Question 1

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

Accepted Answer

A) $3 on the buyers and $0 on the sellers. 
B) $0 on the buyers and $3 on the sellers. 
C) $2 on the buyers and $1 on the sellers. 
D) $1 on the buyers and $2 on the sellers. 
A) $3 on the buyers and $0 on the sellers. 
B) $0 on the buyers and $3 on the sellers. 
C) $2 on the buyers and $1 on the sellers. 
D) $1 on the buyers and $2 on the sellers.

Question 2

From 1960 to 2018, 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 3

The supply curve for a product has infinite elasticity. An excise tax is levied on the product. The likely effect will be to

Accepted Answer

A) reduce the amount the producer receives for each unit sold by the amount of the tax. 
B) increase the price the consumer pays per unit by the amount of the tax. 
C) increase the price to consumers by an amount less than the tax. 
D) increase the amount received by producers by less than the tax. 
A) reduce the amount the producer receives for each unit sold by the amount of the tax. 
B) increase the price the consumer pays per unit by the amount of the tax. 
C) increase the price to consumers by an amount less than the tax. 
D) increase the amount received by producers by less than the tax.

Question 4

The largest source of tax revenue for state governments is the property tax.

Accepted Answer

A) True 
 B)False

Question 5

Differentiate between government purchases of goods and services and government transfer payments.

Accepted Answer

Government purchases are exhaustive. The

Question 6

The largest source of local government's revenue is the sales tax.

Accepted Answer

A) True 
 B)False

Question 7

"Transfer payments" may be thought of as

Accepted Answer

A) wages and salaries. 
B) purchases of services. 
C) taxes in reverse. 
D) expenditures on products. 
A) wages and salaries. 
B) purchases of services. 
C) taxes in reverse. 
D) expenditures on products.

Question 8

The table contains five tax schedules for an economy. All figures are in billions of dollars. Which of the schedules represent(s)a proportional tax?

Accepted Answer

A) II and IV 
B) III and V 
C) IV only 
D) I only 
A) II and IV 
B) III and V 
C) IV only 
D) I only

Question 9

Public finance is the subdiscipline of economics that studies the various ways in which

Accepted Answer

A) the general public acquire financing for their purchases. 
B) governments raise and expend money. 
C) firms in the financial sector provide services to households and firms. 
D) governments may regulate and promote the stability of the financial sector. 
A) the general public acquire financing for their purchases. 
B) governments raise and expend money. 
C) firms in the financial sector provide services to households and firms. 
D) governments may regulate and promote the stability of the financial sector.

Question 10

Refer to the graph. A 3-percent general sales tax would have a structure that is illustrated by

Accepted Answer

A) curve A. 
B) curve B. 
C) curve C. 
D) none of the curves. 
A) curve A. 
B) curve B. 
C) curve C. 
D) none of the curves.

Question 11

The opportunity cost of borrowing funds to finance government deficits is

Accepted Answer

A) greatest when the economy is doing well. 
B) greatest when the economy is in a recession. 
C) zero. 
D) the same regardless of the state of the economy. 
A) greatest when the economy is doing well. 
B) greatest when the economy is in a recession. 
C) zero. 
D) the same regardless of the state of the economy.

Question 12

When Supreme Court Justice Oliver Wendell Holmes stated, "Taxes are the price we pay for civilization," he meant that

Accepted Answer

A) all cultural and educational services and events need to be taxed. 
B) taxes are the major source of funding for the goods and services provided by government. 
C) tax rates should be higher on higher-income well-educated households. 
D) we should collect taxes mostly from those who benefit from the government-provided goods and services. 
A) all cultural and educational services and events need to be taxed. 
B) taxes are the major source of funding for the goods and services provided by government. 
C) tax rates should be higher on higher-income well-educated households. 
D) we should collect taxes mostly from those who benefit from the government-provided goods and services.

Question 13

Between the government and households, money or funds tend to flow only in one direction: from households to government.

Accepted Answer

A) True 
 B)False

Question 14

The table represents a personal income tax schedule. As income increases, the marginal tax rate

Accepted Answer

A) increases. 
B) decreases. 
C) remains constant. 
D) has no definite pattern. 
A) increases. 
B) decreases. 
C) remains constant. 
D) has no definite pattern.

Question 15

The major expenditure of local governments is for education.

Accepted Answer

A) True 
 B)False

Question 16

In 2015, the 20 percent of families with the lowest incomes paid an effective average federal tax rate (on all federal taxes)of about ____, whereas the 20 percent of families with the highest incomes paid an effective average tax rate of about ____.

Accepted Answer

A) 5.5 percent; 50 percent 
B) 1.9 percent; 33.3 percent 
C) 8.4 percent; 27.5 percent 
D) 1.5 percent; 26.7 percent 
A) 5.5 percent; 50 percent 
B) 1.9 percent; 33.3 percent 
C) 8.4 percent; 27.5 percent 
D) 1.5 percent; 26.7 percent

Question 17

In the diagram, if box E represents government, box C businesses, box D the resource market, and box B the product market, then government hiring of teachers, soldiers, police, and judges would be illustrated by arrows

Accepted Answer

A) 5 and 6. 
B) 7 and 8. 
C) 9 and 10. 
D) 10 and 11. 
A) 5 and 6. 
B) 7 and 8. 
C) 9 and 10. 
D) 10 and 11.

Question 18

The marginal tax rate is the

Accepted Answer

A) sum of all individual tax rates. 
B) tax rate paid by those with the lowest family incomes. 
C) total amount of taxes paid as a percentage of total income. 
D) increase in taxes as a percentage of an increase in income. 
A) sum of all individual tax rates. 
B) tax rate paid by those with the lowest family incomes. 
C) total amount of taxes paid as a percentage of total income. 
D) increase in taxes as a percentage of an increase in income.

Question 19

A progressive tax means that if someone earning $40,000 pays $10,000, someone earning $80,000 must pay

Accepted Answer

A) less than $10,000. 
B) more than $20,000. 
C) more than $10,000 but less than $30,000. 
D) more than $30,000 but less than $40,000. 
A) less than $10,000. 
B) more than $20,000. 
C) more than $10,000 but less than $30,000. 
D) more than $30,000 but less than $40,000.

Question 20

The graph represents the market for a product where D ₁ and S ₁ show the initial supply and demand curves, and supply shifts to S ₂ due to a sales tax. The deadweight loss due to the tax is represented by area

Accepted Answer

A) EIG. 
B) EFI. 
C) BCEF. 
D) ABFG. 
A) EIG. 
B) EFI. 
C) BCEF. 
D) ABFG.

Exam 20: Public Finance: Expenditures and Taxes

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

From 1960 to 2018, government purchases in the United States have shrunk as a percentage of GDP, but transfer payments have expanded greatly.

The supply curve for a product has infinite elasticity. An excise tax is levied on the product. The likely effect will be to

The largest source of tax revenue for state governments is the property tax.

Differentiate between government purchases of goods and services and government transfer payments.

The largest source of local government's revenue is the sales tax.

"Transfer payments" may be thought of as

The table contains five tax schedules for an economy. All figures are in billions of dollars. Which of the schedules represent(s)a proportional tax?

Public finance is the subdiscipline of economics that studies the various ways in which

Refer to the graph. A 3-percent general sales tax would have a structure that is illustrated by

The opportunity cost of borrowing funds to finance government deficits is

When Supreme Court Justice Oliver Wendell Holmes stated, "Taxes are the price we pay for civilization," he meant that

Between the government and households, money or funds tend to flow only in one direction: from households to government.

The table represents a personal income tax schedule. As income increases, the marginal tax rate

The major expenditure of local governments is for education.

In 2015, the 20 percent of families with the lowest incomes paid an effective average federal tax rate (on all federal taxes)of about ____, whereas the 20 percent of families with the highest incomes paid an effective average tax rate of about ____.

In the diagram, if box E represents government, box C businesses, box D the resource market, and box B the product market, then government hiring of teachers, soldiers, police, and judges would be illustrated by arrows

The marginal tax rate is the

A progressive tax means that if someone earning $40,000 pays $10,000, someone earning $80,000 must pay

The graph represents the market for a product where D ₁ and S ₁ show the initial supply and demand curves, and supply shifts to S ₂ due to a sales tax. The deadweight loss due to the tax is represented by area

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

Filters

In 2015, the 20 percent of families with the lowest incomes paid an effective average federal tax rate (on all federal taxes)of about , whereas the 20 percent of families with the highest incomes paid an effective average tax rate of about .