6 . The excess burden of a tax on interest income is $ 5 billion per year . Total interest income per year is $ 50 billion . The tax currently collects $ 15 billion in revenue per year . The efficiency-loss ratio of the tax is therefore 0.33 .
7 . A payroll tax results in a difference between the gross wages paid by employers and the net wages received by workers .
8 . If the market supply of labor services is perfectly inelastic , a tax on labor income will reduce the net wages received by workers by the full amount of the tax per labor hour .
9 . If a $ 10 per unit tax is levied on the output of a monopolist , more of that tax will be shifted to consumers than would be the case if the same good were produced by a competitive industry .
10 . A study indicates that taxes in the United States reduce the Gini coefficient for the nation by 10 percent . This implies that taxes make the income distribution more equal .
11 . A lump-sum tax only results in income effects . 12 . An income tax is an example of a price-distorting tax .
13 . The more price-elastic the demand of a taxed item , the lower the excess burden of a tax on the sale of that item .
14 . If the tax on the sale of gasoline is doubled from 20 cents per gallon to 40 cents per gallon , the excess burden of the tax will quadruple .
15 . If the compensated elasticity of supply of labor is zero , then a tax on labor earnings will have zero excess burden .
16 . Lump-sum taxes do not prevent prices from equaling the marginal social cost and benefit of any goods and services .
17 . Lump-sum taxes can vary in amount based on income level . 18 . A lump-sum tax can distort prices and affect consumption behavior . Multiple Choice Questions 1 . A lump-sum tax : a . distorts market prices so that they do not simultaneously equal MSB and MSC .