Question 1

Explain the excess burden of a tax on luxury yachts.

Accepted Answer

A tax on luxury yachts, say of $1,000, w

Question 2

The excess burden of an excise tax is

Accepted Answer

A) greater the more inelastic the supply curve. 
B) greater the more elastic the demand curve. 
C) smaller the more elastic the supply curve. 
D) greater the more inelastic the demand curve. 
A) greater the more inelastic the supply curve. 
B) greater the more elastic the demand curve. 
C) smaller the more elastic the supply curve. 
D) greater the more inelastic the demand curve.

Question 3

Many economists believe a comprehensive income tax

Accepted Answer

A) would balance efficiency and equity well. 
B) would be less efficient than excise taxes. 
C) would be more efficient than a lump sum head tax. 
D) would be less equitable than a lump sum head tax. 
A) would balance efficiency and equity well. 
B) would be less efficient than excise taxes. 
C) would be more efficient than a lump sum head tax. 
D) would be less equitable than a lump sum head tax.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

A tax that does not change consumers' behavior creates no

Accepted Answer

A) economic burden. 
B) excess burden. 
C) tax revenue. 
D) tax incidence. 
A) economic burden. 
B) excess burden. 
C) tax revenue. 
D) tax incidence.

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Direct taxes are levied on specific economic activities.

Accepted Answer

A) True 
 B)False

Question 8

Social Security payroll taxes are

Accepted Answer

A) proportional with a rate of 7.65 percent. 
B) indirect taxes. 
C) progressive because total taxes increase with income. 
D) regressive because the tax is not applied after reaching an income threshold. 
A) proportional with a rate of 7.65 percent. 
B) indirect taxes. 
C) progressive because total taxes increase with income. 
D) regressive because the tax is not applied after reaching an income threshold.

Question 9

"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 10

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 11

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 12

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 13

The individual income tax, the inheritance tax, and the head tax are all examples of direct taxes.

Accepted Answer

A) True 
 B)False

Question 14

When people alter behavior in response to taxes, which of the following is not true?

Accepted Answer

A) Excess burden is created. 
B) Inefficiency occurs. 
C) Tax shifting might occur. 
D) The excise tax rate can increase. 
A) Excess burden is created. 
B) Inefficiency occurs. 
C) Tax shifting might occur. 
D) The excise tax rate can increase.

Question 15

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 16

Property taxes are the main source of funding for public schools.

Accepted Answer

A) True 
 B)False

Question 17

The federal government receives most of its revenues from

Accepted Answer

A) personal income taxes. 
B) property taxes. 
C) corporate taxes. 
D) excise taxes. 
A) personal income taxes. 
B) property taxes. 
C) corporate taxes. 
D) excise taxes.

Question 18

States rely primarily on income taxes as a source of revenue.

Accepted Answer

A) True 
 B)False

Question 19

Figure 18-2  
-On necessities, more of the incidence of tax is

Accepted Answer

A) borne by the producer. 
B) borne by the consumer. 
C) shared equally between the producer and the consumer. 
D) None of these are correct. 
A) borne by the producer. 
B) borne by the consumer. 
C) shared equally between the producer and the consumer. 
D) None of these are correct.

Question 20

Corporate income taxes account for about what percent of federal revenues?

Accepted Answer

A) 6 percent. 
B) 9 percent. 
C) 18 percent. 
D) 24 percent. 
A) 6 percent. 
B) 9 percent. 
C) 18 percent. 
D) 24 percent.

Exam 17: Taxation and Resource Allocation

Explain the excess burden of a tax on luxury yachts.

The excess burden of an excise tax is

Many economists believe a comprehensive income tax

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

A tax that does not change consumers' behavior creates no

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

Direct taxes are levied on specific economic activities.

Social Security payroll taxes are

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

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

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

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

The individual income tax, the inheritance tax, and the head tax are all examples of direct taxes.

When people alter behavior in response to taxes, which of the following is not true?

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

Property taxes are the main source of funding for public schools.

The federal government receives most of its revenues from

States rely primarily on income taxes as a source of revenue.

Figure 18-2 -On necessities, more of the incidence of tax is

Corporate income taxes account for about what percent of federal revenues?

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

Filters

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