Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

If a tax is progressive, the average tax rate

Accepted Answer

A) remains the same as income rises. 
B) rises as income rises. 
C) falls as income rises. 
D) falls with passage of time. 
A) remains the same as income rises. 
B) rises as income rises. 
C) falls as income rises. 
D) falls with passage of time.

Question 4

The incidence of a tax refers to

Accepted Answer

A) who actually collects the tax. 
B) how frequently the tax is collected. 
C) who bears the economic burden of the tax. 
D) how the tax affects prices or wages. 
A) who actually collects the tax. 
B) how frequently the tax is collected. 
C) who bears the economic burden of the tax. 
D) how the tax affects prices or wages.

Question 5

Edgar Browning and William Johnson, in a paper published in the Journal of Political Economy (1984), presented evidence that a one-dollar transfer to the bottom 40 percent of income distribution costs the top 60 percent nine dollars. If correct, this finding proves

Accepted Answer

A) the tax system is generating significant excess burdens. 
B) these transfers are not worth the cost. 
C) loopholes have to be closed. 
D) the burden of the tax system is too great. 
A) the tax system is generating significant excess burdens. 
B) these transfers are not worth the cost. 
C) loopholes have to be closed. 
D) the burden of the tax system is too great.

Question 6

If a corporation earns $1 million in revenues on $750,000 in expenses, including $415,000 from payrolls, and the corporate tax rate is 10 percent with a $100,000 exemption, then the corporate taxes would be

Accepted Answer

A) $90,000. 
B) $31,000. 
C) $25,000. 
D) $15,000. 
A) $90,000. 
B) $31,000. 
C) $25,000. 
D) $15,000.

Question 7

Figure 18-2
 
Figure 18-2 shows the widget market before and after an excise tax is imposed. The revenue collected by the tax is ____.

Accepted Answer

A) $8,000 
B) $50,000 
C) $100,000 
D) $150,000 
A) $8,000 
B) $50,000 
C) $100,000 
D) $150,000

Question 8

A $10 fee to obtain a driver's license is a

Accepted Answer

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

Question 9

A congress member concerned about ensuring vertical equity in taxation would be most likely to argue for obtaining government revenue through a

Accepted Answer

A) progressive tax on personal income. 
B) regressive tax on corporate income. 
C) sales tax. 
D) head tax. 
A) progressive tax on personal income. 
B) regressive tax on corporate income. 
C) sales tax. 
D) head tax.

Question 10

A regressive tax is one in which the average tax rate falls as income rises.

Accepted Answer

A) True 
 B)False

Question 11

If the supply of a good is perfectly inelastic, then suppliers will bear the full burden of an excise tax

Accepted Answer

A) no matter how elastic the demand for the good is. 
B) only if demand is perfectly elastic. 
C) only if demand is perfectly inelastic. 
D) only if the government forbids them to raise the price of the good. 
A) no matter how elastic the demand for the good is. 
B) only if demand is perfectly elastic. 
C) only if demand is perfectly inelastic. 
D) only if the government forbids them to raise the price of the good.

Question 12

Vertical equity refers to the notion that individuals at all levels should be taxed equally.

Accepted Answer

A) True 
 B)False

Question 13

A progressive tax is one in which the fraction of income paid in taxes rises as a person's income increases.

Accepted Answer

A) True 
 B)False

Question 14

One major tax loophole intended to help state & local governments raise funds is

Accepted Answer

A) fiscal federalism. 
B) tax exempt municipal bond interest. 
C) tax deductible mortgage interest. 
D) tax credits for solar panels. 
A) fiscal federalism. 
B) tax exempt municipal bond interest. 
C) tax deductible mortgage interest. 
D) tax credits for solar panels.

Question 15

Direct taxes are levied directly on people or corporations.

Accepted Answer

A) True 
 B)False

Question 16

The Social Security System

Accepted Answer

A) is financed by federal personal income taxes. 
B) pays benefits from a trust built over a retirees working life. 
C) was enacted as part of the New Deal reforms in 1913. 
D) currently has a Trust Fund surplus. 
A) is financed by federal personal income taxes. 
B) pays benefits from a trust built over a retirees working life. 
C) was enacted as part of the New Deal reforms in 1913. 
D) currently has a Trust Fund surplus.

Question 17

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 18

State and local governments receive money from sales taxes, property taxes, and the federal government.

Accepted Answer

A) True 
 B)False

Question 19

From the passage of the 16th amendment to the U.S. Constitution, income taxes became the primary source of income for the United States.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is an example of an indirect tax?

Accepted Answer

A) Value-added tax 
B) Income tax 
C) Inheritance tax 
D) Head tax 
A) Value-added tax 
B) Income tax 
C) Inheritance tax 
D) Head tax

Exam 17: Taxation and Resource Allocation

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

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

If a tax is progressive, the average tax rate

The incidence of a tax refers to

Edgar Browning and William Johnson, in a paper published in the Journal of Political Economy (1984), presented evidence that a one-dollar transfer to the bottom 40 percent of income distribution costs the top 60 percent nine dollars. If correct, this finding proves

If a corporation earns $1 million in revenues on $750,000 in expenses, including $415,000 from payrolls, and the corporate tax rate is 10 percent with a $100,000 exemption, then the corporate taxes would be

Figure 18-2 Figure 18-2 shows the widget market before and after an excise tax is imposed. The revenue collected by the tax is ____.

A $10 fee to obtain a driver's license is a

A congress member concerned about ensuring vertical equity in taxation would be most likely to argue for obtaining government revenue through a

A regressive tax is one in which the average tax rate falls as income rises.

If the supply of a good is perfectly inelastic, then suppliers will bear the full burden of an excise tax

Vertical equity refers to the notion that individuals at all levels should be taxed equally.

A progressive tax is one in which the fraction of income paid in taxes rises as a person's income increases.

One major tax loophole intended to help state & local governments raise funds is

Direct taxes are levied directly on people or corporations.

The Social Security System

The burden of a tax is

State and local governments receive money from sales taxes, property taxes, and the federal government.

From the passage of the 16th amendment to the U.S. Constitution, income taxes became the primary source of income for the United States.

Which of the following is an example of an indirect tax?

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

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

Externalities, Externaliteis, the Environment, and Natural Resources

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

International Trade and Comparative Advantage

Contemporary Issues in the Us Economy

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