C)   raises revenue at the smallest possible cost to taxpayers.
D)   minimises the deadweight loss from the tax.E) B) and C)
F) A) and D) B

Question 7

A larger tax always generates a larger deadweight loss.

Accepted Answer

A) True 
 B)False

Question 8

Why do some economists advocate taxing consumption rather than income?

Accepted Answer

Some economists advocate taxing consumpt...

Question 9

A tax system with a low marginal tax rate generates less deadweight loss and is more efficient than a similar tax system with a higher marginal tax rate.

Accepted Answer

A) True 
 B)False

Question 10

Since the supply of undeveloped land is relatively inelastic, a tax on undeveloped land would generate

Accepted Answer

A)   a small deadweight loss and the burden of the tax would fall on the renter.
B)   a large deadweight loss and the burden of the tax would fall on the landlord.
C)   a large deadweight loss and the burden of the tax would fall on the renter.
D)   a small deadweight loss and the burden of the tax would fall on the landlord.E) B) and C)
F) C) and D)

Question 11

If the supply curve is perfectly price elastic, a per unit tax

Accepted Answer

A)   does not create a deadweight loss.
B)   does not reduce consumer surplus.
C)   does not reduce producer surplus.
D)   reduces consumer surplus but increases producer surplus.E) A) and D)
F) All of the above

Question 12

Illustrate on three demand-and-supply graphs how the size of a tax (small, medium and large) can alter total revenue and deadweight loss.

Accepted Answer

The answer of Illustrate on three demand-and-supply graphs how the...

Question 13

A larger tax always generates more tax revenue.

Accepted Answer

A) True 
 B)False

Question 14

Lump-sum taxes are equitable but not efficient.

Accepted Answer

A) True 
 B)False

Question 15

If the government imposed a R10 000 tax on every individual,

Accepted Answer

A)   this would be an equitable tax.
B)   allocative efficiency would have to be sacrificed.
C)   this would be an efficient tax.
D)   this would be an income tax.E) A) and C)
F) All of the above

Question 16

Which of the following is true with regard to a tax on labour income? Taxes on labour income tend to encourage

Accepted Answer

A)   the unscrupulous to enter the underground economy.
B)   the elderly to retire early.
C)   all of the things described in these answers.
D)   second earners to stay home.
E)   workers to work fewer hours.F) C) and D)
G) C) and E)

Question 17

Which of the following taxes can be supported by the benefits principle of taxation?

Accepted Answer

A)   All of these answers can be supported by the benefits principle of taxation.
B)   Progressive income taxes used to pay for national defence.
C)   Petrol taxes used to pay for roads.
D)   Property taxes used to pay for police and the court system.
E)   Progressive income taxes used to pay for antipoverty programs.F) A) and E)
G) B) and E)

Question 18

The average tax rate is

Accepted Answer

A)   total taxes paid divided by total income.
B)   the extra taxes paid on an additional rand of income.
C)   the taxes paid by the marginal worker.
D)   Total income divided by total taxes paid.E) B) and D)
F) All of the above A

Question 19

A tax is __________ if it takes a constant fraction of income as income rises.

Accepted Answer

A)   regressive
B)   proportional
C)   progressive
D)   aggressiveE) B) and C)
F) None of the above

Question 20

The main arguments in favour of a modified flat-rate tax system (such as a proposal to place a 19% tax on all income over R200 000 with no deductions)  are that it would…

Accepted Answer

A)   raise more revenue than the current tax system, and it would be simpler.
B)   raise more revenue than the current tax system, and it would lower marginal tax rates.
C)   be simpler and it would lower average tax rates.
D)   be simpler and it would lower marginal tax rates.E) A) and B)
F) A) and C)

Exam 9: The Tax System

The appropriate tax rate to consider to gauge how much the tax system distorts incentives and decision-making is the

Correct AnswerverifiedShow Answer

An efficient tax is one that generates minimal deadweight losses and minimal administrative burdens.

Correct AnswerverifiedShow Answer

Corporate taxes are levied on companies

Correct AnswerverifiedShow Answer

Deadweight loss is greatest when

Correct AnswerverifiedShow Answer

A government raises R100m through a R0.05 tax on widgets. It raises another R100m through a R0.10 tax on gadgets. It decides to eliminate the tax on gadgets and double the tax on widgets. Would it raise more, less or the same amount of money in tax revenue? Explain your answer.

Correct AnswerverifiedSince the tax on gadgets was eliminated,...View AnswerShow Answer

An efficient tax

Correct AnswerverifiedB

A larger tax always generates a larger deadweight loss.

Correct AnswerverifiedShow Answer

Why do some economists advocate taxing consumption rather than income?

Correct AnswerverifiedSome economists advocate taxing consumpt...View AnswerShow Answer

A tax system with a low marginal tax rate generates less deadweight loss and is more efficient than a similar tax system with a higher marginal tax rate.

Correct AnswerverifiedShow Answer

Since the supply of undeveloped land is relatively inelastic, a tax on undeveloped land would generate

Correct AnswerverifiedShow Answer

If the supply curve is perfectly price elastic, a per unit tax

Correct AnswerverifiedShow Answer

Illustrate on three demand-and-supply graphs how the size of a tax (small, medium and large) can alter total revenue and deadweight loss.

Correct Answerverified11eb99e0_a5d8_4511_bdc5_b91a95fec649_TB8829_00

A larger tax always generates more tax revenue.

Correct AnswerverifiedShow Answer

Lump-sum taxes are equitable but not efficient.

Correct AnswerverifiedShow Answer

If the government imposed a R10 000 tax on every individual,

Correct AnswerverifiedShow Answer

Which of the following is true with regard to a tax on labour income? Taxes on labour income tend to encourage

Correct AnswerverifiedShow Answer

Which of the following taxes can be supported by the benefits principle of taxation?

Correct AnswerverifiedShow Answer

The average tax rate is

Correct AnswerverifiedA

A tax is __________ if it takes a constant fraction of income as income rises.

Correct AnswerverifiedShow Answer

The main arguments in favour of a modified flat-rate tax system (such as a proposal to place a 19% tax on all income over R200 000 with no deductions) are that it would…

Correct AnswerverifiedShow Answer

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Since the tax on gadgets was eliminated,...
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B

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Some economists advocate taxing consumpt...
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A

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