Question 1

A tax structure is called progressive when

Accepted Answer

A) the average tax rate decreases if income decreases. 
B) high-income groups pay more taxes absolutely than do low-income groups. 
C) the average tax rate on low-income groups exceeds the tax rate of high-income groups. 
D) the average tax rate is constant, but the absolute amount of taxes paid increases with income increases. 
A) the average tax rate decreases if income decreases. 
B) high-income groups pay more taxes absolutely than do low-income groups. 
C) the average tax rate on low-income groups exceeds the tax rate of high-income groups. 
D) the average tax rate is constant, but the absolute amount of taxes paid increases with income increases.

Question 2

A tax is progressive if the average tax rate rises as income increases.

Accepted Answer

A) True 
 B)False

Question 3

Taxes on commodities or on purchases are known as

Accepted Answer

A) corporate income taxes. 
B) sales and excise taxes. 
C) personal income taxes. 
D) payroll taxes. 
A) corporate income taxes. 
B) sales and excise taxes. 
C) personal income taxes. 
D) payroll taxes.

Question 4

(Advanced analysis)The equations for the demand and supply curves for a particular product are P = 10 − 0.4 Q and P = 2 + 0.4 Q, where P is price and Q is quantity expressed in units of 100. After an excise tax is imposed on the product, the supply equation is P = 3 + 0.4 Q. The excise tax on each unit of the product

Accepted Answer

A) is $1. 
B) is $2. 
C) is $3. 
D) cannot be determined with the information given. 
A) is $1. 
B) is $2. 
C) is $3. 
D) cannot be determined with the information given.

Question 5

If the marginal tax rate is 20 percent, by how much must income have increased if your tax bill increases by $300?

Accepted Answer

A) $300 
B) $1,000 
C) $1,500 
D) The amount cannot be determined. 
A) $300 
B) $1,000 
C) $1,500 
D) The amount cannot be determined.

Question 6

Suppose that government imposes a specific excise tax on product X of $4 per unit and that the price elasticity of supply of X is unitary (coefficient = 1). If the incidence of the tax is such that the consumers of X pay $2 of the tax and the producers pay $2, we can conclude that the

Accepted Answer

A) supply of X is inelastic. 
B) demand for X is elastic. 
C) demand for X is inelastic. 
D) demand for X is unitary elastic. 
A) supply of X is inelastic. 
B) demand for X is elastic. 
C) demand for X is inelastic. 
D) demand for X is unitary elastic.

Question 7

In designing taxes, the government economists might focus on the following goals, except

Accepted Answer

A) minimizing efficiency losses. 
B) redistributing income or wealth from one group to another. 
C) reducing the negative externalities of certain activities. 
D) simplifying the estimation of demand elasticities that are relevant to tax incidence. 
A) minimizing efficiency losses. 
B) redistributing income or wealth from one group to another. 
C) reducing the negative externalities of certain activities. 
D) simplifying the estimation of demand elasticities that are relevant to tax incidence.

Question 8

With respect to state finance, for most states

Accepted Answer

A) estate taxes are the major source of revenue and most expenditures are for health services. 
B) the corporate income tax is the major source of revenue and natural resource development is the major type of expenditure. 
C) property taxes are the basic source of revenue and education is the major type of expenditure. 
D) sales and excise taxes are the major source of revenue and education is the major type of expenditure. 
A) estate taxes are the major source of revenue and most expenditures are for health services. 
B) the corporate income tax is the major source of revenue and natural resource development is the major type of expenditure. 
C) property taxes are the basic source of revenue and education is the major type of expenditure. 
D) sales and excise taxes are the major source of revenue and education is the major type of expenditure.

Question 9

Indy currently earns $50,000 in taxable income and pays $8,000 in taxes. Suppose that Indy faces a marginal tax rate of 20 percent and his boss offers him a raise of $3,000 per year. Indy should

Accepted Answer

A) accept the raise because his after-tax income will rise by $2,400. 
B) accept the raise because his after-tax income will rise by $400. 
C) reject the raise because his after-tax income will fall by $2,000. 
D) reject the raise because his after-tax income will fall by $1,500. 
A) accept the raise because his after-tax income will rise by $2,400. 
B) accept the raise because his after-tax income will rise by $400. 
C) reject the raise because his after-tax income will fall by $2,000. 
D) reject the raise because his after-tax income will fall by $1,500.

Question 10

In the U.S., the taxes mostly come from the rich and government spending mostly goes to programs that benefit the rich.

Accepted Answer

A) True 
 B)False

Question 11

Which of the lines in the diagram represent(s)a regressive tax?

Accepted Answer

A) both A and B 
B) D only 
C) C only 
D) B only 
A) both A and B 
B) D only 
C) C only 
D) B only

Question 12

The benefits-received principle of taxation is

Accepted Answer

A) the basis for the gasoline tax. 
B) easy to apply because benefits received are conveniently measurable. 
C) applied in income-redistribution programs. 
D) the principle behind the income tax system. 
A) the basis for the gasoline tax. 
B) easy to apply because benefits received are conveniently measurable. 
C) applied in income-redistribution programs. 
D) the principle behind the income tax system.

Question 13

The marginal tax rate is the tax rate that applies to additional income.

Accepted Answer

A) True 
 B)False

Question 14

Assume you pay a tax of $4,000 on a taxable income of $24,000. If your taxable income were $30,000, your tax payment would be $5,000. This suggests that the tax is

Accepted Answer

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

Question 15

Which of the following best reflects the ability-to-pay philosophy of taxation?

Accepted Answer

A) a tax on residential property 
B) a progressive income tax 
C) an excise tax on gasoline 
D) an excise tax on coffee 
A) a tax on residential property 
B) a progressive income tax 
C) an excise tax on gasoline 
D) an excise tax on coffee

Question 16

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 17

The maximum federal marginal tax rate on taxable personal income is, as of 2019,

Accepted Answer

A) 50 percent. 
B) 37 percent. 
C) 35 percent. 
D) 24 percent. 
A) 50 percent. 
B) 37 percent. 
C) 35 percent. 
D) 24 percent.

Question 18

In general, the buyers will tend to pay a bigger share of a tax on a good when

Accepted Answer

A) the price elasticities of supply and demand are low. 
B) the price elasticities of supply and demand are high. 
C) the price elasticity of supply is low and the price elasticity of demand is high. 
D) the price elasticity of supply is high and the price elasticity of demand is low. 
A) the price elasticities of supply and demand are low. 
B) the price elasticities of supply and demand are high. 
C) the price elasticity of supply is low and the price elasticity of demand is high. 
D) the price elasticity of supply is high and the price elasticity of demand is low.

Question 19

A person whose income has increased from $10,000 to $20,000 finds that her federal marginal tax rate has increased from 18 percent to 22 percent. This is an example of a

Accepted Answer

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

Question 20

The actual incidence of payroll taxes, in the consensus view, is

Accepted Answer

A) split evenly between the worker and the employer. 
B) more on the employer than on the worker. 
C) more on the worker than on the employer. 
D) all on the employer, who remits the tax to the government. 
A) split evenly between the worker and the employer. 
B) more on the employer than on the worker. 
C) more on the worker than on the employer. 
D) all on the employer, who remits the tax to the government.

Exam 20: Public Finance: Expenditures and Taxes

A tax structure is called progressive when

A tax is progressive if the average tax rate rises as income increases.

Taxes on commodities or on purchases are known as

If the marginal tax rate is 20 percent, by how much must income have increased if your tax bill increases by $300?

Suppose that government imposes a specific excise tax on product X of $4 per unit and that the price elasticity of supply of X is unitary (coefficient = 1). If the incidence of the tax is such that the consumers of X pay $2 of the tax and the producers pay $2, we can conclude that the

In designing taxes, the government economists might focus on the following goals, except

With respect to state finance, for most states

Indy currently earns $50,000 in taxable income and pays $8,000 in taxes. Suppose that Indy faces a marginal tax rate of 20 percent and his boss offers him a raise of $3,000 per year. Indy should

In the U.S., the taxes mostly come from the rich and government spending mostly goes to programs that benefit the rich.

Which of the lines in the diagram represent(s)a regressive tax?

The benefits-received principle of taxation is

The marginal tax rate is the tax rate that applies to additional income.

Assume you pay a tax of $4,000 on a taxable income of $24,000. If your taxable income were $30,000, your tax payment would be $5,000. This suggests that the tax is

Which of the following best reflects the ability-to-pay philosophy of taxation?

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

The maximum federal marginal tax rate on taxable personal income is, as of 2019,

In general, the buyers will tend to pay a bigger share of a tax on a good when

A person whose income has increased from $10,000 to $20,000 finds that her federal marginal tax rate has increased from 18 percent to 22 percent. This is an example of a

The actual incidence of payroll taxes, in the consensus view, is

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, 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

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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