1. A tax on coffee which leads the consumer to consume more tea and less coffee than otherwise preferable produces the following:

INCOME EFFECT AND SUBSTITUTION EFFECT

INCOME EFFECT AND SATISFACTION EFFECT

SUBSTITUTION EFFECT BUT NOT INCOME EFFECT

INCOME EFFECT AND EFFICIENCY EFFECT

2. Deadweight Loss includes the amount of taxes paid to the government.

TRUE

FALSE

3. According to Creedy 2003, doubling the tax rate will _____________ the excess burden:

DOUBLE

NEGATE

IMPROVE

QUADRUPLE

4. Illinois imposes a sales tax on Snicker’s but not Twix candy bars. This could cause the price of:

SNICKER’S TO RISE

TWIX TO RISE

BOTH SNICKER’S AND TWIX TO RISE

SNICKER’S PRODUCTION TO RISE

5. The government imposes a new retail sales tax on sales of coffee from cafes. Hipster Coffee Corp is a cafe. The following will bear the statutory incidence of the new tax:

HIPSTER COFFEE CORP’S CUSTOMERS

HIPSTER COFFEE CORP

HIPSTER COFFEE CORP’S EMPLOYEES

HIPSTER COFFEE CORP’S SUPPLIERS

6. A retail sales tax on remote sellers will produce as much revenue as a use tax on in-state purchasers.

TRUE

FALSE

7. The majority opinion in Wayfair did the following

AFFIRMED THE AUTHORITY OF THE COURT UNDER THE DORMANT COMMERCE CLAUSE

AFFIRMED THE AUTHORITY OF SOUTH DAKOTA TO TAX REMOTE SELLERS ON PURCHASES MADE BY SOUTH DAKOTA RESIDENTS

RELIED ON THE INCREASE IN E-COMMERCE SALES TO SUPPORT ITS DECISION

ALL OF THE ABOVE

8. The buyer bears more of the consumption tax in market types involving:

INELASTIC SUPPLY

INELASTIC DEMAND

ELASTIC SUPPLY

BOTH INELASTIC DEMAND AND ELASTIC SUPPLY

9. Joel Slemrod describes what he calls the hierarchy of behavioral responses to taxation in his 2002 article (listed on canvas). Which of the following are part of the hierarchy? Select all that apply. (Maybe not only one correct answer)

REAL

AVOIDANCE

ECONOMIC INCIDENCE

TIMING

INCOME SHIFTING

Hypothetical details:

Indiana will replace its fuel taxes with a road mileage tax on January 1, 2020. The tax rate varies across road types; the rate per mile is $0.20 on interstates, $0.15 on state highways and $0.10 on all other roads.

Use these details to answer the following questions.

10. I decide to reduce the number of miles I drive in 2020 because of this tax. Which of the following best describes this type of response?

REAL

SHIFTING

TIMING

EVASION

11. I decide to take a road trip in December 2019 because of tax. The trip was originally planned for February 2020. Which of the following best describes this type of response?

REAL

TIMING

SHIFTING

EVASION

12. I usually drive on the interstate for all of my trips. However, I plan to use the local roads as much as possible in 2020. Which of the following best describes this type of response?

SHIFTING

REAL

EVASION

TIMING

13. I plan to buy an electronic device that I can use to adjust the recorded mileage on my car. Which of the following best describes this type of response?

TIMING

REAL

EVASION

SHIFTING

14. Given the empirical described by Slemrod (2002), which response is expected to be smallest?

REDUCTION IN USE OF INTERSTATE HIGHWAYS

TAKING ROAD TRIP IN 2019 RATHER THAN 2020

REDUCTION IN NUMBER OF MILES DRIVEN

ADJUSTING ODOMETER (ODOMETER RECORDS MILEAGE) WITH ELECTRONIC DEVICE

15. Assuming the government is interested in maximizing social welfare, the efficiency cost of taxation is driven by income effects.

TRUE

FALSE

16. England introduced a window tax in 1696. Many new buildings were constructed with fewer windows in response to the tax. This type of response is best described as tax evasion.

TRUE

FALSE