Question 1

-An excise tax on gasoline causes

Accepted Answer

A)  supply of gasoline to shift to the left. 
B)  a reduction in the quantity of gasoline demanded. 
C)  the market clearing price of gasoline to rise. 
D)  All of the above are correct. 
A)  supply of gasoline to shift to the left. 
B)  a reduction in the quantity of gasoline demanded. 
C)  the market clearing price of gasoline to rise. 
D)  All of the above are correct.

Question 2

The distributions of tax burdens among various groups in society is known as

Accepted Answer

A)  a proportional tax. 
B)  a progressive tax. 
C)  a regressive tax. 
D)  tax incidence. 
A)  a proportional tax. 
B)  a progressive tax. 
C)  a regressive tax. 
D)  tax incidence.

Question 3

Corporate profits are taxed twice because

Accepted Answer

A)  taxes are collected on profits before profits are distributed to shareholders. 
B)  the government wants to minimize the amount of tax paid on capital gains. 
C)  it is economically efficient to reduce the amount of retained earnings. 
D)  capital gains are not indexed to the rate of inflation. 
A)  taxes are collected on profits before profits are distributed to shareholders. 
B)  the government wants to minimize the amount of tax paid on capital gains. 
C)  it is economically efficient to reduce the amount of retained earnings. 
D)  capital gains are not indexed to the rate of inflation.

Question 4

A tax levied on purchases of a particular good or service

Accepted Answer

A)  is illegal because it is discriminatory. 
B)  always leads to a reduction in total tax revenues. 
C)  always leads to an increase in total tax revenues. 
D)  is an excise tax. 
A)  is illegal because it is discriminatory. 
B)  always leads to a reduction in total tax revenues. 
C)  always leads to an increase in total tax revenues. 
D)  is an excise tax.

Question 5

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

Accepted Answer

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

Question 6

When income is $15,000, the amount of income taxes owed is $1,500; 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)  10 percent. 
C)  13.3 percent. 
D)  20 percent. 
A)  75 percent. 
B)  10 percent. 
C)  13.3 percent. 
D)  20 percent.

Question 7

If we wanted to analyze the effects of a $2 unit tax graphically, we would shift the

Accepted Answer

A)  supply curve upward by $2. 
B)  supply curve downward by $2. 
C)  demand curve upward by $2. 
D)  demand curve downward by $2. 
A)  supply curve upward by $2. 
B)  supply curve downward by $2. 
C)  demand curve upward by $2. 
D)  demand curve downward by $2.

Question 8

Corporate profits are

Accepted Answer

A)  taxed at too low a rate. 
B)  taxed only when a stockholder sells his or her shares of stock. 
C)  taxed twice-once by the corporate tax system, and again by personal tax system when they are paid to stockholders as dividends. 
D)  taxed three times-once by the corporate tax system, again by the personal tax system, and again as capital gains. 
A)  taxed at too low a rate. 
B)  taxed only when a stockholder sells his or her shares of stock. 
C)  taxed twice-once by the corporate tax system, and again by personal tax system when they are paid to stockholders as dividends. 
D)  taxed three times-once by the corporate tax system, again by the personal tax system, and again as capital gains.

Question 9

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 10

The Social Security program is financed directly from

Accepted Answer

A)  voluntary contributions by the elderly. 
B)  sales taxes on goods with inelastic demand. 
C)  payroll taxes. 
D)  poll taxes. 
A)  voluntary contributions by the elderly. 
B)  sales taxes on goods with inelastic demand. 
C)  payroll taxes. 
D)  poll taxes.

Question 11

Advocates of a progressive income tax use arguments EXCEPT for which of the following?

Accepted Answer

A)  A progressive tax system taxes according to ability to pay. 
B)  A progressive tax system taxes according to benefits received. 
C)  A progressive tax system helps redistribute income away from the rich and towards the poor. 
D)  A progressive tax system maximizes government revenues. 
A)  A progressive tax system taxes according to ability to pay. 
B)  A progressive tax system taxes according to benefits received. 
C)  A progressive tax system helps redistribute income away from the rich and towards the poor. 
D)  A progressive tax system maximizes government revenues.

Question 12

A person experiences a capital gain if she

Accepted Answer

A)  sells an asset for more than what she paid for it. 
B)  settles a debt. 
C)  invests in a physical capital project. 
D)  contributes to a country's production of capital goods. 
A)  sells an asset for more than what she paid for it. 
B)  settles a debt. 
C)  invests in a physical capital project. 
D)  contributes to a country's production of capital goods.

Question 13

How do taxation and user charges compare as government revenue sources?

Accepted Answer

A)  Each generates about the same amount of government revenue. 
B)  Revenues from taxation are much greater than revenues from user charges. 
C)  User charges generate much more revenue than do taxes. 
D)  We don't know because the government does not publish revenue figures broken down. 
A)  Each generates about the same amount of government revenue. 
B)  Revenues from taxation are much greater than revenues from user charges. 
C)  User charges generate much more revenue than do taxes. 
D)  We don't know because the government does not publish revenue figures broken down.

Question 14

-Refer to the above figure. An excise tax of $0.50 was imposed on this good. From the figure we can see that the

Accepted Answer

A)  producer will bear most of the tax. 
B)  consumer will bear most of the tax. 
C)  consumer and producer will share the tax. 
D)  amount of the tax collected is less than $0.50. 
A)  producer will bear most of the tax. 
B)  consumer will bear most of the tax. 
C)  consumer and producer will share the tax. 
D)  amount of the tax collected is less than $0.50.

Question 15

-Using the above figure, if the government levies a new unit tax in this market, S represents the original supply curve, and St represents the after-tax supply curve, then the revenues that the government collects from imposing this tax is represented on this graph by

Accepted Answer

A)  OAEG. 
B)  OBCG. 
C)  BAEC. 
D)  CEF. 
A)  OAEG. 
B)  OBCG. 
C)  BAEC. 
D)  CEF.

Question 16

The reason a corporation has retained earnings is to

Accepted Answer

A)  pay unemployment taxes. 
B)  make investments that will increase the value of the stock. 
C)  avoid the double taxation of corporate profits. 
D)  be able to make unemployment payments. 
A)  pay unemployment taxes. 
B)  make investments that will increase the value of the stock. 
C)  avoid the double taxation of corporate profits. 
D)  be able to make unemployment payments.

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 $82,000 while Family B has income of $37,000. What are the marginal tax rates faced by the two families?

Accepted Answer

Since Family A's income ($82,0

Question 18

The Mayor of Stuckeyville is considering increasing the tax on bowling. He is confident that tax revenues will increase but recognizes the possibility that they may decrease. The mayor is engaging in

Accepted Answer

A)  dynamic tax analysis. 
B)  static tax analysis. 
C)  a policy that will cause the tax base to increase. 
D)  a policy that will cause the tax base to remain unchanged. 
A)  dynamic tax analysis. 
B)  static tax analysis. 
C)  a policy that will cause the tax base to increase. 
D)  a policy that will cause the tax base to remain unchanged.

Question 19

Which of the following is TRUE of an excise tax?

Accepted Answer

A)  An excise tax is always a unit tax. 
B)  An excise tax is levied on purchases of particular good or service. 
C)  An excise tax is based on an individual's income. 
D)  Imposing an excise tax shifts the market demand curve. 
A)  An excise tax is always a unit tax. 
B)  An excise tax is levied on purchases of particular good or service. 
C)  An excise tax is based on an individual's income. 
D)  Imposing an excise tax shifts the market demand curve.

Question 20

Eight years ago you purchased an asset for $100,000 that has yielded a nominal capital gain of $30,000. If you sold the asset today, your inflation-adjusted capital gains would be zero due to inflation over the last eight years. The capital gains tax is 28 percent. If you sold the asset today your tax liability would be

Accepted Answer

A)  zero. 
B)  $28,000. 
C)  $8,400. 
D)  cannot be determined without more information. 
A)  zero. 
B)  $28,000. 
C)  $8,400. 
D)  cannot be determined without more information.

Exam 6: Funding the Public Sector

-An excise tax on gasoline causes

The distributions of tax burdens among various groups in society is known as

Corporate profits are taxed twice because

A tax levied on purchases of a particular good or service

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

When income is $15,000, the amount of income taxes owed is $1,500; 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

If we wanted to analyze the effects of a $2 unit tax graphically, we would shift the

Corporate profits are

State sales taxes are operated as a system of

The Social Security program is financed directly from

Advocates of a progressive income tax use arguments EXCEPT for which of the following?

A person experiences a capital gain if she

How do taxation and user charges compare as government revenue sources?

-Refer to the above figure. An excise tax of $0.50 was imposed on this good. From the figure we can see that the

-Using the above figure, if the government levies a new unit tax in this market, S represents the original supply curve, and St represents the after-tax supply curve, then the revenues that the government collects from imposing this tax is represented on this graph by

The reason a corporation has retained earnings is to

The Mayor of Stuckeyville is considering increasing the tax on bowling. He is confident that tax revenues will increase but recognizes the possibility that they may decrease. The mayor is engaging in

Which of the following is TRUE of an excise 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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