Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Since the early 1970s, state and local taxes have remained relatively constant as a percentage of GDP.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is an example of an indirect tax?

Accepted Answer

A)  value-added tax 
B)  income tax 
C)  inheritance tax 
D)  head tax 
A)  value-added tax 
B)  income tax 
C)  inheritance tax 
D)  head tax

Question 4

Interest income on municipal bonds

Accepted Answer

A)  is subject to a portion of federal income tax. 
B)  is taxable on amounts greater than $15,000 per year. 
C)  is payable quarterly, at time of coupon redemption. 
D)  is exempt from federal income tax. 
A)  is subject to a portion of federal income tax. 
B)  is taxable on amounts greater than $15,000 per year. 
C)  is payable quarterly, at time of coupon redemption. 
D)  is exempt from federal income tax.

Question 5

The largest single category of expenditures in the federal budget is traditionally

Accepted Answer

A)  national defense. 
B)  interest on the national debt. 
C)  health and public housing programs. 
D)  pensions and income security programs. 
A)  national defense. 
B)  interest on the national debt. 
C)  health and public housing programs. 
D)  pensions and income security programs.

Question 6

If a tax is proportional, the average tax rate

Accepted Answer

A)  remains the same as income rises. 
B)  rises as income rises. 
C)  falls as income rises. 
D)  falls as income falls. 
A)  remains the same as income rises. 
B)  rises as income rises. 
C)  falls as income rises. 
D)  falls as income falls.

Question 7

The concept of equity pertains to the fairness of a tax.

Accepted Answer

A) True 
 B)False

Question 8

Taxation alters the behavior patterns of individuals.

Accepted Answer

A) True 
 B)False

Question 9

Vertical equity in income taxation refers to the notion that persons with different levels of income should be taxed differently.

Accepted Answer

A) True 
 B)False

Question 10

Under a proportional 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 11

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 12

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 13

Economists generally think that the ____ tax is among the best ways to raise revenue.

Accepted Answer

A)  property 
B)  personal income 
C)  sales 
D)  value-added 
A)  property 
B)  personal income 
C)  sales 
D)  value-added

Question 14

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 15

Since the early 1950s, federal taxes have remained relatively constant as a percentage of GDP.

Accepted Answer

A) True 
 B)False

Question 16

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 17

The payroll tax is the federal government's biggest source of revenue.

Accepted Answer

A) True 
 B)False

Question 18

A head tax is

Accepted Answer

A)  always regressive. 
B)  an indirect tax on the value of property. 
C)  the primary tax used by U.S.municipalities to raise revenue. 
D)  All of the above are correct. 
A)  always regressive. 
B)  an indirect tax on the value of property. 
C)  the primary tax used by U.S.municipalities to raise revenue. 
D)  All of the above are correct.

Question 19

The head tax is regressive.

Accepted Answer

A) True 
 B)False

Question 20

Who bears the burden of an excise tax if demand is perfectly inelastic; if supply is perfectly inelastic? Use graphs in your explanation.

Accepted Answer

If demand is perfectly inelastic and an

Exam 18: Taxation and Resource Allocation

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

Since the early 1970s, state and local taxes have remained relatively constant as a percentage of GDP.

Which of the following is an example of an indirect tax?

Interest income on municipal bonds

The largest single category of expenditures in the federal budget is traditionally

If a tax is proportional, the average tax rate

The concept of equity pertains to the fairness of a tax.

Taxation alters the behavior patterns of individuals.

Vertical equity in income taxation refers to the notion that persons with different levels of income should be taxed differently.

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

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

Taxation may improve the social welfare when the taxed good

Economists generally think that the ____ tax is among the best ways to raise revenue.

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

Since the early 1950s, federal taxes have remained relatively constant as a percentage of GDP.

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 ____.

The payroll tax is the federal government's biggest source of revenue.

A head tax is

The head tax is regressive.

Who bears the burden of an excise tax if demand is perfectly inelastic; if supply is perfectly inelastic? Use graphs in your explanation.

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 I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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