Question 1

Proprietary income refers to:

Accepted Answer

A)  revenue flowing to the government from taxes. 
B)  money borrowed by the government to finance its operations. 
C)  revenue generated by government-run businesses. 
D)  transfer payments from the government to the owners of property resources. 
A)  revenue flowing to the government from taxes. 
B)  money borrowed by the government to finance its operations. 
C)  revenue generated by government-run businesses. 
D)  transfer payments from the government to the owners of property resources.

Question 2

The ability-to-pay principle of taxation:

Accepted Answer

A)  has been declared unconstitutional because it deprives individuals of property without due process of law. 
B)  suggests that people should pay taxes in proportion to the benefits they derive from public goods and services. 
C)  suggests that taxes should vary directly with people's income and wealth. 
D)  suggests that taxes should vary inversely with people's income and wealth. 
A)  has been declared unconstitutional because it deprives individuals of property without due process of law. 
B)  suggests that people should pay taxes in proportion to the benefits they derive from public goods and services. 
C)  suggests that taxes should vary directly with people's income and wealth. 
D)  suggests that taxes should vary inversely with people's income and wealth.

Question 3

Suppose that government imposes a specific excise tax on product X of $2 per unit and that the price elasticity of demand for X is unitary (coefficient = 1).If the incidence of the tax is such that consumers pay $1.80 of the tax and the producers pay $.20,we can conclude that the:

Accepted Answer

A)  supply of X is highly inelastic. 
B)  supply of X is highly elastic. 
C)  demand for X is highly inelastic. 
D)  demand for X is highly elastic. 
A)  supply of X is highly inelastic. 
B)  supply of X is highly elastic. 
C)  demand for X is highly inelastic. 
D)  demand for X is highly elastic.

Question 4

The largest source of tax revenue for the U.S.federal government is:

Accepted Answer

A)  personal income taxes. 
B)  property taxes. 
C)  corporate income taxes. 
D)  sales and excise taxes. 
A)  personal income taxes. 
B)  property taxes. 
C)  corporate income taxes. 
D)  sales and excise taxes.

Question 5

Assume the demand for automobile tires is highly inelastic and that the supply is highly elastic.The burden of a $2 excise tax on each tire will be:

Accepted Answer

A)  borne by resource suppliers that provide the inputs for manufacturing tires. 
B)  shared about equally by buyers and sellers of tires. 
C)  borne primarily by buyers of tires. 
D)  borne primarily by sellers of tires. 
A)  borne by resource suppliers that provide the inputs for manufacturing tires. 
B)  shared about equally by buyers and sellers of tires. 
C)  borne primarily by buyers of tires. 
D)  borne primarily by sellers of tires.

Question 6

Total governmental purchases-federal,state,and local combined-accounted for about what percentage of domestic output in 2012?

Accepted Answer

A)  35 percent. 
B)  20 percent. 
C)  10 percent. 
D)  5 percent. 
A)  35 percent. 
B)  20 percent. 
C)  10 percent. 
D)  5 percent.

Question 7

In 2009,the 20 percent of families with the lowest incomes paid an effective average federal tax rate (on all federal taxes)of about ____,whereas the 20 percent of families with the highest incomes paid an effective average tax rate of about ____.

Accepted Answer

A)  5.5 percent;50 percent 
B)  10.3 percent;30.9 percent 
C)  8.4 percent;27.5 percent 
D)  1.0 percent;23.2 percent 
A)  5.5 percent;50 percent 
B)  10.3 percent;30.9 percent 
C)  8.4 percent;27.5 percent 
D)  1.0 percent;23.2 percent

Question 8

The rationale for ability-to-pay taxation and the contention that those with large incomes should pay more taxes both absolutely and relatively is that:

Accepted Answer

A)  high-income receivers are generally in a better position to shift taxes than are low-income receivers. 
B)  the transfer system is regressive and it is therefore essential to have an offsetting progressive tax structure. 
C)  rational consumers spend their first dollars of income on the most urgently desired goods and successive dollars on less essential goods. 
D)  taxes should be paid for financing public goods in direct proportion to the satisfaction an individual derives from those goods. 
A)  high-income receivers are generally in a better position to shift taxes than are low-income receivers. 
B)  the transfer system is regressive and it is therefore essential to have an offsetting progressive tax structure. 
C)  rational consumers spend their first dollars of income on the most urgently desired goods and successive dollars on less essential goods. 
D)  taxes should be paid for financing public goods in direct proportion to the satisfaction an individual derives from those goods.

Question 9

Using income as the tax base,which of the following best illustrates a regressive tax?

Accepted Answer

A)  The federal inheritance tax. 
B)  A 7 percent general sales tax. 
C)  The corporate income tax. 
D)  The personal income tax. 
A)  The federal inheritance tax. 
B)  A 7 percent general sales tax. 
C)  The corporate income tax. 
D)  The personal income tax.

Question 10

The total amount of U.S.tax revenue needed to finance the public sector:

Accepted Answer

A)  has been a declining percentage of the domestic output in this century. 
B)  equals about 40 percent of domestic output. 
C)  equals about 15 percent of domestic output. 
D)  is larger today,as a percentage of total output,than in 1960. 
A)  has been a declining percentage of the domestic output in this century. 
B)  equals about 40 percent of domestic output. 
C)  equals about 15 percent of domestic output. 
D)  is larger today,as a percentage of total output,than in 1960.

Question 11

In 2010,the top 1 percent of all taxpayers in the United States paid what percent of the federal income tax?

Accepted Answer

A)  23.2 percent. 
B)  37.4 percent. 
C)  39.6 percent. 
D)  59.1 percent. 
A)  23.2 percent. 
B)  37.4 percent. 
C)  39.6 percent. 
D)  59.1 percent.

Question 12

(Consider This)Proponents of a value-added tax (VAT)claim that a VAT:

Accepted Answer

A)  is progressive,leading to a more equitable distribution of income. 
B)  equalizes the tax burden between buyers and sellers of goods. 
C)  is proportional,so all income groups pay a fair share. 
D)  penalizes consumption and encourages savings and investment. 
A)  is progressive,leading to a more equitable distribution of income. 
B)  equalizes the tax burden between buyers and sellers of goods. 
C)  is proportional,so all income groups pay a fair share. 
D)  penalizes consumption and encourages savings and investment.

Question 13

The federal gasoline tax is assessed on a per-gallon basis and the proceeds are used for highway maintenance and improvements.This tax is consistent with the:

Accepted Answer

A)  ability-to-pay principle of taxation. 
B)  benefits-received principle of taxation. 
C)  single-tax theory of taxation. 
D)  pay-as-you-go theory of taxation. 
A)  ability-to-pay principle of taxation. 
B)  benefits-received principle of taxation. 
C)  single-tax theory of taxation. 
D)  pay-as-you-go theory of taxation.

Question 14

If the demand for a product is perfectly inelastic and the supply curve is upsloping,a $1 excise tax per unit of output will:

Accepted Answer

A)  raise price by less than $1. 
B)  raise price by more than $1. 
C)  raise price by $1. 
D)  lower price by $1. 
A)  raise price by less than $1. 
B)  raise price by more than $1. 
C)  raise price by $1. 
D)  lower price by $1.

Question 15

A tax is progressive if the average tax rate rises as income increases.

Accepted Answer

A) True 
 B)False

Question 16

Given supply,the more inelastic the demand for a product,the larger the portion of an excise tax that is shifted to consumers.

Accepted Answer

A) True 
 B)False

Question 17

The tax rates embodied in the federal personal income tax are such that:

Accepted Answer

A)  a rising absolute amount,but a declining proportion,of income is paid in taxes. 
B)  the marginal and average tax rates are equal,making the tax progressive. 
C)  the average tax rate rises more rapidly than does the marginal tax rate. 
D)  the marginal tax rate is higher than the average tax rate,causing the average tax rate to rise. 
A)  a rising absolute amount,but a declining proportion,of income is paid in taxes. 
B)  the marginal and average tax rates are equal,making the tax progressive. 
C)  the average tax rate rises more rapidly than does the marginal tax rate. 
D)  the marginal tax rate is higher than the average tax rate,causing the average tax rate to rise.

Question 18

Although state and local taxes are highly progressive,federal taxation is predominantly regressive.

Accepted Answer

A) True 
 B)False

Question 19

Revenues flowing to the government from government-run or government-sponsored businesses,such as public utilities and state lotteries,are known as:

Accepted Answer

A)  proprietary income. 
B)  transfer payments. 
C)  tax revenue. 
D)  subsidies. 
A)  proprietary income. 
B)  transfer payments. 
C)  tax revenue. 
D)  subsidies.

Question 20

Assume that you pay $10,000 of tax on a taxable income of $50,000.If your taxable income were $150,000,your tax payment would be $25,000.This suggests the tax is:

Accepted Answer

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

Exam 19: Public Finance: Expenditures and Taxes

Proprietary income refers to:

The ability-to-pay principle of taxation:

Suppose that government imposes a specific excise tax on product X of $2 per unit and that the price elasticity of demand for X is unitary (coefficient = 1).If the incidence of the tax is such that consumers pay $1.80 of the tax and the producers pay $.20,we can conclude that the:

The largest source of tax revenue for the U.S.federal government is:

Assume the demand for automobile tires is highly inelastic and that the supply is highly elastic.The burden of a $2 excise tax on each tire will be:

Total governmental purchases-federal,state,and local combined-accounted for about what percentage of domestic output in 2012?

In 2009,the 20 percent of families with the lowest incomes paid an effective average federal tax rate (on all federal taxes)of about ____,whereas the 20 percent of families with the highest incomes paid an effective average tax rate of about ____.

The rationale for ability-to-pay taxation and the contention that those with large incomes should pay more taxes both absolutely and relatively is that:

Using income as the tax base,which of the following best illustrates a regressive tax?

The total amount of U.S.tax revenue needed to finance the public sector:

In 2010,the top 1 percent of all taxpayers in the United States paid what percent of the federal income tax?

(Consider This)Proponents of a value-added tax (VAT)claim that a VAT:

The federal gasoline tax is assessed on a per-gallon basis and the proceeds are used for highway maintenance and improvements.This tax is consistent with the:

If the demand for a product is perfectly inelastic and the supply curve is upsloping,a $1 excise tax per unit of output will:

A tax is progressive if the average tax rate rises as income increases.

Given supply,the more inelastic the demand for a product,the larger the portion of an excise tax that is shifted to consumers.

The tax rates embodied in the federal personal income tax are such that:

Although state and local taxes are highly progressive,federal taxation is predominantly regressive.

Revenues flowing to the government from government-run or government-sponsored businesses,such as public utilities and state lotteries,are known as:

Assume that you pay $10,000 of tax on a taxable income of $50,000.If your taxable income were $150,000,your tax payment would be $25,000.This suggests the tax is:

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Cost of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition and Oligopoly

Technology RD and Efficiency

The Demand for Resources

Wage Determination

Rent Interest and Profit

Natural Resource and Energy Economics

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Filters

In 2009,the 20 percent of families with the lowest incomes paid an effective average federal tax rate (on all federal taxes)of about ,whereas the 20 percent of families with the highest incomes paid an effective average tax rate of about .