Question 1

A factor that would reduce the ability of the Social Security system to maintain current benefit levels with constant tax rates is

Accepted Answer

A) rapid real wage growth. 
B) reduced population growth. 
C) adoption of a "pay as you go" system. 
D) a slowdown in inflation. 
A) rapid real wage growth. 
B) reduced population growth. 
C) adoption of a "pay as you go" system. 
D) a slowdown in inflation.

Question 2

The largest single source of revenue for the federal government is the

Accepted Answer

A) corporate income tax. 
B) federal excise tax. 
C) personal income tax. 
D) Social Security tax. 
A) corporate income tax. 
B) federal excise tax. 
C) personal income tax. 
D) Social Security tax.

Question 3

The corporate tax applies to firms' total revenues.

Accepted Answer

A) True 
 B)False

Question 4

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 5

If Harun's taxes are $20,000 when he earns $100,000 and $15,000 when he earns $80,000, then

Accepted Answer

A) Harun faces a progressive tax. 
B) Harun faces a regressive tax. 
C) Harun faces a proportional tax. 
D) Harun faces a falling marginal tax rates. 
A) Harun faces a progressive tax. 
B) Harun faces a regressive tax. 
C) Harun faces a proportional tax. 
D) Harun faces a falling marginal tax rates.

Question 6

Which of the following situations is a clear application of the benefits principle of taxation?

Accepted Answer

A) Wealthier people are taxed more heavily. 
B) Heavier vehicles are charged higher tolls on turnpikes. 
C) State government providing a free education to any child in the state. 
D) Sales of measles vaccine exempt from sales tax. 
A) Wealthier people are taxed more heavily. 
B) Heavier vehicles are charged higher tolls on turnpikes. 
C) State government providing a free education to any child in the state. 
D) Sales of measles vaccine exempt from sales tax.

Question 7

Figure 18-2
 
Figure 18-2 shows the widget market before and after an excise tax is imposed. After the tax is imposed, the amount that a firm keeps for itself from the sale of each widget is ____.

Accepted Answer

A) $95 
B) $100 
C) $120 
D) $125 
A) $95 
B) $100 
C) $120 
D) $125

Question 8

The economic burden of an excise tax

Accepted Answer

A) can usually be partially shifted from buyers onto sellers. 
B) equals the revenue from the tax. 
C) is less than the burden of an income tax that would raise the same revenue. 
D) is shared equally by buyers and sellers. 
A) can usually be partially shifted from buyers onto sellers. 
B) equals the revenue from the tax. 
C) is less than the burden of an income tax that would raise the same revenue. 
D) is shared equally by buyers and sellers.

Question 9

The main difference between direct and indirect taxes is that

Accepted Answer

A) indirect taxes are automatically deducted from workers' paychecks and direct taxes are not. 
B) direct taxes are paid to state and local governments and indirect taxes are paid to the federal government. 
C) direct taxes are taxes levied on people and indirect taxes are taxes levied on activities undertaken by people. 
D) direct taxes are usually proportional and indirect taxes are usually progressive. 
A) indirect taxes are automatically deducted from workers' paychecks and direct taxes are not. 
B) direct taxes are paid to state and local governments and indirect taxes are paid to the federal government. 
C) direct taxes are taxes levied on people and indirect taxes are taxes levied on activities undertaken by people. 
D) direct taxes are usually proportional and indirect taxes are usually progressive.

Question 10

The concept of vertical equity is that

Accepted Answer

A) income should be taxed instead of property. 
B) property should be taxed instead of income. 
C) there should be little movement up or down the social scale. 
D) persons who are unequal should be treated unequally. 
A) income should be taxed instead of property. 
B) property should be taxed instead of income. 
C) there should be little movement up or down the social scale. 
D) persons who are unequal should be treated unequally.

Question 11

The individual income tax, the inheritance tax, and the head tax are all examples of direct taxes.

Accepted Answer

A) True 
 B)False

Question 12

The concept of equity pertains to the fairness of a tax.

Accepted Answer

A) True 
 B)False

Question 13

The total burden of a tax equals tax receipts plus excess burden.

Accepted Answer

A) True 
 B)False

Question 14

Figure 18-3
 
In which panel of Figure 18-3 would an excise tax be borne entirely by the consumer?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 15

Which of the following would be the most likely candidate for direct application of the benefits principle of taxation?

Accepted Answer

A) Education 
B) Fire protection 
C) Police protection 
D) Use of roads 
A) Education 
B) Fire protection 
C) Police protection 
D) Use of roads

Question 16

The share of GDP going to federal taxes

Accepted Answer

A) has been about 16 to 20 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 20 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 17

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

Accepted Answer

A) True 
 B)False

Question 18

Which is not a significant source of state and local government revenues?

Accepted Answer

A) Payroll taxes 
B) Property taxes 
C) Sales taxes 
D) The federal government 
A) Payroll taxes 
B) Property taxes 
C) Sales taxes 
D) The federal government

Question 19

Define the following terms and explain their importance to the study of economics: 
a. regressive tax 
b. proportional tax 
c. progressive tax 
d. direct tax 
e. indirect tax

Accepted Answer

a. A regressive tax is one in which the

Question 20

Figure 18-1
 
According to the graph in Figure 18-1, the increase in the amount that consumers pay as a result of the tax is

Accepted Answer

A) 1,000.00 
B) 600 
C) 400 
D) indeterminate. 
A) 1,000.00 
B) 600 
C) 400 
D) indeterminate.

Exam 17: Taxation and Resource Allocation

A factor that would reduce the ability of the Social Security system to maintain current benefit levels with constant tax rates is

The largest single source of revenue for the federal government is the

The corporate tax applies to firms' total revenues.

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

If Harun's taxes are $20,000 when he earns $100,000 and $15,000 when he earns $80,000, then

Which of the following situations is a clear application of the benefits principle of taxation?

Figure 18-2 Figure 18-2 shows the widget market before and after an excise tax is imposed. After the tax is imposed, the amount that a firm keeps for itself from the sale of each widget is ____.

The economic burden of an excise tax

The main difference between direct and indirect taxes is that

The concept of vertical equity is that

The individual income tax, the inheritance tax, and the head tax are all examples of direct taxes.

The concept of equity pertains to the fairness of a tax.

The total burden of a tax equals tax receipts plus excess burden.

Figure 18-3 In which panel of Figure 18-3 would an excise tax be borne entirely by the consumer?

Which of the following would be the most likely candidate for direct application of the benefits principle of taxation?

The share of GDP going to federal taxes

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

Which is not a significant source of state and local government revenues?

Define the following terms and explain their importance to the study of economics: a. regressive tax b. proportional tax c. progressive tax d. direct tax e. indirect tax

Figure 18-1 According to the graph in Figure 18-1, the increase in the amount that consumers pay as a result of the tax is

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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