Question 1

With a tax of $4,000 on $24,000 taxable income, the average tax rate is

Accepted Answer

A) 16.67 percent. 
B) 20 percent. 
C) 23.45 percent. 
D) 25 percent. 
A) 16.67 percent. 
B) 20 percent. 
C) 23.45 percent. 
D) 25 percent.

Question 2

The U.S.tax and transfer study done by economists Chamberlain and Prante of the Tax Foundation notes that in 2012 households in the top income quintile received about

Accepted Answer

A) 75 cents in government spending for every dollar they paid in taxes. 
B) 60 cents in government spending for every dollar they paid in taxes. 
C) 30 cents in government spending for every dollar they paid in taxes. 
D) 10 cents in government spending for every dollar they paid in taxes. 
A) 75 cents in government spending for every dollar they paid in taxes. 
B) 60 cents in government spending for every dollar they paid in taxes. 
C) 30 cents in government spending for every dollar they paid in taxes. 
D) 10 cents in government spending for every dollar they paid in taxes.

Question 3

In 2013, the top 1 percent of all taxpayers in the United States paid what percentage of the federal income tax?

Accepted Answer

A) 23.4 percent 
B) 37.8 percent 
C) 39.6 percent 
D) 58.5 percent 
A) 23.4 percent 
B) 37.8 percent 
C) 39.6 percent 
D) 58.5 percent

Question 4

The tax revenues of local governments are typically

Accepted Answer

A) more than their expenditures. 
B) equal to their expenditures. 
C) slightly less than their expenditures. 
D) less than one-half of their expenditures. 
A) more than their expenditures. 
B) equal to their expenditures. 
C) slightly less than their expenditures. 
D) less than one-half of their expenditures.

Question 5

Sales taxes are proportional in relation to income because the same tax rate applies regardless of the size of a purchase.

Accepted Answer

A) True 
 B)False

Question 6

Social Security contributions are part of

Accepted Answer

A) excise taxes. 
B) payroll taxes. 
C) reverse taxes. 
D) indirect taxes. 
A) excise taxes. 
B) payroll taxes. 
C) reverse taxes. 
D) indirect taxes.

Question 7

Assume the Environmental Protection Agency imposes an excise tax on polluting firms.In which of the following situations would we expect the additional costs to be borne most heavily by consumers?

Accepted Answer

A) Demand is highly elastic and supply is highly inelastic. 
B) Demand and supply are both highly elastic. 
C) Demand and supply are both highly inelastic. 
D) Demand is highly inelastic and supply is highly elastic. 
A) Demand is highly elastic and supply is highly inelastic. 
B) Demand and supply are both highly elastic. 
C) Demand and supply are both highly inelastic. 
D) Demand is highly inelastic and supply is highly elastic.

Question 8

Suppose that a $0.75 tax is placed on gasoline.Under what circumstances will gasoline sellers end up shouldering the full burden of the tax?

Accepted Answer

A) if supply is perfectly inelastic and demand is downward-sloping 
B) if demand is perfectly inelastic and supply is upward-sloping 
C) if supply is upward-sloping and demand is perfectly elastic 
D) The consumer and the seller always share the burden of the tax. 
A) if supply is perfectly inelastic and demand is downward-sloping 
B) if demand is perfectly inelastic and supply is upward-sloping 
C) if supply is upward-sloping and demand is perfectly elastic 
D) The consumer and the seller always share the burden of the tax.

Question 9

Approximately what percentage of the federal government's tax revenues are generated from personal income taxes (in 2015)?

Accepted Answer

A) 75 percent 
B) 28 percent 
C) 33 percent 
D) 47 percent 
A) 75 percent 
B) 28 percent 
C) 33 percent 
D) 47 percent

Question 10

A major distinction between government purchases and government transfer payments is that

Accepted Answer

A) government purchases divert resources from private uses to public uses, while transfer payments do not. 
B) transfer payments divert resources from private uses to public uses, while government purchases do not. 
C) government purchases have to be approved by Congress, while transfer payments do not. 
D) government purchases of goods and services have increased more rapidly during the past 20 years than have transfer payments. 
A) government purchases divert resources from private uses to public uses, while transfer payments do not. 
B) transfer payments divert resources from private uses to public uses, while government purchases do not. 
C) government purchases have to be approved by Congress, while transfer payments do not. 
D) government purchases of goods and services have increased more rapidly during the past 20 years than have transfer payments.

Question 11

Only a few states use state-run lotteries to increase their revenues and pay for expenditures.

Accepted Answer

A) True 
 B)False

Question 12

Assume that you pay $10,000 of tax on a taxable income of $50,000.If your taxable income were $150,000, your tax payment would be $25,000.This suggests the tax is

Accepted Answer

A) progressive. 
B) proportional. 
C) regressive. 
D) discriminatory. 
A) progressive. 
B) proportional. 
C) regressive. 
D) discriminatory.

Question 13

From 1960 to 2015, government purchases in the United States have shrunk as a percentage of GDP, but transfer payments have expanded greatly.

Accepted Answer

A) True 
 B)False

Question 14

The ability-to-pay principle of taxation

Accepted Answer

A) has been declared unconstitutional because it deprives individuals of property without due process of law. 
B) suggests that people should pay taxes in proportion to the benefits they derive from public goods and services. 
C) suggests that taxes should vary directly with people's income and wealth. 
D) suggests that taxes should vary inversely with people's income and wealth. 
A) has been declared unconstitutional because it deprives individuals of property without due process of law. 
B) suggests that people should pay taxes in proportion to the benefits they derive from public goods and services. 
C) suggests that taxes should vary directly with people's income and wealth. 
D) suggests that taxes should vary inversely with people's income and wealth.

Question 15

Assume the supply curve for product X is perfectly elastic and that government imposes a $2-per-unit excise tax.We can conclude that the resulting

Accepted Answer

A) increase in output will be greater the less elastic the demand curve. 
B) decrease in output will be greater the less elastic the demand curve. 
C) decrease in output will be greater the more elastic the demand curve. 
D) increase in output will be greater the more elastic the demand curve. 
A) increase in output will be greater the less elastic the demand curve. 
B) decrease in output will be greater the less elastic the demand curve. 
C) decrease in output will be greater the more elastic the demand curve. 
D) increase in output will be greater the more elastic the demand curve.

Question 16

The marginal tax rate is

Accepted Answer

A) the difference between the total tax rate and the average tax rate. 
B) the percentage of total income paid as taxes. 
C) equal to the change in taxes/change in taxable income. 
D) equal to the total taxes/total taxable income. 
A) the difference between the total tax rate and the average tax rate. 
B) the percentage of total income paid as taxes. 
C) equal to the change in taxes/change in taxable income. 
D) equal to the total taxes/total taxable income.

Question 17

A progressive tax takes relatively more from the rich than it does from the poor.

Accepted Answer

A) True 
 B)False

Question 18

If the tax on gasoline is increased, gas stations are most likely to pass most of this increase to the consumer if the demand is

Accepted Answer

A) unitary elastic. 
B) very inelastic. 
C) slightly elastic. 
D) perfectly elastic. 
A) unitary elastic. 
B) very inelastic. 
C) slightly elastic. 
D) perfectly elastic.

Question 19

Which of the following statements about state lotteries is false?

Accepted Answer

A) State lotteries are monopolies, with competing private lotteries banned. 
B) State lotteries are highly controversial, with critics and defenders still debating their merits. 
C) Fewer than half of the states in the U.S.have state lotteries because of their controversial nature. 
D) The payout rates of state lotteries are substantially lower than in private betting operations like casinos. 
A) State lotteries are monopolies, with competing private lotteries banned. 
B) State lotteries are highly controversial, with critics and defenders still debating their merits. 
C) Fewer than half of the states in the U.S.have state lotteries because of their controversial nature. 
D) The payout rates of state lotteries are substantially lower than in private betting operations like casinos.

Question 20

Assume that in year 1 your average tax rate is 20 percent on a taxable income of $20,000.If the marginal tax rate on the next $10,000 of taxable income is 30 percent, what will be the average tax rate if your taxable income rises to $30,000?

Accepted Answer

A) 7 percent 
B) 30 percent 
C) about 16 percent 
D) about 23 percent 
A) 7 percent 
B) 30 percent 
C) about 16 percent 
D) about 23 percent

Exam 20: Public Finance: Expenditures and Taxes

With a tax of $4,000 on $24,000 taxable income, the average tax rate is

The U.S.tax and transfer study done by economists Chamberlain and Prante of the Tax Foundation notes that in 2012 households in the top income quintile received about

In 2013, the top 1 percent of all taxpayers in the United States paid what percentage of the federal income tax?

The tax revenues of local governments are typically

Sales taxes are proportional in relation to income because the same tax rate applies regardless of the size of a purchase.

Social Security contributions are part of

Assume the Environmental Protection Agency imposes an excise tax on polluting firms.In which of the following situations would we expect the additional costs to be borne most heavily by consumers?

Suppose that a $0.75 tax is placed on gasoline.Under what circumstances will gasoline sellers end up shouldering the full burden of the tax?

Approximately what percentage of the federal government's tax revenues are generated from personal income taxes (in 2015)?

A major distinction between government purchases and government transfer payments is that

Only a few states use state-run lotteries to increase their revenues and pay for expenditures.

Assume that you pay $10,000 of tax on a taxable income of $50,000.If your taxable income were $150,000, your tax payment would be $25,000.This suggests the tax is

From 1960 to 2015, government purchases in the United States have shrunk as a percentage of GDP, but transfer payments have expanded greatly.

The ability-to-pay principle of taxation

Assume the supply curve for product X is perfectly elastic and that government imposes a $2-per-unit excise tax.We can conclude that the resulting

The marginal tax rate is

A progressive tax takes relatively more from the rich than it does from the poor.

If the tax on gasoline is increased, gas stations are most likely to pass most of this increase to the consumer if the demand is

Which of the following statements about state lotteries is false?

Assume that in year 1 your average tax rate is 20 percent on a taxable income of $20,000.If the marginal tax rate on the next $10,000 of taxable income is 30 percent, what will be the average tax rate if your taxable income rises to $30,000?

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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