Question 1

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 2

The table gives data for the market for a product. If an excise tax of $3 per unit is imposed on this product, the new equilibrium price with tax will be

Accepted Answer

A) $6. 
B) $5. 
C) $4. 
D) $2. 
A) $6. 
B) $5. 
C) $4. 
D) $2.

Question 3

Assume that in year 1 you pay an average tax rate of 20 percent on a taxable income of $20,000. In year 2, you pay an average tax rate of 25 percent on a taxable income of $30,000. Assuming no change in tax rates, the marginal tax rate on your additional $10,000 of income is

Accepted Answer

A) 5 percent. 
B) 12 percent. 
C) 35 percent. 
D) 42 percent. 
A) 5 percent. 
B) 12 percent. 
C) 35 percent. 
D) 42 percent.

Question 4

The largest source of tax revenue for the U.S. federal government is

Accepted Answer

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

Question 5

Transfer payments are "exhaustive" in that they directly absorb resources, whereas government purchases are "nonexhaustive."

Accepted Answer

A) True 
 B)False

Question 6

If a tax is progressive, then

Accepted Answer

A) the average and marginal tax rates are always equal. 
B) as the tax base increases, the marginal tax rate declines. 
C) as the tax base rises, the average tax rate is greater than the marginal tax rate. 
D) as the tax base increases, the marginal tax rate is greater than the average tax rate. 
A) the average and marginal tax rates are always equal. 
B) as the tax base increases, the marginal tax rate declines. 
C) as the tax base rises, the average tax rate is greater than the marginal tax rate. 
D) as the tax base increases, the marginal tax rate is greater than the average tax rate.

Question 7

List the arguments for and against state lotteries.

Accepted Answer

The arguments for state lotteries are: (

Question 8

The incidence of a tax pertains to

Accepted Answer

A) the degree to which it alters the distribution of income. 
B) how easy it is to evade the tax. 
C) who actually bears the burden of a tax. 
D) the progressiveness or regressiveness of tax rates. 
A) the degree to which it alters the distribution of income. 
B) how easy it is to evade the tax. 
C) who actually bears the burden of a tax. 
D) the progressiveness or regressiveness of tax rates.

Question 9

The table represents a personal income tax schedule. If income increases from $15,000 to $30,000, the marginal tax rate is

Accepted Answer

A) 10.0 percent. 
B) 13.3 percent. 
C) 18.3 percent. 
D) 26.6 percent 
A) 10.0 percent. 
B) 13.3 percent. 
C) 18.3 percent. 
D) 26.6 percent

Question 10

Refer to the graph. Assume the market for this product is initially in equilibrium at the intersection of D ₂ and S ₁. The shift in supply from S ₁ to S ₂ is due to an excise tax imposed on the product. The excise tax revenue collected by the government will be

Accepted Answer

A) $60. 
B) $36. 
C) $32. 
D) $24. 
A) $60. 
B) $36. 
C) $32. 
D) $24.

Question 11

Proprietary income refers to

Accepted Answer

A) revenue flowing to the government from taxes. 
B) money borrowed by the government to finance its operations. 
C) revenue generated by government-run businesses. 
D) transfer payments from the government to the owners of property resources. 
A) revenue flowing to the government from taxes. 
B) money borrowed by the government to finance its operations. 
C) revenue generated by government-run businesses. 
D) transfer payments from the government to the owners of property resources.

Question 12

The probable incidence of the tax on business property is on consumers.

Accepted Answer

A) True 
 B)False

Question 13

The graph illustrates the market for a product on which an excise tax has been imposed by government. What is the area that represents the portion of the excise tax that is the burden to consumers?

Accepted Answer

A) WXTV 
B) WXZU 
C) VTZU 
D) WXYZU 
A) WXTV 
B) WXZU 
C) VTZU 
D) WXYZU

Question 14

The two largest sources of tax revenue for the U.S. federal government are

Accepted Answer

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

Question 15

The overall tax structure of the United States is proportional or slightly regressive.

Accepted Answer

A) True 
 B)False

Question 16

The largest expenditure of the U.S. federal government is for

Accepted Answer

A) education. 
B) national defense. 
C) pensions and income security. 
D) interest on public debt. 
A) education. 
B) national defense. 
C) pensions and income security. 
D) interest on public debt.

Question 17

Which of the lines in the diagram represent(s)a progressive 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 18

Federal employment in the United States is dominated by what two functions?

Accepted Answer

A) national defense and postal service 
B) health care and police 
C) postal service and education 
D) health care and national defense 
A) national defense and postal service 
B) health care and police 
C) postal service and education 
D) health care and national defense

Question 19

(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 = 4 + 0.4 Q. The equilibrium quantity before the excise tax is imposed is

Accepted Answer

A) 1,000 units. 
B) 750 units. 
C) 875 units. 
D) 1,200 units. 
A) 1,000 units. 
B) 750 units. 
C) 875 units. 
D) 1,200 units.

Question 20

In the diagram, solid arrows reflect real flows, while broken arrows are monetary flows. Flow (4)might represent

Accepted Answer

A) the services of NASA astrophysicists. 
B) the purchase of stealth bombers. 
C) personal income taxes. 
D) investment spending by private corporations. 
A) the services of NASA astrophysicists. 
B) the purchase of stealth bombers. 
C) personal income taxes. 
D) investment spending by private corporations.

Exam 20: Public Finance: Expenditures and Taxes

The marginal tax rate is

The table gives data for the market for a product. If an excise tax of $3 per unit is imposed on this product, the new equilibrium price with tax will be

Assume that in year 1 you pay an average tax rate of 20 percent on a taxable income of $20,000. In year 2, you pay an average tax rate of 25 percent on a taxable income of $30,000. Assuming no change in tax rates, the marginal tax rate on your additional $10,000 of income is

The largest source of tax revenue for the U.S. federal government is

Transfer payments are "exhaustive" in that they directly absorb resources, whereas government purchases are "nonexhaustive."

If a tax is progressive, then

List the arguments for and against state lotteries.

The incidence of a tax pertains to

The table represents a personal income tax schedule. If income increases from $15,000 to $30,000, the marginal tax rate is

Refer to the graph. Assume the market for this product is initially in equilibrium at the intersection of D ₂ and S ₁. The shift in supply from S ₁ to S ₂ is due to an excise tax imposed on the product. The excise tax revenue collected by the government will be

Proprietary income refers to

The probable incidence of the tax on business property is on consumers.

The graph illustrates the market for a product on which an excise tax has been imposed by government. What is the area that represents the portion of the excise tax that is the burden to consumers?

The two largest sources of tax revenue for the U.S. federal government are

The overall tax structure of the United States is proportional or slightly regressive.

The largest expenditure of the U.S. federal government is for

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

Federal employment in the United States is dominated by what two functions?

In the diagram, solid arrows reflect real flows, while broken arrows are monetary flows. Flow (4)might represent

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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