Question 1

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 2

For about the past 45 years, 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 not true about the tax exemptions on interest from municipal bonds?

Accepted Answer

A) It is a tax loophole. 
B) It reduces excess tax burden. 
C) It helps the wealthy the most. 
D) It makes the tax system less progressive. 
A) It is a tax loophole. 
B) It reduces excess tax burden. 
C) It helps the wealthy the most. 
D) It makes the tax system less progressive.

Question 4

If demand is more elastic, the portion of an excise tax borne by a buyer will

Accepted Answer

A) increase. 
B) decrease. 
C) be unchanged. 
D) increase for normal goods, decrease for inferior goods. 
A) increase. 
B) decrease. 
C) be unchanged. 
D) increase for normal goods, decrease for inferior goods.

Question 5

Which of the following is not true of tax loopholes?

Accepted Answer

A) They reduce the progressivity of the federal income tax. 
B) They encourage particular patterns of behavior. 
C) They include exemption of interest earned on municipal bonds. 
D) They reduce excess burdens. 
A) They reduce the progressivity of the federal income tax. 
B) They encourage particular patterns of behavior. 
C) They include exemption of interest earned on municipal bonds. 
D) They reduce excess burdens.

Question 6

Figure 18-2  
-Figure 18-2 shows the widget market before and after an excise tax is imposed.What percentage of the tax per widget is borne by consumers, considering the true economic incidence of the tax?

Accepted Answer

A) 0 percent 
B) 20 percent 
C) 50 percent 
D) 80 percent 
A) 0 percent 
B) 20 percent 
C) 50 percent 
D) 80 percent

Question 7

Taxation can promote good social policy while minimizing economic inefficiency.

Accepted Answer

A) True 
 B)False

Question 8

The corporate tax applies to firms' total revenues.

Accepted Answer

A) True 
 B)False

Question 9

Which is not a significant source of state and local government revenues?

Accepted Answer

A) Payroll taxes 
B) Property taxes 
C) Sales taxes 
D) The federal government 
A) Payroll taxes 
B) Property taxes 
C) Sales taxes 
D) The federal government

Question 10

Suppose Mishka buys 15 apples per month her total tax burden from a $3 per apple tax is $100 every month.

Accepted Answer

A) Her excess burden is $45. 
B) Her excess burden is $6.67 per apple. 
C) Her excess burden is greater than her taxes paid. 
D) Her taxes paid are greater than her tax burden. 
A) Her excess burden is $45. 
B) Her excess burden is $6.67 per apple. 
C) Her excess burden is greater than her taxes paid. 
D) Her taxes paid are greater than her tax burden.

Question 11

The payroll tax is a direct tax.

Accepted Answer

A) True 
 B)False

Question 12

Which is least likely to help in understanding who bears the tax incidence?

Accepted Answer

A) Supply elasticity 
B) Demand elasticity 
C) Who the tax is levied on 
D) Whether or not supply is fixed 
A) Supply elasticity 
B) Demand elasticity 
C) Who the tax is levied on 
D) Whether or not supply is fixed

Question 13

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 14

Mrs.Dodge has $8 million in income and pays no income taxes.Her income is most likely

Accepted Answer

A) capital gains. 
B) interest on corporate bonds. 
C) interest on municipal bonds. 
D) offset by mortgage interest. 
A) capital gains. 
B) interest on corporate bonds. 
C) interest on municipal bonds. 
D) offset by mortgage interest.

Question 15

The incidence of cigarette taxes falls mainly on

Accepted Answer

A) smokers. 
B) retail sellers of cigarettes. 
C) cigarette producers. 
D) people who are no longer exposed to second-hand smoke. 
A) smokers. 
B) retail sellers of cigarettes. 
C) cigarette producers. 
D) people who are no longer exposed to second-hand smoke.

Question 16

The Social Security Trust Fund

Accepted Answer

A) is insolvent relying on payments from the general fund. 
B) is in surplus but the surplus is falling. 
C) generates dividends and investment income to fund Social Security payments. 
D) is managed by the Federal Reserve. 
A) is insolvent relying on payments from the general fund. 
B) is in surplus but the surplus is falling. 
C) generates dividends and investment income to fund Social Security payments. 
D) is managed by the Federal Reserve.

Question 17

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 18

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 19

Consumers can avoid excess tax burden by purchasing more goods that are exempt from sales taxes.

Accepted Answer

A) True 
 B)False

Question 20

If Jenny's taxes are $10,000 when she earns $50,000 and $12,000 when she earns $60,000, then

Accepted Answer

A) Jenny faces a progressive tax. 
B) Jenny faces a regressive tax. 
C) Jenny faces a proportional tax. 
D) Jenny faces a rising marginal tax rate. 
A) Jenny faces a progressive tax. 
B) Jenny faces a regressive tax. 
C) Jenny faces a proportional tax. 
D) Jenny faces a rising marginal tax rate.

Exam 17: Taxation and Resource Allocation

If a tax is proportional, the average tax rate

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

Which of the following is not true about the tax exemptions on interest from municipal bonds?

If demand is more elastic, the portion of an excise tax borne by a buyer will

Which of the following is not true of tax loopholes?

Figure 18-2 -Figure 18-2 shows the widget market before and after an excise tax is imposed.What percentage of the tax per widget is borne by consumers, considering the true economic incidence of the tax?

Taxation can promote good social policy while minimizing economic inefficiency.

The corporate tax applies to firms' total revenues.

Which is not a significant source of state and local government revenues?

Suppose Mishka buys 15 apples per month her total tax burden from a $3 per apple tax is $100 every month.

The payroll tax is a direct tax.

Which is least likely to help in understanding who bears the tax incidence?

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?

Mrs.Dodge has $8 million in income and pays no income taxes.Her income is most likely

The incidence of cigarette taxes falls mainly on

The Social Security Trust Fund

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

The incidence of a tax refers to

Consumers can avoid excess tax burden by purchasing more goods that are exempt from sales taxes.

If Jenny's taxes are $10,000 when she earns $50,000 and $12,000 when she earns $60,000, then

What Is Economics

The Economony: 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

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of 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

Contemporary Issues in the Useconomy

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