Question 1

Social Security taxes are

Accepted Answer

A)  progressive because all workers pay the tax. 
B)  regressive because higher income workers pay taxes on a smaller percentage of their income. 
C)  proportional because everyone is charged the same percentage tax rate. 
D)  regressive because higher income workers don't pay the tax. 
A)  progressive because all workers pay the tax. 
B)  regressive because higher income workers pay taxes on a smaller percentage of their income. 
C)  proportional because everyone is charged the same percentage tax rate. 
D)  regressive because higher income workers don't pay the tax.

Question 2

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 3

-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 4

-Assume that the government one day decides to tax greens fees at all state golf courses. To the government's dismay, not only was the amount of tax collected small, but there was a 90 percent decline in golfing. What type of tax analysis did the government apparently rely upon when it imposed this tax?

Accepted Answer

A)  static tax analysis 
B)  dynamic tax analysis 
C)  transaction cost analysis 
D)  ad hoc tax analysis 
A)  static tax analysis 
B)  dynamic tax analysis 
C)  transaction cost analysis 
D)  ad hoc tax analysis

Question 5

-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 6

A unit tax of $1 will always

Accepted Answer

A)  shift the supply curve upward by more than $1. 
B)  shift the supply curve upward by less than $1. 
C)  shift the supply curve up by exactly $1. 
D)  leave the supply curve unchanged. 
A)  shift the supply curve upward by more than $1. 
B)  shift the supply curve upward by less than $1. 
C)  shift the supply curve up by exactly $1. 
D)  leave the supply curve unchanged.

Question 7

The imposition of a tax on a product

Accepted Answer

A)  shifts the supply curve to the right. 
B)  shifts the demand curve to the right. 
C)  shifts both the supply and the demand curve to the right. 
D)  shifts the supply curve to the left. 
A)  shifts the supply curve to the right. 
B)  shifts the demand curve to the right. 
C)  shifts both the supply and the demand curve to the right. 
D)  shifts the supply curve to the left.

Question 8

Dynamic tax analysis assumes

Accepted Answer

A)  all of the present tax rates will be in place for a minimum of twenty years. 
B)  changes in the tax rates have no effect on the tax base. 
C)  changes in the tax rates have no effect on tax revenue. 
D)  changes in the tax rates will change the tax base. 
A)  all of the present tax rates will be in place for a minimum of twenty years. 
B)  changes in the tax rates have no effect on the tax base. 
C)  changes in the tax rates have no effect on tax revenue. 
D)  changes in the tax rates will change the tax base.

Question 9

Suppose Jill has earned more income this year as compared to what she did last year. Her income tax has also increased. Does it necessarily mean that the income tax system is progressive? Explain.

Accepted Answer

No, the amount of income tax can increas

Question 10

A government is thinking about increasing the sales tax rate. Should it use static or dynamic tax analysis? Explain why one approach is better than the other.

Accepted Answer

The government should use dynamic tax an

Question 11

A "flat tax" on personal income, in which the same tax rate is applied to every dollar of income earned by each taxpayer, is an example of

Accepted Answer

A)  a regressive tax. 
B)  a proportional tax. 
C)  a progressive tax. 
D)  a value-added tax. 
A)  a regressive tax. 
B)  a proportional tax. 
C)  a progressive tax. 
D)  a value-added tax.

Question 12

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 13

State and local governments receive most of their revenue from

Accepted Answer

A)  sales and excise taxes, revenue from the federal government, and property taxes. 
B)  individual income taxes, social insurance contributions, and property taxes. 
C)  corporate income taxes, property taxes, and personal income taxes. 
D)  property taxes, sales and excise taxes, and Social Security contribution. 
A)  sales and excise taxes, revenue from the federal government, and property taxes. 
B)  individual income taxes, social insurance contributions, and property taxes. 
C)  corporate income taxes, property taxes, and personal income taxes. 
D)  property taxes, sales and excise taxes, and Social Security contribution.

Question 14

If you were to face a marginal tax rate of 20 percent, how much would your tax bill increase when your income increased from $50,000 to $52,000?

Accepted Answer

A)  $1,000 
B)  $400 
C)  $450 
D)  $10,400 
A)  $1,000 
B)  $400 
C)  $450 
D)  $10,400

Question 15

-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 16

How can we anticipate the proportion of a newly imposed unit excise tax that consumers will pay?

Accepted Answer

A)  Consumers will pay most of the tax whenever their demand for a product is relatively unresponsive to price changes. 
B)  Consumers will always pay 100 percent of an excise tax. 
C)  Consumers will pay most of the tax whenever their demand for the product is very price sensitive. 
D)  Since producers always pay 100 percent of an excise tax, we know consumers will not pay any of the tax. 
A)  Consumers will pay most of the tax whenever their demand for a product is relatively unresponsive to price changes. 
B)  Consumers will always pay 100 percent of an excise tax. 
C)  Consumers will pay most of the tax whenever their demand for the product is very price sensitive. 
D)  Since producers always pay 100 percent of an excise tax, we know consumers will not pay any of the tax.

Question 17

Which of the following is an argument that the incidence of corporate taxation falls entirely on consumers?

Accepted Answer

A)  Corporations pass their tax burdens on to consumers by charging higher prices equal to the amount of the tax. 
B)  Corporations pass their tax burdens on to consumers because consumers ultimately work for the corporations. 
C)  Corporations always evade taxes so that consumers ultimately bear the tax burdens as taxpayers. 
D)  Most taxes on consumers are collected by corporations through sales taxes. 
A)  Corporations pass their tax burdens on to consumers by charging higher prices equal to the amount of the tax. 
B)  Corporations pass their tax burdens on to consumers because consumers ultimately work for the corporations. 
C)  Corporations always evade taxes so that consumers ultimately bear the tax burdens as taxpayers. 
D)  Most taxes on consumers are collected by corporations through sales taxes.

Question 18

The largest share of federal government tax receipts is derived from

Accepted Answer

A)  corporate income taxes. 
B)  excise taxes. 
C)  social insurance contributions. 
D)  individual income taxes. 
A)  corporate income taxes. 
B)  excise taxes. 
C)  social insurance contributions. 
D)  individual income taxes.

Question 19

-When a unit tax of $2 is levied on a product

Accepted Answer

A)  the entire $2 is paid by the consumer. 
B)  the entire $2 is paid by the producer. 
C)  both the consumer and producer pay $2 each. 
D)  the consumer pays part of the $2 and the producer pays the rest. 
A)  the entire $2 is paid by the consumer. 
B)  the entire $2 is paid by the producer. 
C)  both the consumer and producer pay $2 each. 
D)  the consumer pays part of the $2 and the producer pays the rest.

Question 20

Suppose the tax rate on the first $10,000 of income is 0 percent; 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 income over $60,000. Family A has an income of $55,000. What is the tax liability of Family A?

Accepted Answer

A)  $16,500 
B)  $6,600 
C)  $7,500 
D)  $3,400 
A)  $16,500 
B)  $6,600 
C)  $7,500 
D)  $3,400

Exam 6: Funding the Public Sector

Social Security taxes are

A unit tax

-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?

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

A unit tax of $1 will always

The imposition of a tax on a product

Dynamic tax analysis assumes

Suppose Jill has earned more income this year as compared to what she did last year. Her income tax has also increased. Does it necessarily mean that the income tax system is progressive? Explain.

A government is thinking about increasing the sales tax rate. Should it use static or dynamic tax analysis? Explain why one approach is better than the other.

A "flat tax" on personal income, in which the same tax rate is applied to every dollar of income earned by each taxpayer, is an example of

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

State and local governments receive most of their revenue from

If you were to face a marginal tax rate of 20 percent, how much would your tax bill increase when your income increased from $50,000 to $52,000?

-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

How can we anticipate the proportion of a newly imposed unit excise tax that consumers will pay?

Which of the following is an argument that the incidence of corporate taxation falls entirely on consumers?

The largest share of federal government tax receipts is derived from

-When a unit tax of $2 is levied on a product

Suppose the tax rate on the first $10,000 of income is 0 percent; 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 income over $60,000. Family A has an income of $55,000. What is the tax liability of Family A?

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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