1. What is a lump sum tax? What are the desirable and undesirable aspects of using a lump-sum tax to finance government expenditures?

2. What influence the magnitude of the total excess burden of a tax? If we were to have zero excess burden, how elastic should the supply or demand of a good should be?

3. What is the efficiency loss ratio of a tax? How is it used in designing a tax?

4. What is the difference between excess burden of a tax and the incidence of a tax? What the impact of zero elasticity on each?

k. What is forward and backward shifting of a tax? How is shifting related to elasticity?

5. Explain why minimizing the excess burden a sales tax would require that products with inelastic demand be taxed at higher rates than products with elastic demand.

6. Explain how a tax on one product, such as gasoline, can cause the price of other products to decline.

Answer rating: 100% (QA)

1 A lumpsum tax is a tax that is levied as a fixed amount regardless of a taxpayers income or ability to pay This type of tax is considered desirable ... View the full answer