ECN 104 Finals 7-13 Terms Exam Questions
With Verified Answers
Excise Tax - ANSWER Per-unit tax on sales of a good or services. +price paid by
consumers - the price received by producers.
Incidence - ANSWER a measure of who really pays a tax.
Tax Rate - ANSWER The amount of tax people are required to pay per unit of
whatever is being taxed.
Administrative Costs - ANSWER The resources used (which is a cost) by
government to collect the tax and by taxpayers to pay it over and above the
amount of the tax as well as to evade it.
Benefits Principle - ANSWER The principle of tax fairness by which those who
benefit from public spending should bear the burden of the tax that pays for that
spending.
Ability-to-pay - ANSWER The principle of tax fairness by which those with
greater ability to pay a tax should pay more tax.
Lump-sum tax - ANSWER A tax that is the same for everyone regardless of any
actions people take.
Trade off between equity and efficiency - ANSWER The dynamic whereby a well-
designed tax system can be made more efficient only by making it less fair and
vice versa.
Tax Base - ANSWER The measure or value such as income or property value
that determines how much tax an individual pays.
Tax Structure - ANSWER Specifies how a tax depends on the tax base usually
expressed in percentage terms.
Income Tax - ANSWER a tax on the income of an individual or family.
Payroll Tax - ANSWER a tax on the earnings an employer pays to an employee.
Sales Tax - ANSWER a tax on the value of goods sold.
, Profit Tax - ANSWER a tax on the profits of a firm.
Property Tax - ANSWER a tax on the value of property such as the value of a
home.
Wealth Tax - ANSWER a tax on the wealth of an individual.
Proportional Tax - ANSWER tax that is the same percentage of the tax base
regardless of the taxpayer's income or wealth.
Progressive Tax - ANSWER a tax that takes a larger share of the income of high-
income taxpayers than of low-income taxpayers.
Regressive Tax - ANSWER A tax that takes a smaller share of the income of high-
income taxpayers than of low-income taxpayers.
Marginal Tax Rate - ANSWER the percentage of an increase in income that is
taxed away.
Budget constraint - ANSWER the limitation that the cost of a consumer's
consumption bundle cannot exceed the consumer's income.
Marginal utility - ANSWER the change in total utility generated by consuming one
additional unit of a good or service.
Principle of diminishing marginal utility - ANSWER the proposition that each
successive unit of a good or service consumed adds less to total utility than did
the previous unit.
Consumption Bundle - ANSWER the collection of all the goods and services
consumed by a given individual.
Marginal Utility Curve - ANSWER A graphical representation showing how
marginal utility depends on the quantity of the good or service consumed.
Optimal consumption rule - ANSWER the optimal consumption bundle is on the
budget line and the marginal utility per dollar spent on each good in the bundle
is equal.
Marginal utility per dollar - ANSWER the additional utility gained from spending
one more dollar on a good or service.
Utility - ANSWER (of a consumer) a measure of the satisfaction derived from
consumption of goods and services.
With Verified Answers
Excise Tax - ANSWER Per-unit tax on sales of a good or services. +price paid by
consumers - the price received by producers.
Incidence - ANSWER a measure of who really pays a tax.
Tax Rate - ANSWER The amount of tax people are required to pay per unit of
whatever is being taxed.
Administrative Costs - ANSWER The resources used (which is a cost) by
government to collect the tax and by taxpayers to pay it over and above the
amount of the tax as well as to evade it.
Benefits Principle - ANSWER The principle of tax fairness by which those who
benefit from public spending should bear the burden of the tax that pays for that
spending.
Ability-to-pay - ANSWER The principle of tax fairness by which those with
greater ability to pay a tax should pay more tax.
Lump-sum tax - ANSWER A tax that is the same for everyone regardless of any
actions people take.
Trade off between equity and efficiency - ANSWER The dynamic whereby a well-
designed tax system can be made more efficient only by making it less fair and
vice versa.
Tax Base - ANSWER The measure or value such as income or property value
that determines how much tax an individual pays.
Tax Structure - ANSWER Specifies how a tax depends on the tax base usually
expressed in percentage terms.
Income Tax - ANSWER a tax on the income of an individual or family.
Payroll Tax - ANSWER a tax on the earnings an employer pays to an employee.
Sales Tax - ANSWER a tax on the value of goods sold.
, Profit Tax - ANSWER a tax on the profits of a firm.
Property Tax - ANSWER a tax on the value of property such as the value of a
home.
Wealth Tax - ANSWER a tax on the wealth of an individual.
Proportional Tax - ANSWER tax that is the same percentage of the tax base
regardless of the taxpayer's income or wealth.
Progressive Tax - ANSWER a tax that takes a larger share of the income of high-
income taxpayers than of low-income taxpayers.
Regressive Tax - ANSWER A tax that takes a smaller share of the income of high-
income taxpayers than of low-income taxpayers.
Marginal Tax Rate - ANSWER the percentage of an increase in income that is
taxed away.
Budget constraint - ANSWER the limitation that the cost of a consumer's
consumption bundle cannot exceed the consumer's income.
Marginal utility - ANSWER the change in total utility generated by consuming one
additional unit of a good or service.
Principle of diminishing marginal utility - ANSWER the proposition that each
successive unit of a good or service consumed adds less to total utility than did
the previous unit.
Consumption Bundle - ANSWER the collection of all the goods and services
consumed by a given individual.
Marginal Utility Curve - ANSWER A graphical representation showing how
marginal utility depends on the quantity of the good or service consumed.
Optimal consumption rule - ANSWER the optimal consumption bundle is on the
budget line and the marginal utility per dollar spent on each good in the bundle
is equal.
Marginal utility per dollar - ANSWER the additional utility gained from spending
one more dollar on a good or service.
Utility - ANSWER (of a consumer) a measure of the satisfaction derived from
consumption of goods and services.
