Question 1

If a unit excise tax is placed on a good for which the demand is very unresponsive to a price change, then

Accepted Answer

A)  the government generally pays the majority of the tax. 
B)  the consumers generally pay the majority of the tax. 
C)  the producers generally pay the majority of the tax. 
D)  producers and consumers pay equal portions of the tax. 
A)  the government generally pays the majority of the tax. 
B)  the consumers generally pay the majority of the tax. 
C)  the producers generally pay the majority of the tax. 
D)  producers and consumers pay equal portions of the tax.

Question 2

When income is $15,000, the amount of income taxes owed is $2,000; when income increases to $20,000, the amount owed increases to $3,000. The average income tax rate when a person earns $15,000 is

Accepted Answer

A)  75 percent. 
B)  15 percent. 
C)  13.3 percent. 
D)  20 percent. 
A)  75 percent. 
B)  15 percent. 
C)  13.3 percent. 
D)  20 percent.

Question 3

"Only in a progressive tax system does the amount of taxes increase as income increases." Do you agree or disagree? Explain.

Accepted Answer

Disagree. In all of the three tax system

Question 4

State sales taxes are operated as a system of

Accepted Answer

A)  ad valorem taxation. 
B)  unit taxation. 
C)  income taxation. 
D)  revenue minimizing taxation. 
A)  ad valorem taxation. 
B)  unit taxation. 
C)  income taxation. 
D)  revenue minimizing taxation.

Question 5

What happens when the government imposes a unit excise tax on a good?

Accepted Answer

A)  The amount of the tax is added to the current equilibrium price. 
B)  The demand for the newly taxed good decreases. 
C)  That good's supply curve shifts down by the amount of the tax. 
D)  The newly taxed good's supply curve shifts vertically upward by the amount of the per-unit tax being levied. 
A)  The amount of the tax is added to the current equilibrium price. 
B)  The demand for the newly taxed good decreases. 
C)  That good's supply curve shifts down by the amount of the tax. 
D)  The newly taxed good's supply curve shifts vertically upward by the amount of the per-unit tax being levied.

Question 6

Current concern about Social Security is that

Accepted Answer

A)  the fund is growing too rapidly and would trigger inflation. 
B)  the fund might be depleted before long and might not be there for workers who retire later. 
C)  the government is planning to phase out the program. 
D)  none of the above 
A)  the fund is growing too rapidly and would trigger inflation. 
B)  the fund might be depleted before long and might not be there for workers who retire later. 
C)  the government is planning to phase out the program. 
D)  none of the above

Question 7

-Refer to the above figures. A unit tax of $2 has been levied on a good. Which of the panels depict the effect of the taxes?

Accepted Answer

A)  Panel 1. 
B)  Panel 2. 
C)  Panel 3. 
D)  None of the diagrams reflect the effect of the tax. 
A)  Panel 1. 
B)  Panel 2. 
C)  Panel 3. 
D)  None of the diagrams reflect the effect of the tax.

Question 8

What is a government's budget constraint in the long run as opposed to a given time period?

Accepted Answer

In a given time period, the government b

Question 9

How is the market for gasoline affected if the excise tax on gasoline is reduced?

Accepted Answer

A)  The supply of gasoline decreases. 
B)  The supply of gasoline increases. 
C)  The equilibrium quantity of gasoline decreases. 
D)  The equilibrium price of gasoline increases. 
A)  The supply of gasoline decreases. 
B)  The supply of gasoline increases. 
C)  The equilibrium quantity of gasoline decreases. 
D)  The equilibrium price of gasoline increases.

Question 10

Suppose the income tax rate schedule 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 any income over $70,000. Family A earns $32,000 a year and Family B earns $70,000 a year. Both families each receive a ten percent raise. What is the marginal tax rate of each and what is the extra tax paid by each after the raise?

Accepted Answer

Family A's new income is $35,200 which f

Question 11

The marginal tax rate is

Accepted Answer

A)  the sum of all individual tax rates. 
B)  the total taxes paid as a percentage of total income. 
C)  the average tax rate paid by both individuals and corporations. 
D)  the increase in taxes as a percentage of the increase in income. 
A)  the sum of all individual tax rates. 
B)  the total taxes paid as a percentage of total income. 
C)  the average tax rate paid by both individuals and corporations. 
D)  the increase in taxes as a percentage of the increase in income.

Question 12

If a new unit excise tax is levied on bottles of wine, the

Accepted Answer

A)  demand for wine shifts to the left. 
B)  demand for wine shifts to the right. 
C)  supply of wine shifts to the right. 
D)  supply of wine shifts to the left. 
A)  demand for wine shifts to the left. 
B)  demand for wine shifts to the right. 
C)  supply of wine shifts to the right. 
D)  supply of wine shifts to the left.

Question 13

Suppose the capital gains tax is 28 percent and you purchased a house ten years ago for $80,000. If you sold the house today you would get $140,000. Your tax liability would be

Accepted Answer

A)  $39,200. 
B)  $16,800. 
C)  indeterminate without knowing the inflation rate. 
D)  indeterminate without knowing the personal income tax rate. 
A)  $39,200. 
B)  $16,800. 
C)  indeterminate without knowing the inflation rate. 
D)  indeterminate without knowing the personal income tax rate.

Question 14

Suppose you purchased 100 shares of stock in 2010 for $25 a share and you sell them today for $50 a share. If the capital gains tax is 28 percent, your tax liability is

Accepted Answer

A)  $70. 
B)  $700. 
C)  $2500. 
D)  indeterminate without knowing the inflation rate. 
A)  $70. 
B)  $700. 
C)  $2500. 
D)  indeterminate without knowing the inflation rate.

Question 15

Social Security contributions are

Accepted Answer

A)  a voluntary dollar amount that people contribute towards Social Security. 
B)  entirely paid by your employer. 
C)  mandatory taxes partially paid out of workers' wages and salaries. 
D)  collected only from people earning more than $80,000 a year. 
A)  a voluntary dollar amount that people contribute towards Social Security. 
B)  entirely paid by your employer. 
C)  mandatory taxes partially paid out of workers' wages and salaries. 
D)  collected only from people earning more than $80,000 a year.

Question 16

What determines the proportion of a unit excise tax that will be passed on to consumers in the form of higher prices?

Accepted Answer

A)  the nature of the projects funded by the tax 
B)  the number of additional taxes that consumers have to pay 
C)  the popularity of the tax 
D)  the degree to which quantity demanded and supplied of the good respond to price changes 
A)  the nature of the projects funded by the tax 
B)  the number of additional taxes that consumers have to pay 
C)  the popularity of the tax 
D)  the degree to which quantity demanded and supplied of the good respond to price changes

Question 17

The responsibility of paying for the Social Security benefits for currently retired individuals falls on

Accepted Answer

A)  current and future workers. 
B)  the retired people themselves. 
C)  no one, since the government prints the money. 
D)  only working people over 50 years of age. 
A)  current and future workers. 
B)  the retired people themselves. 
C)  no one, since the government prints the money. 
D)  only working people over 50 years of age.

Question 18

The fact that every dollar that the government spends or transfers must ultimately be provided by the taxes and user charges it collects plus government borrowing is known as the

Accepted Answer

A)  government balance sheet constraint. 
B)  government budget constraint. 
C)  tax collection constraint 
D)  user charge constraint. 
A)  government balance sheet constraint. 
B)  government budget constraint. 
C)  tax collection constraint 
D)  user charge constraint.

Question 19

The average tax rate can be calculated by which of the following formulas?

Accepted Answer

A)  The change in taxes due divided by the change in taxable income 
B)  The change in taxable income divided by the change in taxes due 
C)  Total taxes due divided by total taxable income 
D)  Total taxable income divided by total taxes due 
A)  The change in taxes due divided by the change in taxable income 
B)  The change in taxable income divided by the change in taxes due 
C)  Total taxes due divided by total taxable income 
D)  Total taxable income divided by total taxes due

Question 20

An example of ad valorem taxation is

Accepted Answer

A)  a luxury tax. 
B)  the corporate profit tax. 
C)  the personal income tax. 
D)  the Social Security tax. 
A)  a luxury tax. 
B)  the corporate profit tax. 
C)  the personal income tax. 
D)  the Social Security tax.

Exam 6: Funding the Public Sector

If a unit excise tax is placed on a good for which the demand is very unresponsive to a price change, then

When income is $15,000, the amount of income taxes owed is $2,000; when income increases to $20,000, the amount owed increases to $3,000. The average income tax rate when a person earns $15,000 is

"Only in a progressive tax system does the amount of taxes increase as income increases." Do you agree or disagree? Explain.

State sales taxes are operated as a system of

What happens when the government imposes a unit excise tax on a good?

Current concern about Social Security is that

-Refer to the above figures. A unit tax of $2 has been levied on a good. Which of the panels depict the effect of the taxes?

What is a government's budget constraint in the long run as opposed to a given time period?

How is the market for gasoline affected if the excise tax on gasoline is reduced?

The marginal tax rate is

If a new unit excise tax is levied on bottles of wine, the

Suppose the capital gains tax is 28 percent and you purchased a house ten years ago for $80,000. If you sold the house today you would get $140,000. Your tax liability would be

Suppose you purchased 100 shares of stock in 2010 for $25 a share and you sell them today for $50 a share. If the capital gains tax is 28 percent, your tax liability is

Social Security contributions are

What determines the proportion of a unit excise tax that will be passed on to consumers in the form of higher prices?

The responsibility of paying for the Social Security benefits for currently retired individuals falls on

The fact that every dollar that the government spends or transfers must ultimately be provided by the taxes and user charges it collects plus government borrowing is known as the

The average tax rate can be calculated by which of the following formulas?

An example of ad valorem taxation is

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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