Tax Incidence Flashcards

1
Q

direct tax

A

tax on income and wealth

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2
Q

How are direct taxes paid to government?

A

directly and without intermediary

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3
Q

Can direct taxes be adjusted?

A

yes - adjust rate based on income

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4
Q

indirect tax

A

tax on the production and consumption of goods and services

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5
Q

Who bears the burden of indirect taxes?

A

shared by consumers and producers

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6
Q

How are indirect taxes paid to government?

A

through intermediaries such as producers

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7
Q

sales tax

A

tax placed on a good when it is sold as a final good to a consumer

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8
Q

Are sales taxes changing?

A

yes based on retail value of good

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9
Q

ad valorem tax

A

tax placed on every transaction in the production life of good

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10
Q

How is an ad valorem tax different to a sales tax?

A

charged to every transformative stage of produciton where good is exchanged and ownership changed

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11
Q

Do ad valorem taxes change?

A

yes based on retail value

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12
Q

What are the other names for per-unit tax?

A

specific tax excise tax

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13
Q

per-unit tax

A

tax where a fixed amount of money per good is charged

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14
Q

tariff

A

tax on imported goods, levied upon entry into a country

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15
Q

What are the other names for tariff?

A

custorms duty impost

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16
Q

Are tariffs changing?

A

no generally specific tax

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17
Q

Graph for ad valorem tax

A
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18
Q

Graph for per-unit tax

A
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19
Q

How do lump sum taxes affect the supply curve?

A

no effect

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20
Q

What is assumed when apply tariffs?

A

constant price of imported good

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21
Q

taxes —- the prices of goods and services

A

increase

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22
Q

taxes —- the output of goods and services

A

reduce

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23
Q

the size of the market for the good or service is —-

A

diminished

24
Q

consumer surplus is —- as consumers pay a higher price

A

reduced

25
Q

producer surplus is —- as producers after-tax revenue is —-

A

reduced reduced

26
Q

government enjoys —- tax revenue

A

greater

27
Q

tax incidence

A

relative measurement of the respective burden of a per-unit tax on the consumers and producers

28
Q

What does deadweight welfare loss represent?

A

existence of inefficiency in the market

29
Q

Where is consumer surplus found at equilibrium?

A

A + B + C + D

30
Q

Where is producer surplus found at equilibrium?

A

E + F + G + H

31
Q

Where is community surplus found at equilibrium?

A

A + B + C + D + E + F + G + H

32
Q

What is not found at equilibrium?

A

tax revenue or deadweight welfare loss

33
Q

How do you see per-unit tax on graph?

A

distance between two supply curves P1 - P2

34
Q

Total tax revenue

A

(P1 - P2) x Q1

35
Q

Where is tax revenue found on a graph?

A

B + C + E + F

36
Q

Where is the tax that comes from consumers found on a graph?

A

B + C

37
Q

Where is the tax that comes from producers found on a graph?

A

E + F

38
Q

Where is consumer surplus after tax found on a graph?

A

A

39
Q

Where is producer surplus found on a graph?

A

H

40
Q

Where is deadweight welfare loss found on a graph?

A

D + G

41
Q

deadweight welfare loss

A

value lost to society by the introduction of tax value lost rather than transferred to another agent within society cost of inefficiency in market

42
Q

Where is the consumer’s share of deadweight welfare loss found on a graph?

A

D

43
Q

Where is the producers’s share of deadweight welfare loss found on a graph?

A

G

44
Q

Burden when PED greater than PES

A

greater on producers than consumers

45
Q

Burden when PED less than PES

A

greater on consumers than producers

46
Q

Burden when PED equals PES

A

burden equally shared between consumers

47
Q

Effect of inelastic PED on tax revenue, deadweight welfare loss and efficiency

A

greater tax revenue relatively small DWL less inefficiency caused

48
Q

Effect of elastic PED on tax revenue, DWL and efficiency

A

lower tax revenue relatively large DWL more inefficiency caused

49
Q

burden when PED = undefined (perfectly elastic)

A

producers have entire burden

50
Q

burden when PED = 0 (perfectly inelastic)

A

consumers have entire burden

51
Q

burden when PES = undefined (perfectly elastic)

A

consumers have entire burden

52
Q

burden when PES = 0 (perfectly inelastic)

A

producers have entire burden

53
Q

What is the effect of per-unit taxation on demand curve?

A

no effect

54
Q

What is the supply equation given specific tax, t?

A

Qs = m(P-t) + A

55
Q

What is the supply equation given ad valorem tax of x percent (given as decimal)?

A

Qs = m(P-Px) + A