Question 1

Explain the concept of efficiency as it relates to taxation.

Accepted Answer

A tax is said to be efficient if it has

Question 2

If a tax is regressive, 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 as income falls. 
A) remains the same as income rises. 
B) rises as income rises. 
C) falls as income rises. 
D) falls as income falls.

Question 3

Economists generally think that the ____ tax is among the best ways to raise revenue.

Accepted Answer

A) property 
B) personal income 
C) sales 
D) value-added 
A) property 
B) personal income 
C) sales 
D) value-added

Question 4

An excess burden is present when taxpayers alter their behavior on account of taxation.

Accepted Answer

A) True 
 B)False

Question 5

Social Security payroll taxes are examples of

Accepted Answer

A) progressive taxation. 
B) regressive taxation. 
C) proportional taxation. 
D) marginal taxes. 
A) progressive taxation. 
B) regressive taxation. 
C) proportional taxation. 
D) marginal taxes.

Question 6

The benefits principle states that the users of a service should pay for that service.

Accepted Answer

A) True 
 B)False

Question 7

If Jenny's taxes are $10,000 when she earns $50,000 and $12,000 when she earns $60,000, then

Accepted Answer

A) Jenny faces a progressive tax. 
B) Jenny faces a regressive tax. 
C) Jenny faces a proportional tax. 
D) Jenny faces a rising marginal tax rate. 
A) Jenny faces a progressive tax. 
B) Jenny faces a regressive tax. 
C) Jenny faces a proportional tax. 
D) Jenny faces a rising marginal tax rate.

Question 8

The share of GDP taken by taxes is considerably higher in the United States than in other countries.

Accepted Answer

A) True 
 B)False

Question 9

Which is least likely to help in understanding who bears the tax incidence?

Accepted Answer

A) Supply elasticity 
B) Demand elasticity 
C) Who the tax is levied on 
D) Whether or not supply is fixed 
A) Supply elasticity 
B) Demand elasticity 
C) Who the tax is levied on 
D) Whether or not supply is fixed

Question 10

State governments' main source of revenue is

Accepted Answer

A) property taxes. 
B) income taxes. 
C) excise taxes. 
D) sales taxes. 
A) property taxes. 
B) income taxes. 
C) excise taxes. 
D) sales taxes.

Question 11

Since World War II, the share of corporate income tax collections in total federal revenue has been

Accepted Answer

A) increasing rapidly. 
B) declining rapidly. 
C) increasing slowly. 
D) declining generally. 
A) increasing rapidly. 
B) declining rapidly. 
C) increasing slowly. 
D) declining generally.

Question 12

Compared to other countries, the U.S. federal government relies

Accepted Answer

A) more heavily on direct taxes than do governments of other countries. 
B) less heavily on direct taxes than do governments of other countries. 
C) more heavily on indirect taxes than do governments of other countries. 
D) on direct taxes about as heavily as do governments of other countries. 
A) more heavily on direct taxes than do governments of other countries. 
B) less heavily on direct taxes than do governments of other countries. 
C) more heavily on indirect taxes than do governments of other countries. 
D) on direct taxes about as heavily as do governments of other countries.

Question 13

Most loopholes in the income tax system

Accepted Answer

A) are more likely to be exploited by the wealthy. 
B) make it more progressive. 
C) were created by the tax reforms instituted in 1986. 
D) do not affect the economic decisions of the people who benefit from them. 
A) are more likely to be exploited by the wealthy. 
B) make it more progressive. 
C) were created by the tax reforms instituted in 1986. 
D) do not affect the economic decisions of the people who benefit from them.

Question 14

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

Accepted Answer

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

Question 15

Who actually pays an excise tax

Accepted Answer

A) is determined by income bracket. 
B) is determined by who the law assigns the tax. 
C) is wage and salary earners but not people who have only investment income. 
D) is determined by the change in prices and outputs caused by the tax. 
A) is determined by income bracket. 
B) is determined by who the law assigns the tax. 
C) is wage and salary earners but not people who have only investment income. 
D) is determined by the change in prices and outputs caused by the tax.

Question 16

An excise tax is

Accepted Answer

A) levied on accounting profits not economic profits. 
B) levied on salaries and wages but not investment income. 
C) levied on the purchase of specific goods. 
D) levied on purchases of goods in general excluding exempted goods that are considered necessities. 
A) levied on accounting profits not economic profits. 
B) levied on salaries and wages but not investment income. 
C) levied on the purchase of specific goods. 
D) levied on purchases of goods in general excluding exempted goods that are considered necessities.

Question 17

The courts in some states have declared the financing of public schools by local property taxes unconstitutional because

Accepted Answer

A) housing should never be the basis for taxation of any kind. 
B) taxes on real estate generate too much tax revenue. 
C) disparity in property values means some communities have more in tax revenues to spend on education than do communities containing less valuable property. 
D) the funds for public education should come from federal revenues, not from local property taxes. 
A) housing should never be the basis for taxation of any kind. 
B) taxes on real estate generate too much tax revenue. 
C) disparity in property values means some communities have more in tax revenues to spend on education than do communities containing less valuable property. 
D) the funds for public education should come from federal revenues, not from local property taxes.

Question 18

Figure 18-1
 
According to the graph in Figure 18-1, the tax is which of the following?

Accepted Answer

A) 400 
B) 600 
C) 1,000 
D) 200 
A) 400 
B) 600 
C) 1,000 
D) 200

Question 19

A tax has an excess burden whenever

Accepted Answer

A) people are unable to alter their behavior to avoid paying it. 
B) government seeks to raise it. 
C) it raises a great deal of revenue. 
D) it induces people to change their behavior. 
A) people are unable to alter their behavior to avoid paying it. 
B) government seeks to raise it. 
C) it raises a great deal of revenue. 
D) it induces people to change their behavior.

Question 20

Homeowners

Accepted Answer

A) are subject to double taxation. 
B) benefit from several loopholes. 
C) have no particular advantages in the tax system. 
D) must pay tax on the "income" of living in a house. 
A) are subject to double taxation. 
B) benefit from several loopholes. 
C) have no particular advantages in the tax system. 
D) must pay tax on the "income" of living in a house.

Exam 17: Taxation and Resource Allocation

Explain the concept of efficiency as it relates to taxation.

If a tax is regressive, the average tax rate

Economists generally think that the ____ tax is among the best ways to raise revenue.

An excess burden is present when taxpayers alter their behavior on account of taxation.

Social Security payroll taxes are examples of

The benefits principle states that the users of a service should pay for that service.

If Jenny's taxes are $10,000 when she earns $50,000 and $12,000 when she earns $60,000, then

The share of GDP taken by taxes is considerably higher in the United States than in other countries.

Which is least likely to help in understanding who bears the tax incidence?

State governments' main source of revenue is

Since World War II, the share of corporate income tax collections in total federal revenue has been

Compared to other countries, the U.S. federal government relies

Most loopholes in the income tax system

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

Who actually pays an excise tax

An excise tax is

The courts in some states have declared the financing of public schools by local property taxes unconstitutional because

Figure 18-1 According to the graph in Figure 18-1, the tax is which of the following?

A tax has an excess burden whenever

Homeowners

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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