Question 1

Which of the following government entities relies most heavily on sales taxes?

Accepted Answer

A) local government 
B) state government 
C) federal government 
D) the Social Security Administration 
A) local government 
B) state government 
C) federal government 
D) the Social Security Administration

Question 2

Loopholes increase the efficiency of the tax system by making taxpayers better off.

Accepted Answer

A) True 
 B)False

Question 3

The total burden of a tax equals tax collections minus excess burdens.

Accepted Answer

A) True 
 B)False

Question 4

For about the last 45 years, state and local taxes have remained relatively constant as a percentage of GDP.

Accepted Answer

A) True 
 B)False

Question 5

The federal government receives most of its revenue from three sources: personal income tax, corporate income tax, and payroll tax.

Accepted Answer

A) True 
 B)False

Question 6

A tax system under which an individual pays a higher fraction of his income in taxes at higher levels of income is formally described as

Accepted Answer

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

Question 7

Which of the following is an example of a direct tax?

Accepted Answer

A) sales tax 
B) property tax 
C) gasoline tax 
D) income tax 
A) sales tax 
B) property tax 
C) gasoline tax 
D) income tax

Question 8

The incidence of a tax refers to

Accepted Answer

A) who actually collects the tax. 
B) how frequently the tax is collected. 
C) who bears the economic burden of the tax. 
D) how the tax affects prices or wages. 
A) who actually collects the tax. 
B) how frequently the tax is collected. 
C) who bears the economic burden of the tax. 
D) how the tax affects prices or wages.

Question 9

Homeowners receive tax benefits that are not available to renters.

Accepted Answer

A) True 
 B)False

Question 10

The federal income tax is a good example of a

Accepted Answer

A) regressive tax. 
B) proportional tax. 
C) digressive tax. 
D) progressive tax. 
A) regressive tax. 
B) proportional tax. 
C) digressive tax. 
D) progressive tax.

Question 11

Under a progressive tax, the fraction of income paid in taxes

Accepted Answer

A) rises as income rises. 
B) is unchanged as income changes. 
C) falls as income rises. 
D) is proportional to the change in income. 
A) rises as income rises. 
B) is unchanged as income changes. 
C) falls as income rises. 
D) is proportional to the change in income.

Question 12

The United States Social Security system

Accepted Answer

A) pays benefits in direct accordance to what each individual has paid into the system. 
B) has paid the current generation of recipients less in benefits than it paid in payroll taxes. 
C) has paid the current generation of recipients more than it paid in payroll taxes. 
D) paid the earlier generations more and the current generation less than each paid in payroll taxes. 
A) pays benefits in direct accordance to what each individual has paid into the system. 
B) has paid the current generation of recipients less in benefits than it paid in payroll taxes. 
C) has paid the current generation of recipients more than it paid in payroll taxes. 
D) paid the earlier generations more and the current generation less than each paid in payroll taxes.

Question 13

A comprehensive income tax with few loopholes is efficient because labor

Accepted Answer

A) supply is very little affected by taxation. 
B) demand is very little affected by taxation. 
C) supply is highly responsive to taxation. 
D) demand is highly responsive to taxation. 
A) supply is very little affected by taxation. 
B) demand is very little affected by taxation. 
C) supply is highly responsive to taxation. 
D) demand is highly responsive to taxation.

Question 14

In the spring of 1993, President Clinton proposed an energy tax.At one point in the congressional review of the proposal there was discussion of various exemptions for farmers, truckers, etc.One plan was to dye fuel different colors to better track the appropriate tax on the user of the fuel.Economists would label these exemptions

Accepted Answer

A) loopholes. 
B) economically efficient. 
C) obviously fair. 
D) all of the above. 
A) loopholes. 
B) economically efficient. 
C) obviously fair. 
D) all of the above.

Question 15

Figure 18-3  
-In which panel of Figure 18-3 would an excise tax be borne entirely by the consumer?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 16

In Country X, the government requires employers to collect 9 percent of every employee's compensation as payroll tax.This is an example of

Accepted Answer

A) progressive tax. 
B) regressive tax. 
C) digressive tax. 
D) proportional tax. 
A) progressive tax. 
B) regressive tax. 
C) digressive tax. 
D) proportional tax.

Question 17

Most state governments finance their budgets through ____, and most local governments finance their budgets through ____.

Accepted Answer

A) income taxes; property taxes 
B) property taxes; sales taxes 
C) sales taxes; property taxes 
D) income taxes; sales taxes 
A) income taxes; property taxes 
B) property taxes; sales taxes 
C) sales taxes; property taxes 
D) income taxes; sales taxes

Question 18

Figure 18-2  
-Figure 18-2 shows the widget market before and after an excise tax is imposed.After the tax is imposed, the amount that a firm keeps for itself from the sale of each widget is ____.

Accepted Answer

A) $95 
B) $100 
C) $120 
D) $125 
A) $95 
B) $100 
C) $120 
D) $125

Question 19

Figure 18-2  
-Figure 18-2 shows the widget market before and after an excise tax is imposed.The tax per widget equals ____.

Accepted Answer

A) $5 
B) $20 
C) $25 
D) $30 
A) $5 
B) $20 
C) $25 
D) $30

Question 20

Describe the U.S.Social Security system and explain how it is funded.

Accepted Answer

Originally created as a trust fund syste

Exam 17: Taxation and Resource Allocation

Which of the following government entities relies most heavily on sales taxes?

Loopholes increase the efficiency of the tax system by making taxpayers better off.

The total burden of a tax equals tax collections minus excess burdens.

For about the last 45 years, state and local taxes have remained relatively constant as a percentage of GDP.

The federal government receives most of its revenue from three sources: personal income tax, corporate income tax, and payroll tax.

A tax system under which an individual pays a higher fraction of his income in taxes at higher levels of income is formally described as

Which of the following is an example of a direct tax?

The incidence of a tax refers to

Homeowners receive tax benefits that are not available to renters.

The federal income tax is a good example of a

Under a progressive tax, the fraction of income paid in taxes

The United States Social Security system

A comprehensive income tax with few loopholes is efficient because labor

Figure 18-3 -In which panel of Figure 18-3 would an excise tax be borne entirely by the consumer?

In Country X, the government requires employers to collect 9 percent of every employee's compensation as payroll tax.This is an example of

Most state governments finance their budgets through ____, and most local governments finance their budgets through ____.

Figure 18-2 -Figure 18-2 shows the widget market before and after an excise tax is imposed.After the tax is imposed, the amount that a firm keeps for itself from the sale of each widget is ____.

Figure 18-2 -Figure 18-2 shows the widget market before and after an excise tax is imposed.The tax per widget equals ____.

Describe the U.S.Social Security system and explain how it is funded.

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand an Initial Look

Consumer Choice Individual and Market Demand

Demand and Elasticity

Production Inputs and Cost Building Blocks for Supply Analysis

Output Price and Profit the Importance of Marginal Analysis

Securities Business Finance and the Economy the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power Regulation and Antitrust

The Case for Free Markets the Price System

The Shortcomings of Free Markets

Externalities the Environment and Natural Resources

Pricing the Factors of Production

Labor and Entrepreneurship the Human Inputs

Poverty Inequality and Discrimination

Is Us Economic Leadership Threatened

International Trade and Comparative Advantage

Filters

Most state governments finance their budgets through , and most local governments finance their budgets through .