Question 1

An average tax rate is calculated as

Accepted Answer

A)  total taxable income × taxes paid. 
B)  total taxable income ÷ taxes paid. 
C)  taxes paid ÷ total taxable income. 
D)  (total taxable income - taxes paid) ÷ taxable income. 
A)  total taxable income × taxes paid. 
B)  total taxable income ÷ taxes paid. 
C)  taxes paid ÷ total taxable income. 
D)  (total taxable income - taxes paid) ÷ taxable income.

Question 2

Which of the following statements concerning the federal corporate income tax is true?

Accepted Answer

A)  It is an efficient tax because it imposes a small excess burden relative to the tax revenue it raises. 
B)  The incidence of the corporate income tax can be determined by using demand and supply analysis. 
C)  Determining the incidence of the corporate income tax is complicated because it is not certain how corporations respond to the tax. 
D)  The corporate income tax is an example of the benefits-received principle. 
A)  It is an efficient tax because it imposes a small excess burden relative to the tax revenue it raises. 
B)  The incidence of the corporate income tax can be determined by using demand and supply analysis. 
C)  Determining the incidence of the corporate income tax is complicated because it is not certain how corporations respond to the tax. 
D)  The corporate income tax is an example of the benefits-received principle.

Question 3

-Refer to Figure 16-1. Of the tax revenue collected by the government, the portion borne by producers is represented by the area

Accepted Answer

A)  B + C. 
B)  F + G. 
C)  E + H. 
D)  B + C + F + G. 
A)  B + C. 
B)  F + G. 
C)  E + H. 
D)  B + C + F + G.

Question 4

Exempting food purchases from sales tax is consistent with the ability-to-pay principle, although not necessarily consistent with vertical equity.

Accepted Answer

A) True 
 B)False

Question 5

-Refer to Figure 16-1. Area E + H represents

Accepted Answer

A)  the portion of sales tax revenue borne by consumers. 
B)  the portion of sales tax revenue borne by producers. 
C)  the excess burden of the sales tax. 
D)  sales tax revenue collected by the government. 
A)  the portion of sales tax revenue borne by consumers. 
B)  the portion of sales tax revenue borne by producers. 
C)  the excess burden of the sales tax. 
D)  sales tax revenue collected by the government.

Question 6

Rapid economic growth tends to increase the degree of income mobility.

Accepted Answer

A) True 
 B)False

Question 7

All of the following occur whenever a government taxes a product except

Accepted Answer

A)  the quantity consumed of that product falls. 
B)  the price of that product rises. 
C)  the marginal benefit of the last unit sold exceeds the marginal cost of producing it. 
D)  there will be no excess burden if the government's tax revenue is sufficiently large to offset the deadweight loss. 
A)  the quantity consumed of that product falls. 
B)  the price of that product rises. 
C)  the marginal benefit of the last unit sold exceeds the marginal cost of producing it. 
D)  there will be no excess burden if the government's tax revenue is sufficiently large to offset the deadweight loss.

Question 8

-Refer to Figure 16-7. The second highest 20 per cent of households

Accepted Answer

A)  earn 24 per cent of the society's total income. 
B)  earn 28 per cent of the society's total income. 
C)  earn 42 per cent of the society's total income. 
D)  earn 72 per cent of the society's total income. 
A)  earn 24 per cent of the society's total income. 
B)  earn 28 per cent of the society's total income. 
C)  earn 42 per cent of the society's total income. 
D)  earn 72 per cent of the society's total income.

Question 9

A personal exemption refers to

Accepted Answer

A)  the tax rate that applies to a particular tax bracket. 
B)  the tax bracket that represents basic living expenses. 
C)  an amount representing basic living expenses that can be subtracted from income. 
D)  a dispensation that allows certain qualifying individuals not to pay federal taxes. 
A)  the tax rate that applies to a particular tax bracket. 
B)  the tax bracket that represents basic living expenses. 
C)  an amount representing basic living expenses that can be subtracted from income. 
D)  a dispensation that allows certain qualifying individuals not to pay federal taxes.

Question 10

'For a given supply curve, the excess burden of a tax will be greater when the demand for a product is less elastic than when the demand is more elastic.' This statement is

Accepted Answer

A)  correct. 
B)  incorrect because the incidence of the tax, not the burden of the tax, is affected by the elasticity of demand. 
C)  incorrect. When demand is less elastic, the burden of the tax is smaller than when the demand is more elastic. 
D)  incorrect. The statement confuses demand with quantity demanded. 
A)  correct. 
B)  incorrect because the incidence of the tax, not the burden of the tax, is affected by the elasticity of demand. 
C)  incorrect. When demand is less elastic, the burden of the tax is smaller than when the demand is more elastic. 
D)  incorrect. The statement confuses demand with quantity demanded.

Question 11

A regressive tax is a tax for which people with lower incomes

Accepted Answer

A)  pay a lower percentage of their incomes in tax than do people with higher incomes. 
B)  pay a higher percentage of their incomes in tax than do people with higher incomes. 
C)  pay the same percentage of their incomes in tax as do people with higher incomes. 
D)  do not have to pay unless their incomes exceeds a certain amount. 
A)  pay a lower percentage of their incomes in tax than do people with higher incomes. 
B)  pay a higher percentage of their incomes in tax than do people with higher incomes. 
C)  pay the same percentage of their incomes in tax as do people with higher incomes. 
D)  do not have to pay unless their incomes exceeds a certain amount.

Question 12

Petrol taxes that are typically used for highway construction and maintenance are consistent with which of the following principles of taxation?

Accepted Answer

A)  the ability-to-pay principle 
B)  the horizontal-equity principle 
C)  the vertical-equity principle 
D)  the benefits-received principle 
A)  the ability-to-pay principle 
B)  the horizontal-equity principle 
C)  the vertical-equity principle 
D)  the benefits-received principle

Question 13

-Refer to Figure 16-1. The excess burden of the tax is represented by the area

Accepted Answer

A)  B + C. 
B)  F + G. 
C)  E + H. 
D)  B + C + F + G. 
A)  B + C. 
B)  F + G. 
C)  E + H. 
D)  B + C + F + G.

Question 14

If you pay $3000 in taxes on an income of $28 000, and $4450 in taxes on an income of $38 000, what is your marginal tax rate? Show your work.

Accepted Answer

= 0.145 or

Question 15

What is meant by 'tax incidence'?

Accepted Answer

Tax incidence refers to the ac

Question 16

Suppose the government wants to finance housing for low-income families by placing a tax on the purchase of luxury homes. Assume the government defines a luxury home as a home that is purchased for at least $1 million. This tax is consistent with the

Accepted Answer

A)  benefits-received principle. 
B)  social equity principle. 
C)  ability-to-pay principle. 
D)  horizontal-equity principle. 
A)  benefits-received principle. 
B)  social equity principle. 
C)  ability-to-pay principle. 
D)  horizontal-equity principle.

Question 17

Consider the following methods of taxing a corporation's income: a. A flat tax, as opposed to a progressive tax, is levied on corporate profits.
B. A system whereby a corporation calculates its annual profit and notifies each shareholder of her portion of the profits. The shareholder would then be required to include this amount as taxable income for her personal income tax. The corporation does not pay a tax.
C. A system where the federal government continues to tax corporate income through the corporate income tax but allows individual taxpayers to receive, tax free, corporate dividends and capital gains.
Which of the methods above would avoid double taxation?

Accepted Answer

A)  a, b, and c 
B)  a and b only 
C)  a and c only 
D)  b and c only 
A)  a, b, and c 
B)  a and b only 
C)  a and c only 
D)  b and c only

Question 18

When the demand for a product is less elastic than the supply,

Accepted Answer

A)  consumers pay the majority of the tax on the product. 
B)  firms pay the majority of the tax on the product. 
C)  firms pay the entire tax on the product. 
D)  consumers pay the entire tax on the product. 
A)  consumers pay the majority of the tax on the product. 
B)  firms pay the majority of the tax on the product. 
C)  firms pay the entire tax on the product. 
D)  consumers pay the entire tax on the product.

Question 19

-Refer to Figure 16-1. Of the tax revenue collected by the government, the portion borne by consumers is represented by the area

Accepted Answer

A)  B + C. 
B)  F + G. 
C)  E + H. 
D)  B + C + F + G. 
A)  B + C. 
B)  F + G. 
C)  E + H. 
D)  B + C + F + G.

Question 20

-Refer to Figure 16-7. The second lowest 20 per cent of households

Accepted Answer

A)  earn 12 per cent of the society's total income. 
B)  earn 16 per cent of the society's total income. 
C)  earn 28 per cent of the society's total income. 
D)  earn 40 per cent of the society's total income. 
A)  earn 12 per cent of the society's total income. 
B)  earn 16 per cent of the society's total income. 
C)  earn 28 per cent of the society's total income. 
D)  earn 40 per cent of the society's total income.

An average tax rate is calculated as

Which of the following statements concerning the federal corporate income tax is true?

-Refer to Figure 16-1. Of the tax revenue collected by the government, the portion borne by producers is represented by the area

Exempting food purchases from sales tax is consistent with the ability-to-pay principle, although not necessarily consistent with vertical equity.

-Refer to Figure 16-1. Area E + H represents

Rapid economic growth tends to increase the degree of income mobility.

All of the following occur whenever a government taxes a product except

-Refer to Figure 16-7. The second highest 20 per cent of households

A personal exemption refers to

'For a given supply curve, the excess burden of a tax will be greater when the demand for a product is less elastic than when the demand is more elastic.' This statement is

A regressive tax is a tax for which people with lower incomes

Petrol taxes that are typically used for highway construction and maintenance are consistent with which of the following principles of taxation?

-Refer to Figure 16-1. The excess burden of the tax is represented by the area

If you pay $3000 in taxes on an income of $28 000, and $4450 in taxes on an income of $38 000, what is your marginal tax rate? Show your work.

What is meant by 'tax incidence'?

Suppose the government wants to finance housing for low-income families by placing a tax on the purchase of luxury homes. Assume the government defines a luxury home as a home that is purchased for at least $1 million. This tax is consistent with the

When the demand for a product is less elastic than the supply,

-Refer to Figure 16-1. Of the tax revenue collected by the government, the portion borne by consumers is represented by the area

-Refer to Figure 16-7. The second lowest 20 per cent of households

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency , Government Price Setting and Taxes

Concumer Choice and Behavioural Economics

Technology , Production and Costs

Firms in Perfectly Compitive Markets

Monopoly Markets

Monopolistic Competition : The Competitive Model in More Realistic Setting

Oligopoly : Firms in Less Competitve Markets

The Market for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities , Environmental Policy and Public Goods

Filters

Exam 16: The Distribution of Income and Social Policy

An average tax rate is calculated as

Which of the following statements concerning the federal corporate income tax is true?

-Refer to Figure 16-1. Of the tax revenue collected by the government, the portion borne by producers is represented by the area

Exempting food purchases from sales tax is consistent with the ability-to-pay principle, although not necessarily consistent with vertical equity.

-Refer to Figure 16-1. Area E + H represents

Rapid economic growth tends to increase the degree of income mobility.

All of the following occur whenever a government taxes a product except

-Refer to Figure 16-7. The second highest 20 per cent of households

A personal exemption refers to

'For a given supply curve, the excess burden of a tax will be greater when the demand for a product is less elastic than when the demand is more elastic.' This statement is

A regressive tax is a tax for which people with lower incomes

Petrol taxes that are typically used for highway construction and maintenance are consistent with which of the following principles of taxation?

-Refer to Figure 16-1. The excess burden of the tax is represented by the area

If you pay $3000 in taxes on an income of $28 000, and $4450 in taxes on an income of $38 000, what is your marginal tax rate? Show your work.

What is meant by 'tax incidence'?

Suppose the government wants to finance housing for low-income families by placing a tax on the purchase of luxury homes. Assume the government defines a luxury home as a home that is purchased for at least $1 million. This tax is consistent with the

When the demand for a product is less elastic than the supply,

-Refer to Figure 16-1. Of the tax revenue collected by the government, the portion borne by consumers is represented by the area

-Refer to Figure 16-7. The second lowest 20 per cent of households

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency , Government Price Setting and Taxes

Concumer Choice and Behavioural Economics

Technology , Production and Costs

Firms in Perfectly Compitive Markets

Monopoly Markets

Monopolistic Competition : The Competitive Model in More Realistic Setting

Oligopoly : Firms in Less Competitve Markets

The Market for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities , Environmental Policy and Public Goods

Filters