Question 1

If a person is taxed $100 on an income of $1,000, taxed $180 on an income of $2,000, and taxed $220 on an income of $3,000, this person is paying a:

Accepted Answer

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

Question 2

According to public choice theory, which of the following is not a likely reason that government policy might benefit only a narrow interest group?

Accepted Answer

A)  If the benefits to the narrow interest group are relatively large, they have an incentive to invest a lot of money and effort in lobbying government. 
B)  If the costs of this policy are spread out among the general population, and are a very small burden for anyone person, then those paying the costs have little incentive to organize opposition. 
C)  The additional rewards of a policy to the general population outweigh the additional costs that are imposed on a narrow interest group. 
D)  Politicians follow their own self-interest and seek to maximize their reelection chances rather than promoting the best interests of society. 
A)  If the benefits to the narrow interest group are relatively large, they have an incentive to invest a lot of money and effort in lobbying government. 
B)  If the costs of this policy are spread out among the general population, and are a very small burden for anyone person, then those paying the costs have little incentive to organize opposition. 
C)  The additional rewards of a policy to the general population outweigh the additional costs that are imposed on a narrow interest group. 
D)  Politicians follow their own self-interest and seek to maximize their reelection chances rather than promoting the best interests of society. C

Question 3

Which of the following lists tax revenue sources from greatest to least?

Accepted Answer

A)  individual income taxes, social insurance taxes, corporate income taxes, excise and other taxes 
B)  corporate income taxes, social insurance taxes, individual income taxes, excise and other taxes 
C)  individual income taxes, corporate income taxes, social insurance taxes, excise and other taxes 
D)  social insurance taxes, excise and other taxes, individual income taxes, corporate income taxes 
A)  individual income taxes, social insurance taxes, corporate income taxes, excise and other taxes 
B)  corporate income taxes, social insurance taxes, individual income taxes, excise and other taxes 
C)  individual income taxes, corporate income taxes, social insurance taxes, excise and other taxes 
D)  social insurance taxes, excise and other taxes, individual income taxes, corporate income taxes A

Question 4

The benefits-received principle of taxation is most evident in:

Accepted Answer

A)  progressive tax rates. 
B)  excise taxes on gasoline. 
C)  the personal income tax. 
D)  the corporate income tax. 
A)  progressive tax rates. 
B)  excise taxes on gasoline. 
C)  the personal income tax. 
D)  the corporate income tax.

Question 5

Which of the following represents the basic principle of public choice theory?

Accepted Answer

A)  Politicians act consistently in the public's interest. 
B)  Politicians follow their own self-interest and seek to maximize their reelection chances, rather than promote the best interests of society. 
C)  Politicians act in the public interest once they are elected, but follow their own self-interest and seek to maximize their reelection chances during a political campaign. 
D)  Politicians have an incentive to be cost-conscious and creative because they face the same type of profit motive as producers. 
A)  Politicians act consistently in the public's interest. 
B)  Politicians follow their own self-interest and seek to maximize their reelection chances, rather than promote the best interests of society. 
C)  Politicians act in the public interest once they are elected, but follow their own self-interest and seek to maximize their reelection chances during a political campaign. 
D)  Politicians have an incentive to be cost-conscious and creative because they face the same type of profit motive as producers.

Question 6

The choice of a voter to remain uninformed because the marginal cost of obtaining information is greater than the marginal benefit from obtaining knowledge is called:

Accepted Answer

A)  irrational ignorance. 
B)  rational ignorance. 
C)  collective interest. 
D)  choice. 
A)  irrational ignorance. 
B)  rational ignorance. 
C)  collective interest. 
D)  choice.

Question 7

"It would be an undue hardship to require people whose income is below $15,000 per year to pay income taxes." This statement reflects which of the following principles for a tax?

Accepted Answer

A)  benefits-received 
B)  inexpensive-to-collect 
C)  ability-to-pay 
D)  fairness of contribution 
A)  benefits-received 
B)  inexpensive-to-collect 
C)  ability-to-pay 
D)  fairness of contribution

Question 8

Suppose fairness is defined as those with the highest incomes can afford to pay a greater proportion of their income in taxes. Then which of the following taxation systems would be consistent with this notion of fairness?

Accepted Answer

A)  A true flax tax. 
B)  A flat sales tax on consumption purchases. 
C)  A progressive tax on income. 
D)  A fixed federal tax of $5,000 that everyone pays regardless of income status. 
A)  A true flax tax. 
B)  A flat sales tax on consumption purchases. 
C)  A progressive tax on income. 
D)  A fixed federal tax of $5,000 that everyone pays regardless of income status.

Question 9

Income security expenditures include

Accepted Answer

A)  Medicare, Social Security, and unemployment compensation. 
B)  Social Security and disability benefits, but not Medicare. 
C)  unemployment compensation, disability benefits, and Medicare, but not Social Security. 
D)  transfer payments to the disadvantaged, but not transfer payments to the elderly. 
A)  Medicare, Social Security, and unemployment compensation. 
B)  Social Security and disability benefits, but not Medicare. 
C)  unemployment compensation, disability benefits, and Medicare, but not Social Security. 
D)  transfer payments to the disadvantaged, but not transfer payments to the elderly.

Question 10

Which of the following statements is not  correct regarding taxes?

Accepted Answer

A)  The largest source of state and local governments tax revenue is sales and excise taxes. 
B)  The largest source of federal government tax revenue is individual income taxes. 
C)  A sales tax on food is a regressive tax. 
D)  A proportional tax is equal to a fixed dollar amount. 
A)  The largest source of state and local governments tax revenue is sales and excise taxes. 
B)  The largest source of federal government tax revenue is individual income taxes. 
C)  A sales tax on food is a regressive tax. 
D)  A proportional tax is equal to a fixed dollar amount.

Question 11

Exhibit 12-4 Marginal tax rate lines
 
In Exhibit 12-4, line C represents a(n):

Accepted Answer

A)  regressive tax. 
B)  progressive tax. 
C)  proportional tax. 
D)  ability-to-pay tax. 
A)  regressive tax. 
B)  progressive tax. 
C)  proportional tax. 
D)  ability-to-pay tax.

Question 12

A tax is regressive if it collects a:

Accepted Answer

A)  larger amount as income rises. 
B)  constant amount as income rises. 
C)  smaller fraction of income as income falls. 
D)  smaller fraction of income as income rises. 
A)  larger amount as income rises. 
B)  constant amount as income rises. 
C)  smaller fraction of income as income falls. 
D)  smaller fraction of income as income rises.

Question 13

The study of the decision-making process of government is the study of:

Accepted Answer

A)  Keynesian economics. 
B)  public choice theory. 
C)  rational expectations theory. 
D)  social economics. 
A)  Keynesian economics. 
B)  public choice theory. 
C)  rational expectations theory. 
D)  social economics.

Question 14

Gina Smith and Mariel Jones are both running for the same seat on the town council. Pat Johnson is voting in the town council election. Pat decides to read each candidates one-paragraph statement, but did not attend the town debate to listen to the candidates explain their positions in detail. Which of the following best describes Pat's actions?

Accepted Answer

A)  Pat displays the special-interest group effect; he figures the extra cost to him of any pet projects of either candidate will be small so he is not concerned. 
B)  Pat displays the shortsightedness effect; the long-run benefits of policies will exceed the short-run costs. 
C)  Pat is a victim of bureaucratic inefficiency; the candidates failed to provide sufficient information about their positions. 
D)  Pat displays rational voter ignorance; the perceived extra effort to be better informed exceeds the marginal benefit of knowing more about the candidates. 
A)  Pat displays the special-interest group effect; he figures the extra cost to him of any pet projects of either candidate will be small so he is not concerned. 
B)  Pat displays the shortsightedness effect; the long-run benefits of policies will exceed the short-run costs. 
C)  Pat is a victim of bureaucratic inefficiency; the candidates failed to provide sufficient information about their positions. 
D)  Pat displays rational voter ignorance; the perceived extra effort to be better informed exceeds the marginal benefit of knowing more about the candidates.

Question 15

Exhibit 12-3 Income for two persons
 
In Exhibit 12-3, if the income tax system is currently proportional, we know that:

Accepted Answer

A)  Meredith would probably prefer a progressive income tax system while Hillary would probably prefer a regressive income tax system. 
B)  Meredith and Hillary would both probably prefer a regressive income tax system. 
C)  Meredith and Hillary would both probably prefer a progressive income tax system. 
D)  Meredith would probably prefer a regressive income tax system while Hillary would probably prefer a progressive income tax system. 
A)  Meredith would probably prefer a progressive income tax system while Hillary would probably prefer a regressive income tax system. 
B)  Meredith and Hillary would both probably prefer a regressive income tax system. 
C)  Meredith and Hillary would both probably prefer a progressive income tax system. 
D)  Meredith would probably prefer a regressive income tax system while Hillary would probably prefer a progressive income tax system.

Question 16

Majority-rule voting, special-interest group effects, rational voter ignorance, bureaucratic inefficiency, and the shortsightedness effect

Accepted Answer

A)  reflect irrational behavior by the general population. 
B)  are public choice theories that explain why the public sector might fail to achieve efficient policies. 
C)  explain why democratic societies need elected officials. 
D)  are the causes of efficient public policy decisions. 
A)  reflect irrational behavior by the general population. 
B)  are public choice theories that explain why the public sector might fail to achieve efficient policies. 
C)  explain why democratic societies need elected officials. 
D)  are the causes of efficient public policy decisions.

Question 17

Exhibit 12-1 Income for two persons
 
In Exhibit 12-1, if the income tax system is progressive, then:

Accepted Answer

A)  Elaine and Daniel will face the same tax rate and will have tax bills the same size. 
B)  Elaine and Daniel will face the same tax rate but have tax bills that are different sizes. 
C)  Elaine will face a higher tax rate and will have a larger tax bill than Daniel. 
D)  Elaine will face a lower tax rate and will have a smaller tax bill than Daniel. 
A)  Elaine and Daniel will face the same tax rate and will have tax bills the same size. 
B)  Elaine and Daniel will face the same tax rate but have tax bills that are different sizes. 
C)  Elaine will face a higher tax rate and will have a larger tax bill than Daniel. 
D)  Elaine will face a lower tax rate and will have a smaller tax bill than Daniel.

Question 18

Which of the following statements best answers the question of how burdensome overall taxation is in the United States?

Accepted Answer

A)  An excise tax is a sales tax on a particular good or service. 
B)  The largest source of revenue for the federal government is individual income taxes. 
C)  Countries that tax more heavily are expected to provide more public services. 
D)  By international standards, U.S. citizens are among the most lightly taxed people in the industrialized world. 
A)  An excise tax is a sales tax on a particular good or service. 
B)  The largest source of revenue for the federal government is individual income taxes. 
C)  Countries that tax more heavily are expected to provide more public services. 
D)  By international standards, U.S. citizens are among the most lightly taxed people in the industrialized world.

Question 19

Which of the following countries devote the smallest percentage of its GDP to taxes?

Accepted Answer

A)  Norway 
B)  Sweden 
C)  France 
D)  United States 
A)  Norway 
B)  Sweden 
C)  France 
D)  United States

Question 20

Which of the following is the largest source of revenue for the federal government?

Accepted Answer

A)  corporate income tax 
B)  payroll tax 
C)  personal income tax 
D)  user charges 
A)  corporate income tax 
B)  payroll tax 
C)  personal income tax 
D)  user charges

Exam 22: The Public Sector

If a person is taxed $100 on an income of $1,000, taxed $180 on an income of $2,000, and taxed $220 on an income of $3,000, this person is paying a:

According to public choice theory, which of the following is not a likely reason that government policy might benefit only a narrow interest group?

Which of the following lists tax revenue sources from greatest to least?

The benefits-received principle of taxation is most evident in:

Which of the following represents the basic principle of public choice theory?

The choice of a voter to remain uninformed because the marginal cost of obtaining information is greater than the marginal benefit from obtaining knowledge is called:

"It would be an undue hardship to require people whose income is below $15,000 per year to pay income taxes." This statement reflects which of the following principles for a tax?

Suppose fairness is defined as those with the highest incomes can afford to pay a greater proportion of their income in taxes. Then which of the following taxation systems would be consistent with this notion of fairness?

Income security expenditures include

Which of the following statements is not correct regarding taxes?

Exhibit 12-4 Marginal tax rate lines In Exhibit 12-4, line C represents a(n):

A tax is regressive if it collects a:

The study of the decision-making process of government is the study of:

Exhibit 12-3 Income for two persons In Exhibit 12-3, if the income tax system is currently proportional, we know that:

Majority-rule voting, special-interest group effects, rational voter ignorance, bureaucratic inefficiency, and the shortsightedness effect

Exhibit 12-1 Income for two persons In Exhibit 12-1, if the income tax system is progressive, then:

Which of the following statements best answers the question of how burdensome overall taxation is in the United States?

Which of the following countries devote the smallest percentage of its GDP to taxes?

Which of the following is the largest source of revenue for the federal government?

Introducing the Economic Way of Thinking

Production Possibilities Opportunity Cost and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution Poverty and Discrimination

Antitrust and Regulation

Environmental Economics

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Aggregate Demand and Supply

Fiscal Policy

Federal Deficits Surpluses and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less Developed Countries

Understanding Direct and Inverse Relationships between Variables

Filters