Question 1

A state tax assessed specifically on cigarettes is an example of

Accepted Answer

A) an excise tax. 
B) a consumption tax. 
C) a social tax. 
D) a tariff. 
A) an excise tax. 
B) a consumption tax. 
C) a social tax. 
D) a tariff.

Question 2

A government wishing to maximize its tax revenues should

Accepted Answer

A) always assess the highest possible tax rate. 
B) always assess the lowest possible tax rate. 
C) determine the highest possible tax rate and then back it down by exactly 4 percentage points. 
D) push tax rates up to the point where revenues peak, but raise the tax rate no farther. 
A) always assess the highest possible tax rate. 
B) always assess the lowest possible tax rate. 
C) determine the highest possible tax rate and then back it down by exactly 4 percentage points. 
D) push tax rates up to the point where revenues peak, but raise the tax rate no farther.

Question 3

-Using the above figure, which of the lines in the above diagram represents a proportional tax?

Accepted Answer

A) A 
B) B 
C) C 
D) none of them 
A) A 
B) B 
C) C 
D) none of them

Question 4

How does the imposition of an excise tax on a good affect its market equilibrium?

Accepted Answer

A) Equilibrium quantity decreases, and equilibrium price decreases. 
B) Equilibrium quantity decreases, and equilibrium price increases. 
C) Equilibrium quantity increases, and equilibrium price decreases. 
D) Equilibrium quantity increases, and equilibrium price increases 
A) Equilibrium quantity decreases, and equilibrium price decreases. 
B) Equilibrium quantity decreases, and equilibrium price increases. 
C) Equilibrium quantity increases, and equilibrium price decreases. 
D) Equilibrium quantity increases, and equilibrium price increases

Question 5

The corporate income tax in the United States

Accepted Answer

A) excludes dividends paid out. 
B) only taxes retained earnings. 
C) results in individuals' being doubly taxed on corporate earnings. 
D) does not apply to profits earned on exports. 
A) excludes dividends paid out. 
B) only taxes retained earnings. 
C) results in individuals' being doubly taxed on corporate earnings. 
D) does not apply to profits earned on exports.

Question 6

The Social Security system was founded

Accepted Answer

A) during the Civil War, to pay pensions for veterans. 
B) during the last years of the nineteenth century, as people who had once depended on having a family farm found themselves without a means of support. 
C) as the United States began to recover from the Great Depression. 
D) in response to concerns that arose during the high inflation of the 1970s. 
A) during the Civil War, to pay pensions for veterans. 
B) during the last years of the nineteenth century, as people who had once depended on having a family farm found themselves without a means of support. 
C) as the United States began to recover from the Great Depression. 
D) in response to concerns that arose during the high inflation of the 1970s.

Question 7

One criticism of the corporate income tax is that

Accepted Answer

A) it is too regressive. 
B) it is too flat. 
C) it is so complex to administer that corporate income taxes are rarely collected by the Internal Revenue Service. 
D) a portion of the corporations' tax burden is passed on to consumers via higher prices for goods and services and to workers via lower wages. 
A) it is too regressive. 
B) it is too flat. 
C) it is so complex to administer that corporate income taxes are rarely collected by the Internal Revenue Service. 
D) a portion of the corporations' tax burden is passed on to consumers via higher prices for goods and services and to workers via lower wages.

Question 8

Corporate profits are taxed twice because

Accepted Answer

A) taxes are collected on profits before profits are distributed to shareholders. 
B) the government wants to minimize the amount of tax paid on capital gains. 
C) it is economically efficient to reduce the amount of retained earnings. 
D) capital gains are not indexed to the rate of inflation. 
A) taxes are collected on profits before profits are distributed to shareholders. 
B) the government wants to minimize the amount of tax paid on capital gains. 
C) it is economically efficient to reduce the amount of retained earnings. 
D) capital gains are not indexed to the rate of inflation.

Question 9

A ad valorem sales tax can be thought of as

Accepted Answer

A) a proportional tax. 
B) not part of the tax base. 
C) a revenue source for county governments only. 
D) none of the above. 
A) a proportional tax. 
B) not part of the tax base. 
C) a revenue source for county governments only. 
D) none of the above.

Question 10

A local government currently has a tax base of $4 billion and a tax rate of 5 percent. If the tax rate is increased to 6 percent, the tax base will decrease to $3.5 billion. If the goal is to maximize tax revenues the tax rate should be

Accepted Answer

A) lowered below 5 percent. 
B) kept at 5 percent. 
C) raised to 6 percent. 
D) abolished. 
A) lowered below 5 percent. 
B) kept at 5 percent. 
C) raised to 6 percent. 
D) abolished.

Question 11

Ad valorem taxes

Accepted Answer

A) are not used in the United States. 
B) are assessed as a percentage of a good's price. 
C) are based on income levels. 
D) are applied only to imports. 
A) are not used in the United States. 
B) are assessed as a percentage of a good's price. 
C) are based on income levels. 
D) are applied only to imports.

Question 12

-Refer to the above figure. An excise tax of $0.50 was imposed on this good. From the figure we can see that the

Accepted Answer

A) producer will bear most of the tax. 
B) consumer will bear most of the tax. 
C) consumer and producer will share the tax. 
D) amount of the tax collected is less than $0.50. 
A) producer will bear most of the tax. 
B) consumer will bear most of the tax. 
C) consumer and producer will share the tax. 
D) amount of the tax collected is less than $0.50.

Question 13

-Refer to the above figure. A unit tax has been placed on the good. The producer pays what amount of the tax?

Accepted Answer

A) none of the tax 
B) P₂ - P₀ 
C) P₂ - P₁ 
D) P₁ - P₀ 
A) none of the tax 
B) P₂ - P₀ 
C) P₂ - P₁ 
D) P₁ - P₀

Question 14

The three possible sources of government funding include

Accepted Answer

A) explicit fees, taxes, and borrowing. 
B) international income, personal income taxes, and export taxes. 
C) foreign aid, revenues, and implicit fees. 
D) None of the above are correct. 
A) explicit fees, taxes, and borrowing. 
B) international income, personal income taxes, and export taxes. 
C) foreign aid, revenues, and implicit fees. 
D) None of the above are correct.

Question 15

The distributions of tax burdens among various groups in society is known as

Accepted Answer

A) a proportional tax. 
B) a progressive tax. 
C) a regressive tax. 
D) tax incidence. 
A) a proportional tax. 
B) a progressive tax. 
C) a regressive tax. 
D) tax incidence.

Question 16

The imposition of a tax on a product

Accepted Answer

A) shifts the supply curve to the right. 
B) shifts the demand curve to the right. 
C) shifts both the supply and the demand curve to the right. 
D) shifts the supply curve to the left. 
A) shifts the supply curve to the right. 
B) shifts the demand curve to the right. 
C) shifts both the supply and the demand curve to the right. 
D) shifts the supply curve to the left.

Question 17

Of the following, which is the largest source of government funds in the long run?

Accepted Answer

A) government borrowing 
B) government transfers 
C) user fees 
D) taxation 
A) government borrowing 
B) government transfers 
C) user fees 
D) taxation

Question 18

A 5 percent tax is going to be applied to a $100,000 tax base. What can be said about the revenue collected assuming dynamic tax analysis?

Accepted Answer

A) The total revenue will be zero. 
B) The total revenue will be between $0 and $5,000. 
C) The total revenue will be $5,000. 
D) There is not enough information to determine what revenues will equal. 
A) The total revenue will be zero. 
B) The total revenue will be between $0 and $5,000. 
C) The total revenue will be $5,000. 
D) There is not enough information to determine what revenues will equal.

Question 19

-Refer to the above figure. A unit tax of $2 has been placed on the good. Which of the following statements is TRUE about the vertical distance between S₁ and S₂?

Accepted Answer

A) The distance is less than $2. 
B) The distance is $2. 
C) The distance is more than $2. 
D) The distance cannot be determined with the information given. 
A) The distance is less than $2. 
B) The distance is $2. 
C) The distance is more than $2. 
D) The distance cannot be determined with the information given.

Question 20

Sales taxes are

Accepted Answer

A) assessed on the prices paid on a large set of goods and services. 
B) levied on purchases of a particular good or service. 
C) based on each individual taxpayer's income level. 
D) collected only by the U.S. government. 
A) assessed on the prices paid on a large set of goods and services. 
B) levied on purchases of a particular good or service. 
C) based on each individual taxpayer's income level. 
D) collected only by the U.S. government.

A state tax assessed specifically on cigarettes is an example of

A government wishing to maximize its tax revenues should

-Using the above figure, which of the lines in the above diagram represents a proportional tax?

How does the imposition of an excise tax on a good affect its market equilibrium?

The corporate income tax in the United States

The Social Security system was founded

One criticism of the corporate income tax is that

Corporate profits are taxed twice because

A ad valorem sales tax can be thought of as

A local government currently has a tax base of $4 billion and a tax rate of 5 percent. If the tax rate is increased to 6 percent, the tax base will decrease to $3.5 billion. If the goal is to maximize tax revenues the tax rate should be

Ad valorem taxes

-Refer to the above figure. An excise tax of $0.50 was imposed on this good. From the figure we can see that the

-Refer to the above figure. A unit tax has been placed on the good. The producer pays what amount of the tax?

The three possible sources of government funding include

The distributions of tax burdens among various groups in society is known as

The imposition of a tax on a product

Of the following, which is the largest source of government funds in the long run?

A 5 percent tax is going to be applied to a $100,000 tax base. What can be said about the revenue collected assuming dynamic tax analysis?

-Refer to the above figure. A unit tax of $2 has been placed on the good. Which of the following statements is TRUE about the vertical distance between S₁ and S₂?

Sales taxes are

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

Exam 6: Funding the Public Sector

A state tax assessed specifically on cigarettes is an example of

A government wishing to maximize its tax revenues should

-Using the above figure, which of the lines in the above diagram represents a proportional tax?

How does the imposition of an excise tax on a good affect its market equilibrium?

The corporate income tax in the United States

The Social Security system was founded

One criticism of the corporate income tax is that

Corporate profits are taxed twice because

A ad valorem sales tax can be thought of as

A local government currently has a tax base of $4 billion and a tax rate of 5 percent. If the tax rate is increased to 6 percent, the tax base will decrease to $3.5 billion. If the goal is to maximize tax revenues the tax rate should be

Ad valorem taxes

-Refer to the above figure. An excise tax of $0.50 was imposed on this good. From the figure we can see that the

-Refer to the above figure. A unit tax has been placed on the good. The producer pays what amount of the tax?

The three possible sources of government funding include

The distributions of tax burdens among various groups in society is known as

The imposition of a tax on a product

Of the following, which is the largest source of government funds in the long run?

A 5 percent tax is going to be applied to a $100,000 tax base. What can be said about the revenue collected assuming dynamic tax analysis?

-Refer to the above figure. A unit tax of $2 has been placed on the good. Which of the following statements is TRUE about the vertical distance between S₁ and S₂?

Sales taxes are

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters