Econ 1014 Exam 2 Study Guide

If the government wants to raise tax revenue with the

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1) If the government wants to raise tax revenue with the least economic inefficiency, it should tax goods that consumers consider to be ; but this is considered a tax. a) Necessities; more equitable b) Luxuries; more equitable c) Normal; less equitable d) Inferior; more equitable e) Necessities; less equitable 2) The burden of tax: 3) When economists refer to a tax wedge , they are referring to: 4) A progressive tax is one in which:
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5) Which of the following would you want to tax if you wanted to raise tax revenue in the most efficient way possible, but which results in the least equitable way of raising taxes? a) Food b) Cars c) Yachts d) Diamonds e) College education 6) The following rule describes how a tax burden gets shared: Whoever is more responsive to price changes pays of the tax burden. 7) If we place a tax on buyers we can expect buyer’s price to be than seller’s price and if we place a tax on sellers we can expect buyer’s price to be than seller’s price. Unit 3 Section 5: Subsidies 1) Government policies designed to promote greater equity in society often result in market efficiency. Explain why these policies result in inefficiency. 2) When economists use the term “market failure”, they are saying that: a) The equilibrium outcome chosen by buyers and sellers is not the best outcome for society b) Pigovian taxes will always fix this market so that the equilibrium outcome and the social optimum coincide c) Externalities must exist in this market d) All of the above e) None of the above
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