Question 1

A $10 fee to obtain a driver's license is a

Accepted Answer

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

Question 2

The payroll tax system is a proportional tax for all income earners.

Accepted Answer

A) True 
 B)False

Question 3

A proportional tax is one in which the fraction of income paid in taxes rises as a person's income increases.

Accepted Answer

A) True 
 B)False

Question 4

Explain why some argue that income tax loopholes primarily benefit the rich.

Accepted Answer

Since the personal income tax is progres

Question 5

A factor that would reduce the ability of the Social Security system to maintain current benefit levels with constant tax rates is

Accepted Answer

A) rapid real wage growth. 
B) reduced population growth. 
C) adoption of a "pay as you go" system. 
D) a slowdown in inflation. 
A) rapid real wage growth. 
B) reduced population growth. 
C) adoption of a "pay as you go" system. 
D) a slowdown in inflation.

Question 6

A progressive tax is one for which the percentage of each added dollar of income paid in taxes

Accepted Answer

A) increases as income increases. 
B) remains the same as income increases. 
C) decreases as income increases. 
D) is zero after a certain maximum income is reached. 
A) increases as income increases. 
B) remains the same as income increases. 
C) decreases as income increases. 
D) is zero after a certain maximum income is reached.

Question 7

The authors of the text suggest that a comprehensive personal income tax with few loopholes would be efficient and equitable.What is their reasoning for this statement?

Accepted Answer

They argue that a personal income tax wi

Question 8

The benefits principle is often used to justify

Accepted Answer

A) the progressive income tax. 
B) a flat income tax. 
C) a regressive excise tax. 
D) earmarking the proceeds from taxes for specific public services. 
A) the progressive income tax. 
B) a flat income tax. 
C) a regressive excise tax. 
D) earmarking the proceeds from taxes for specific public services.

Question 9

What is personal income tax? On which principle does the federal government levy this tax?

Accepted Answer

The personal income tax is a tax levied

Question 10

An efficient tax is one that raises the desired tax revenue but creates the least possible

Accepted Answer

A) total burden. 
B) excess burden. 
C) tax incidence. 
D) tax shifting. 
A) total burden. 
B) excess burden. 
C) tax incidence. 
D) tax shifting.

Question 11

Figure 18-1  
-According to the graph in Figure 18-1, tax collections will be which of the following?

Accepted Answer

A) 14 million 
B) 1.4 million 
C) 12 million 
D) 1 million 
A) 14 million 
B) 1.4 million 
C) 12 million 
D) 1 million

Question 12

Figure 18-1  
-According to the graph in Figure 18-1, the tax is which of the following?

Accepted Answer

A) 400 
B) 600 
C) 1,000 
D) 200 
A) 400 
B) 600 
C) 1,000 
D) 200

Question 13

Tax loopholes are equally available to all taxpayers.

Accepted Answer

A) True 
 B)False

Question 14

In the area of taxation, the trade-off between equity and efficiency

Accepted Answer

A) never occurs since efficient taxes are often the most progressive. 
B) is relevant as efficient taxes are often regressive. 
C) is irrelevant. 
D) is relevant because efficient taxes are often progressive. 
A) never occurs since efficient taxes are often the most progressive. 
B) is relevant as efficient taxes are often regressive. 
C) is irrelevant. 
D) is relevant because efficient taxes are often progressive.

Question 15

A tax that reduces economic efficiency is always bad policy.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following best reflects the ability-to-pay philosophy of taxation?

Accepted Answer

A) an excise tax on coffee 
B) an excise tax on gasoline 
C) a progressive income tax 
D) a tax on residential property 
A) an excise tax on coffee 
B) an excise tax on gasoline 
C) a progressive income tax 
D) a tax on residential property

Question 17

Federal tax loopholes in personal income tax provide benefits only to very high-income people.

Accepted Answer

A) True 
 B)False

Question 18

An excise tax

Accepted Answer

A) is a sales tax on the purchase of a particular good or service. 
B) is a tax on the profits earned from the sale of an asset. 
C) represents a surcharge on corporate profits beyond the normal corporate tax rate. 
D) is a tax on income-earning rental property. 
A) is a sales tax on the purchase of a particular good or service. 
B) is a tax on the profits earned from the sale of an asset. 
C) represents a surcharge on corporate profits beyond the normal corporate tax rate. 
D) is a tax on income-earning rental property.

Question 19

Taxation may improve the social welfare when the taxed good

Accepted Answer

A) is socially undesirable (like, in some views, liquor and pornography). 
B) imposes negative externalities. 
C) is overproduced under a free-market system. 
D) All of the above are correct. 
A) is socially undesirable (like, in some views, liquor and pornography). 
B) imposes negative externalities. 
C) is overproduced under a free-market system. 
D) All of the above are correct.

Question 20

If the demand curve for a product is vertical, then

Accepted Answer

A) consumers will refuse to bear any share of tax burden. 
B) producers will bear the larger share of the tax burden. 
C) consumers will bear the entire tax burden. 
D) producers and consumers will equally share the tax burden. 
A) consumers will refuse to bear any share of tax burden. 
B) producers will bear the larger share of the tax burden. 
C) consumers will bear the entire tax burden. 
D) producers and consumers will equally share the tax burden.

Exam 17: Taxation and Resource Allocation

A $10 fee to obtain a driver's license is a

The payroll tax system is a proportional tax for all income earners.

A proportional tax is one in which the fraction of income paid in taxes rises as a person's income increases.

Explain why some argue that income tax loopholes primarily benefit the rich.

A factor that would reduce the ability of the Social Security system to maintain current benefit levels with constant tax rates is

A progressive tax is one for which the percentage of each added dollar of income paid in taxes

The authors of the text suggest that a comprehensive personal income tax with few loopholes would be efficient and equitable.What is their reasoning for this statement?

The benefits principle is often used to justify

What is personal income tax? On which principle does the federal government levy this tax?

An efficient tax is one that raises the desired tax revenue but creates the least possible

Figure 18-1 -According to the graph in Figure 18-1, tax collections will be which of the following?

Figure 18-1 -According to the graph in Figure 18-1, the tax is which of the following?

Tax loopholes are equally available to all taxpayers.

In the area of taxation, the trade-off between equity and efficiency

A tax that reduces economic efficiency is always bad policy.

Which of the following best reflects the ability-to-pay philosophy of taxation?

Federal tax loopholes in personal income tax provide benefits only to very high-income people.

An excise tax

Taxation may improve the social welfare when the taxed good

If the demand curve for a product is vertical, then

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

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