Question 1

"He who pays a tax should receive the benefit from the expenditure financed by the tax." This statement reflects which of the following principles for a tax?

Accepted Answer

A)  Fairness of contribution. 
B)  Ability-to-pay. 
C)  Benefits-received. 
D)  Inexperience-to-collect. 
A)  Fairness of contribution. 
B)  Ability-to-pay. 
C)  Benefits-received. 
D)  Inexperience-to-collect. C

Question 2

Some cities finance their airports with a departure tax: every person leaving the city by plane is charged a small fixed dollar amount that is used to help pay for building and running the airport.The departure tax follows the:

Accepted Answer

A)  benefits-received principle. 
B)  ability-to-pay principle. 
C)  flat-rate taxation principle. 
D)  public-choice principle. 
A)  benefits-received principle. 
B)  ability-to-pay principle. 
C)  flat-rate taxation principle. 
D)  public-choice principle. A

Question 3

Exhibit 16-3 Income for two persons
  
-In Exhibit 16-3,if the income tax system is currently proportional,we know that:

Accepted Answer

A)  Meredith has a larger tax bill than Hillary, although they pay the same tax rate. 
B)  Meredith has a larger tax bill than Hillary and pays a higher tax rate. 
C)  Hillary has a larger tax bill than Meredith, although they pay the same tax rate. 
D)  Hillary has a larger tax bill than Meredith and pays a higher tax rate. 
E)  Meredith and Hillary's tax bills are equal. 
A)  Meredith has a larger tax bill than Hillary, although they pay the same tax rate. 
B)  Meredith has a larger tax bill than Hillary and pays a higher tax rate. 
C)  Hillary has a larger tax bill than Meredith, although they pay the same tax rate. 
D)  Hillary has a larger tax bill than Meredith and pays a higher tax rate. 
E)  Meredith and Hillary's tax bills are equal. A

Question 4

Consider two people,Sandy Ross,who earns $25,000,and Gary Belcher,who earns $50,000.If the flat-tax rate is 20 percent,then:

Accepted Answer

A)  the government collects a total of $20,000. 
B)  Gary pays twice the tax amount Sandy pays. 
C)  Gary pays three times the tax amount Sandy pays. 
D)  Gary and Sandy pay exactly the same tax amount. 
E)  Gary pays $15,000 in taxes. 
A)  the government collects a total of $20,000. 
B)  Gary pays twice the tax amount Sandy pays. 
C)  Gary pays three times the tax amount Sandy pays. 
D)  Gary and Sandy pay exactly the same tax amount. 
E)  Gary pays $15,000 in taxes.

Question 5

Which of the following categories accounted for the third largest percentage of total federal government expenditures?

Accepted Answer

A)  Education and health. 
B)  National defense. 
C)  Income security. 
D)  Interest on the national debt. 
A)  Education and health. 
B)  National defense. 
C)  Income security. 
D)  Interest on the national debt.

Question 6

Which of the following categories accounted for the lowest percent of the total federal government expenditures in recent years?

Accepted Answer

A)  Income security. 
B)  National defense. 
C)  Education and health. 
D)  Interest on the national debt. 
A)  Income security. 
B)  National defense. 
C)  Education and health. 
D)  Interest on the national debt.

Question 7

Rational ignorance might explain low voter turnout because people apply marginal analysis to voting.

Accepted Answer

A) True 
 B)False

Question 8

Taxes in the United States as a percentage of GDP are among the highest in the world.

Accepted Answer

A) True 
 B)False

Question 9

Cost-benefit analysis can be applied to individual decision-making and public choice theory.

Accepted Answer

A) True 
 B)False

Question 10

Jose pays a tax of $24,000 on his income of $60,000,while Richard pays a tax of $3,000 on his income of $30,000.This tax is:

Accepted Answer

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

Question 11

The results of majority voting sometimes,but not always,agree with the results of benefit-cost analysis.

Accepted Answer

A) True 
 B)False

Question 12

A tax where wealthy people pay a larger percentage of their income than poor people is known as a(n):

Accepted Answer

A)  excise tax. 
B)  flat tax. 
C)  proportional tax. 
D)  progressive tax. 
E)  regressive tax. 
A)  excise tax. 
B)  flat tax. 
C)  proportional tax. 
D)  progressive tax. 
E)  regressive tax.

Question 13

Which of the following categories accounted for the largest percentage of total federal government expenditures in recent years?

Accepted Answer

A)  Income security. 
B)  National defense. 
C)  Education and health. 
D)  Interest on the national debt. 
A)  Income security. 
B)  National defense. 
C)  Education and health. 
D)  Interest on the national debt.

Question 14

Which of the following statements is true?

Accepted Answer

A)  Sales, excise, and flat-rate taxes violate the ability-to-pay principle of taxation fairness because each results in a greater burden on the poor than the rich. 
B)  Government failure may occur if voters are rationally ignorant. 
C)  Government failure may occur because of special-interest group political pressure. 
D)  All of the above. 
A)  Sales, excise, and flat-rate taxes violate the ability-to-pay principle of taxation fairness because each results in a greater burden on the poor than the rich. 
B)  Government failure may occur if voters are rationally ignorant. 
C)  Government failure may occur because of special-interest group political pressure. 
D)  All of the above.

Question 15

Suppose a person with an income of $20,000 pays a tax of $2,000.If the tax is progressive,then how large of a tax will a person with an income of $40,000 pay?

Accepted Answer

A)  Exactly $2,000. 
B)  Between $2,000 and $4,000. 
C)  Exactly $4,000. 
D)  More than $4,000. 
A)  Exactly $2,000. 
B)  Between $2,000 and $4,000. 
C)  Exactly $4,000. 
D)  More than $4,000.

Question 16

Public choice theory argues that one reason for rational voter ignorance is the indivisibility of public service.

Accepted Answer

A) True 
 B)False

Question 17

Since the 1950s,total private sector expenditures in the United States fell by half to 50 percent of GDP.

Accepted Answer

A) True 
 B)False

Question 18

Currently,total government expenditures in the United States:

Accepted Answer

A)  are over one third of GDP. 
B)  fell by half, to 10 percent of GDP. 
C)  nearly doubled to one half of GDP. 
D)  nearly tripled to about 60 percent of GDP. 
A)  are over one third of GDP. 
B)  fell by half, to 10 percent of GDP. 
C)  nearly doubled to one half of GDP. 
D)  nearly tripled to about 60 percent of GDP.

Question 19

After 1970,the share of federal spending allocated to national defense:

Accepted Answer

A)  declined sharply, while the share allocated to income security increased substantially. 
B)  rose sharply, while the share allocated to income security declined substantially. 
C)  was relatively constant, while the share allocated to income security declined modestly. 
D)  declined modestly, while the share allocated to income security was relatively constant. 
A)  declined sharply, while the share allocated to income security increased substantially. 
B)  rose sharply, while the share allocated to income security declined substantially. 
C)  was relatively constant, while the share allocated to income security declined modestly. 
D)  declined modestly, while the share allocated to income security was relatively constant.

Question 20

Which of the following offers theories to explain why the government,like the private sector,may also "fail"?

Accepted Answer

A)  Social economics. 
B)  Public choice theory. 
C)  Rational expectations theory. 
D)  Keynesian economics. 
A)  Social economics. 
B)  Public choice theory. 
C)  Rational expectations theory. 
D)  Keynesian economics.

Exam 16: The Public Sector

"He who pays a tax should receive the benefit from the expenditure financed by the tax." This statement reflects which of the following principles for a tax?

Some cities finance their airports with a departure tax: every person leaving the city by plane is charged a small fixed dollar amount that is used to help pay for building and running the airport.The departure tax follows the:

Exhibit 16-3 Income for two persons -In Exhibit 16-3,if the income tax system is currently proportional,we know that:

Consider two people,Sandy Ross,who earns $25,000,and Gary Belcher,who earns $50,000.If the flat-tax rate is 20 percent,then:

Which of the following categories accounted for the third largest percentage of total federal government expenditures?

Which of the following categories accounted for the lowest percent of the total federal government expenditures in recent years?

Rational ignorance might explain low voter turnout because people apply marginal analysis to voting.

Taxes in the United States as a percentage of GDP are among the highest in the world.

Cost-benefit analysis can be applied to individual decision-making and public choice theory.

Jose pays a tax of $24,000 on his income of $60,000,while Richard pays a tax of $3,000 on his income of $30,000.This tax is:

The results of majority voting sometimes,but not always,agree with the results of benefit-cost analysis.

A tax where wealthy people pay a larger percentage of their income than poor people is known as a(n):

Which of the following categories accounted for the largest percentage of total federal government expenditures in recent years?

Which of the following statements is true?

Suppose a person with an income of $20,000 pays a tax of $2,000.If the tax is progressive,then how large of a tax will a person with an income of $40,000 pay?

Public choice theory argues that one reason for rational voter ignorance is the indivisibility of public service.

Since the 1950s,total private sector expenditures in the United States fell by half to 50 percent of GDP.

Currently,total government expenditures in the United States:

After 1970,the share of federal spending allocated to national defense:

Which of the following offers theories to explain why the government,like the private sector,may also "fail"?

Introducing the Economic Way of Thinking

A: Appendix: Applying Graphs to Economics

Production Possibilities,Opportunity Cost,and Economic Growth

Part 1: Market Demand and Supply

Part 2: Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

A: Appendix: The Self-Correcting Aggregate Demand and Supply Model

Fiscal Policy

Federal Deficits,Surpluses,and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

A: Appendix: Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Filters