Question 1

The economic burden of an excise tax

Accepted Answer

A)  can usually be partially shifted from buyers onto sellers. 
B)  equals the revenue from the tax. 
C)  is less than the burden of an income tax that would raise the same revenue. 
D)  is shared equally by buyers and sellers. 
A)  can usually be partially shifted from buyers onto sellers. 
B)  equals the revenue from the tax. 
C)  is less than the burden of an income tax that would raise the same revenue. 
D)  is shared equally by buyers and sellers.

Question 2

Which of the following is exempt from taxation (a tax exemption)?

Accepted Answer

A)  interest on a home mortgage 
B)  interest from municipal bonds 
C)  rent 
D)  property taxes 
A)  interest on a home mortgage 
B)  interest from municipal bonds 
C)  rent 
D)  property taxes

Question 3

In 1984, the South Carolina State Supreme Court ruled that a 20 percent admission tax on X-rated movies was unconstitutional.When the affected cinemas sought a refund of collected taxes, they were denied on the grounds that the tax, although collected by the theater, was indeed paid by the theatergoers.The Supreme Court apparently believed

Accepted Answer

A)  the supply of X-rated movies was perfectly elastic. 
B)  the demand for X-rated movies was perfectly inelastic. 
C)  the legislation intended that the theatergoers pay the tax. 
D)  the burden fell on the theatergoers-there are no excess burdens on the theater. 
A)  the supply of X-rated movies was perfectly elastic. 
B)  the demand for X-rated movies was perfectly inelastic. 
C)  the legislation intended that the theatergoers pay the tax. 
D)  the burden fell on the theatergoers-there are no excess burdens on the theater.

Question 4

Are property taxes progressive or regressive?

Accepted Answer

The nature of property taxes is controve

Question 5

A regressive tax is one in which the average tax rate falls as income rises.

Accepted Answer

A) True 
 B)False

Question 6

Above a certain income the marginal social security tax drops to zero.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following taxes is most likely to be shifted?

Accepted Answer

A)  a property tax on an owner-occupied residence 
B)  a progressive income tax 
C)  a flat-rate state income tax 
D)  a general sales tax 
A)  a property tax on an owner-occupied residence 
B)  a progressive income tax 
C)  a flat-rate state income tax 
D)  a general sales tax

Question 8

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 9

The ____ is the fraction of each additional dollar of income that is paid in taxes.

Accepted Answer

A)  deferred tax rate 
B)  cumulative tax rate 
C)  average tax rate 
D)  marginal tax rate 
A)  deferred tax rate 
B)  cumulative tax rate 
C)  average tax rate 
D)  marginal tax rate

Question 10

"People who make more money should pay higher taxes" is an example of

Accepted Answer

A)  the benefits principle. 
B)  horizontal equity. 
C)  vertical efficiency. 
D)  the ability-to-pay principle. 
A)  the benefits principle. 
B)  horizontal equity. 
C)  vertical efficiency. 
D)  the ability-to-pay principle.

Question 11

Members of the European Union (EU), rely heavily on this form of indirect taxes.

Accepted Answer

A)  Value-added tax 
B)  Excise tax 
C)  Property tax 
D)  Sales tax 
A)  Value-added tax 
B)  Excise tax 
C)  Property tax 
D)  Sales tax

Question 12

The payroll tax receipts

Accepted Answer

A)  are used to reduce the national debt. 
B)  are invested in private business for future payments. 
C)  pay off current recipients of Social Security payments. 
D)  go directly into a trust fund for investment in private businesses. 
A)  are used to reduce the national debt. 
B)  are invested in private business for future payments. 
C)  pay off current recipients of Social Security payments. 
D)  go directly into a trust fund for investment in private businesses.

Question 13

Employers can shift payroll taxes by substituting capital for labor.

Accepted Answer

A) True 
 B)False

Question 14

Two reasons why the Social Security system nearly went bankrupt in the early 1980s are: (i) wages were indexed but benefits were not; (ii) the percentage of elderly people in the country declined.

Accepted Answer

A)  i and ii 
B)  i but not ii 
C)  ii but not i 
D)  neither i nor ii 
A)  i and ii 
B)  i but not ii 
C)  ii but not i 
D)  neither i nor ii

Question 15

The corporate tax applies to firms' total revenues.

Accepted Answer

A) True 
 B)False

Question 16

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 17

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.

Question 18

Suppose that the government imposes an excise tax on widgets.The portion of the tax borne by the buyer of widgets depends upon

Accepted Answer

A)  elasticity of demand. 
B)  income of buyers. 
C)  size of the tax that is imposed. 
D)  cross elasticity of demand between widgets and floogles. 
A)  elasticity of demand. 
B)  income of buyers. 
C)  size of the tax that is imposed. 
D)  cross elasticity of demand between widgets and floogles.

Question 19

Sales taxes, property taxes, and value-added taxes are examples of indirect taxes.

Accepted Answer

A) True 
 B)False

Question 20

In 2005, the median income of renters was $26,317 and the median income of homeowners was $50,505.If imputed rent were added to household income or rent became deductible, the personal income tax would become

Accepted Answer

A)  more progressive. 
B)  more regressive. 
C)  about proportional. 
D)  less progressive. 
A)  more progressive. 
B)  more regressive. 
C)  about proportional. 
D)  less progressive.

Exam 18: Taxation and Resource Allocation

The economic burden of an excise tax

Which of the following is exempt from taxation (a tax exemption)?

Are property taxes progressive or regressive?

A regressive tax is one in which the average tax rate falls as income rises.

Above a certain income the marginal social security tax drops to zero.

Which of the following taxes is most likely to be shifted?

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

The ____ is the fraction of each additional dollar of income that is paid in taxes.

"People who make more money should pay higher taxes" is an example of

Members of the European Union (EU), rely heavily on this form of indirect taxes.

The payroll tax receipts

Employers can shift payroll taxes by substituting capital for labor.

Two reasons why the Social Security system nearly went bankrupt in the early 1980s are: (i) wages were indexed but benefits were not; (ii) the percentage of elderly people in the country declined.

The corporate tax applies to firms' total revenues.

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?

If the demand curve for a product is vertical, then

Suppose that the government imposes an excise tax on widgets.The portion of the tax borne by the buyer of widgets depends upon

Sales taxes, property taxes, and value-added taxes are examples of indirect taxes.

In 2005, the median income of renters was $26,317 and the median income of homeowners was $50,505.If imputed rent were added to household income or rent became deductible, the personal income tax would become

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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