Question 1

No tax can lead the economy to higher levels of efficiency.

Accepted Answer

A) True 
 B)False

Question 2

The excess burden of an excise tax is

Accepted Answer

A)  greater the more inelastic the supply curve. 
B)  greater the more elastic the demand curve. 
C)  smaller the more elastic the supply curve. 
D)  greater the more inelastic the demand curve. 
A)  greater the more inelastic the supply curve. 
B)  greater the more elastic the demand curve. 
C)  smaller the more elastic the supply curve. 
D)  greater the more inelastic the demand curve.

Question 3

An efficient tax is one that raises the desired tax revenue but creates the least possible

Accepted Answer

A)  total burden. 
B)  excess burden. 
C)  tax incidence. 
D)  tax shifting. 
A)  total burden. 
B)  excess burden. 
C)  tax incidence. 
D)  tax shifting.

Question 4

The share of Gross Domestic Product paid by Americans in federal taxes is now roughly

Accepted Answer

A)  5 percent. 
B)  160 percent. 
C)  60 percent. 
D)  65 percent. 
A)  5 percent. 
B)  160 percent. 
C)  60 percent. 
D)  65 percent.

Question 5

The benefits principle states that the users of a service should pay for that service.

Accepted Answer

A) True 
 B)False

Question 6

What is personal income tax? On which principle does the federal government levy this tax?

Accepted Answer

The personal income tax is a tax levied

Question 7

The more inelastic the demand for a product, the larger the share of the tax that will be paid by consumers.

Accepted Answer

A) True 
 B)False

Question 8

Mrs.Dodge has $8 million in income and pays no income taxes.Her income is most likely

Accepted Answer

A)  capital gains. 
B)  interest on corporate bonds. 
C)  interest on municipal bonds. 
D)  offset by mortgage interest. 
A)  capital gains. 
B)  interest on corporate bonds. 
C)  interest on municipal bonds. 
D)  offset by mortgage interest.

Question 9

The burden of a tax is

Accepted Answer

A)  the amount of revenue that the government raises from the tax. 
B)  what it would cost in alternative tax revenue to provide the same level of service. 
C)  greater as the total revenue from the tax decreases. 
D)  the amount the taxpayer would have to be given to be just as well off in the presence of the tax as in its absence. 
A)  the amount of revenue that the government raises from the tax. 
B)  what it would cost in alternative tax revenue to provide the same level of service. 
C)  greater as the total revenue from the tax decreases. 
D)  the amount the taxpayer would have to be given to be just as well off in the presence of the tax as in its absence.

Question 10

In Country X, the government requires employers to collect 9 percent of every employee's compensation as payroll tax.This is an example of

Accepted Answer

A)  progressive tax. 
B)  regressive tax. 
C)  digressive tax. 
D)  proportional tax. 
A)  progressive tax. 
B)  regressive tax. 
C)  digressive tax. 
D)  proportional tax.

Question 11

The people most likely to pay little personal income tax to the U.S.government are

Accepted Answer

A)  the middle class. 
B)  renters. 
C)  the very poor. 
D)  earners of wages (as opposed to salaries). 
A)  the middle class. 
B)  renters. 
C)  the very poor. 
D)  earners of wages (as opposed to salaries).

Question 12

A tax system under which an individual pays a higher fraction of his income in taxes at higher levels of income is formally described as

Accepted Answer

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

Question 13

The sales tax is generally considered to be a regressive tax.

Accepted Answer

A) True 
 B)False

Question 14

Revenue sharing is usually a means of

Accepted Answer

A)  making states transfer money to the federal government. 
B)  equalizing expenditures per pupil made by school districts. 
C)  splitting the revenue earned from excise taxes between states and the federal government. 
D)  making grants to state and local governments. 
A)  making states transfer money to the federal government. 
B)  equalizing expenditures per pupil made by school districts. 
C)  splitting the revenue earned from excise taxes between states and the federal government. 
D)  making grants to state and local governments.

Question 15

The share of GDP going to federal taxes

Accepted Answer

A)  has been about 16 to 21 percent for the past 40 years. 
B)  has been about 35 percent for the past 40 years. 
C)  was about 40 percent until the early 1980s and has dropped greatly since then. 
D)  has risen steadily in the past 40 years to about 35 percent. 
A)  has been about 16 to 21 percent for the past 40 years. 
B)  has been about 35 percent for the past 40 years. 
C)  was about 40 percent until the early 1980s and has dropped greatly since then. 
D)  has risen steadily in the past 40 years to about 35 percent.

Question 16

The Social Security system works exactly like any private retirement trust system.

Accepted Answer

A) True 
 B)False

Question 17

Americans generally pay

Accepted Answer

A)  a lower percentage of their incomes in taxes than citizens of other industrialized countries. 
B)  a lower percentage of their incomes in taxes than citizens of other industrialized countries, with the exceptions of Sweden and the Netherlands. 
C)  about the same percentage of their incomes in taxes as citizens of other industrialized countries. 
D)  a higher percentage of their incomes in taxes than citizens of other industrialized countries. 
A)  a lower percentage of their incomes in taxes than citizens of other industrialized countries. 
B)  a lower percentage of their incomes in taxes than citizens of other industrialized countries, with the exceptions of Sweden and the Netherlands. 
C)  about the same percentage of their incomes in taxes as citizens of other industrialized countries. 
D)  a higher percentage of their incomes in taxes than citizens of other industrialized countries.

Question 18

The Bush tax cuts of 2001

Accepted Answer

A)  made federal income taxes more progressive. 
B)  made federal income taxes perfectly proportional. 
C)  made federal income taxes less progressive. 
D)  had no effect on the progressivity of the federal income tax system. 
A)  made federal income taxes more progressive. 
B)  made federal income taxes perfectly proportional. 
C)  made federal income taxes less progressive. 
D)  had no effect on the progressivity of the federal income tax system.

Question 19

Horizontal equity means that equally situated individuals should be taxed equally.

Accepted Answer

A) True 
 B)False

Question 20

Payroll taxes are used to collect revenue for the Social Security program.

Accepted Answer

A) True 
 B)False

Exam 18: Taxation and Resource Allocation

No tax can lead the economy to higher levels of efficiency.

The excess burden of an excise tax is

An efficient tax is one that raises the desired tax revenue but creates the least possible

The share of Gross Domestic Product paid by Americans in federal taxes is now roughly

The benefits principle states that the users of a service should pay for that service.

What is personal income tax? On which principle does the federal government levy this tax?

The more inelastic the demand for a product, the larger the share of the tax that will be paid by consumers.

Mrs.Dodge has $8 million in income and pays no income taxes.Her income is most likely

The burden of a tax is

In Country X, the government requires employers to collect 9 percent of every employee's compensation as payroll tax.This is an example of

The people most likely to pay little personal income tax to the U.S.government are

A tax system under which an individual pays a higher fraction of his income in taxes at higher levels of income is formally described as

The sales tax is generally considered to be a regressive tax.

Revenue sharing is usually a means of

The share of GDP going to federal taxes

The Social Security system works exactly like any private retirement trust system.

Americans generally pay

The Bush tax cuts of 2001

Horizontal equity means that equally situated individuals should be taxed equally.

Payroll taxes are used to collect revenue for the Social Security program.

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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