Question 1

-Refer to the above figure. A unit tax has been placed on the good. What is the total amount of the tax?

Accepted Answer

A)  0 
B)    -   
C)    -   
D)    -   
A)  0 
B)    -   
C)    -   
D)    -   B

Question 2

When a unit tax of $0.50 is levied on a product

Accepted Answer

A)  the entire $0.50 is paid by the consumer. 
B)  the entire $0.50 is paid by the producer. 
C)  both the consumer and producer pay $0.50 each. 
D)  the consumer pays part of the $0.50 and the producer pays the rest. 
A)  the entire $0.50 is paid by the consumer. 
B)  the entire $0.50 is paid by the producer. 
C)  both the consumer and producer pay $0.50 each. 
D)  the consumer pays part of the $0.50 and the producer pays the rest. D

Question 3

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. A

Question 4

If the marginal tax rate is less than the average tax rate, the tax system is

Accepted Answer

A)  progressive. 
B)  proportional. 
C)  regressive. 
D)  liberal. 
A)  progressive. 
B)  proportional. 
C)  regressive. 
D)  liberal.

Question 5

The federal income tax code of the United States is

Accepted Answer

A)  progressive. 
B)  proportional. 
C)  regressive. 
D)  progressive for individuals but proportional for married couples. 
A)  progressive. 
B)  proportional. 
C)  regressive. 
D)  progressive for individuals but proportional for married couples.

Question 6

A tax rate system characterized by higher marginal tax rates as income increases is known as

Accepted Answer

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

Question 7

The government imposes a unit excise tax on bubble gum. What happens as a result?

Accepted Answer

A)  The equilibrium quantity of bubble gum increases. 
B)  At the original market price, there will be a bubble gum shortage. 
C)  At the original market price, there is a bubble gum shortage and so price rises. 
D)  There will be no change in either the market price or equilibrium quantity as long as the excise tax rate is 5 percent or less. 
A)  The equilibrium quantity of bubble gum increases. 
B)  At the original market price, there will be a bubble gum shortage. 
C)  At the original market price, there is a bubble gum shortage and so price rises. 
D)  There will be no change in either the market price or equilibrium quantity as long as the excise tax rate is 5 percent or less.

Question 8

A unit tax

Accepted Answer

A)  is based on the value of the good being sold. 
B)  is a constant tax assessed on each unit of a good sold. 
C)  is the primary tax studied in dynamic tax analysis. 
D)  does not influence equilibrium price and quantity. 
A)  is based on the value of the good being sold. 
B)  is a constant tax assessed on each unit of a good sold. 
C)  is the primary tax studied in dynamic tax analysis. 
D)  does not influence equilibrium price and quantity.

Question 9

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 10

Which of the following are considered ad valorem taxes?

Accepted Answer

A)  taxes assessed by charging a rate equal to a percentage of an item's price 
B)  taxes assessed by charging a flat amount per unit purchased 
C)  taxes based on the amount of debt that the government must repay 
D)  taxes based on the amount of spending the government will undertake 
A)  taxes assessed by charging a rate equal to a percentage of an item's price 
B)  taxes assessed by charging a flat amount per unit purchased 
C)  taxes based on the amount of debt that the government must repay 
D)  taxes based on the amount of spending the government will undertake

Question 11

-Refer to the above figures. Which panel represents the expected relationship between tax revenue and the sales tax rate if dynamic tax analysis is used?

Accepted Answer

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

Question 12

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 13

In what type of analysis could an increase in the tax rate lead to a decrease in tax revenues?

Accepted Answer

A)  Ad valorem taxation 
B)  Excise taxation 
C)  Dynamic tax analysis 
D)  Static tax analysis 
A)  Ad valorem taxation 
B)  Excise taxation 
C)  Dynamic tax analysis 
D)  Static tax analysis

Question 14

-The demand and supply of a product is given in the above table. A unit tax of $2 is imposed on the product. The equilibrium quantity for this product after the tax is imposed is equal to

Accepted Answer

A)  30 units. 
B)  25 units. 
C)  20 units. 
D)  15 units. 
A)  30 units. 
B)  25 units. 
C)  20 units. 
D)  15 units.

Question 15

A typical capital gain is experienced by

Accepted Answer

A)  selling stock or a mutual fund. 
B)  only rich people. 
C)  only investment bankers. 
D)  all shareholders in the United States. 
A)  selling stock or a mutual fund. 
B)  only rich people. 
C)  only investment bankers. 
D)  all shareholders in the United States.

Question 16

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

Accepted Answer

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

Question 17

Suppose the income tax rate is 0 percent on the first $10,000; 10 percent on the next $20,000; 20 percent on the next $20,000; 30 percent on the next $20,000; and 40 percent on all income above $70,000. Family A has income of $100,000 while Family B has income of $40,000. The marginal tax rates faced by the two families are

Accepted Answer

A)  40 percent on A and 10 percent on B. 
B)  40 percent on A and 20 percent on B. 
C)  30 percent on A and 20 percent on B. 
D)  30 percent on A and 30 percent on B. 
A)  40 percent on A and 10 percent on B. 
B)  40 percent on A and 20 percent on B. 
C)  30 percent on A and 20 percent on B. 
D)  30 percent on A and 30 percent on B.

Question 18

The marginal tax rate is

Accepted Answer

A)  total tax due/change in taxable income. 
B)  total tax due/total taxable income. 
C)  change in taxes due/change in taxable income. 
D)  change in taxes due/total taxable income. 
A)  total tax due/change in taxable income. 
B)  total tax due/total taxable income. 
C)  change in taxes due/change in taxable income. 
D)  change in taxes due/total taxable income.

Question 19

A tax system in which the average and marginal tax rates are the same for every level of taxable income and every change in income is an example of

Accepted Answer

A)  regressive taxation. 
B)  proportional taxation. 
C)  progressive taxation. 
D)  premium taxation. 
A)  regressive taxation. 
B)  proportional taxation. 
C)  progressive taxation. 
D)  premium taxation.

Question 20

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

Accepted Answer

A)  None of the tax. 
B)    -   
C)    -   
D)    -   
A)  None of the tax. 
B)    -   
C)    -   
D)    -

Exam 6: Funding the Public Sector

-Refer to the above figure. A unit tax has been placed on the good. What is the total amount of the tax?

When a unit tax of $0.50 is levied on a product

The three possible sources of government funding include

If the marginal tax rate is less than the average tax rate, the tax system is

The federal income tax code of the United States is

A tax rate system characterized by higher marginal tax rates as income increases is known as

The government imposes a unit excise tax on bubble gum. What happens as a result?

A unit tax

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

Which of the following are considered ad valorem taxes?

-Refer to the above figures. Which panel represents the expected relationship between tax revenue and the sales tax rate if dynamic tax analysis is used?

The Social Security system was founded

In what type of analysis could an increase in the tax rate lead to a decrease in tax revenues?

-The demand and supply of a product is given in the above table. A unit tax of $2 is imposed on the product. The equilibrium quantity for this product after the tax is imposed is equal to

A typical capital gain is experienced by

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

The marginal tax rate is

A tax system in which the average and marginal tax rates are the same for every level of taxable income and every change in income is an example of

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

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

Measuring the Economys Performance

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

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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