Question 1

With respect to local finance,

Accepted Answer

A) death and gift taxes are the major source of revenue and most expenditures are for hospitals and health services. 
B) the corporate income tax is the major source of revenue and natural resource development is the major type of expenditure. 
C) property taxes are the basic source of revenue and education is the major type of expenditure. 
D) sales and excise taxes are the major source of revenue and highway construction and maintenance is the major type of expenditure. 
A) death and gift taxes are the major source of revenue and most expenditures are for hospitals and health services. 
B) the corporate income tax is the major source of revenue and natural resource development is the major type of expenditure. 
C) property taxes are the basic source of revenue and education is the major type of expenditure. 
D) sales and excise taxes are the major source of revenue and highway construction and maintenance is the major type of expenditure. C

Question 2

Which of the following statements about payroll taxes is false?

Accepted Answer

A) They provide funds for Social Security. 
B) They include Medicare taxes. 
C) Both employers and employees pay these taxes. 
D) They are lump-sum taxes not based on wages/salaries. 
A) They provide funds for Social Security. 
B) They include Medicare taxes. 
C) Both employers and employees pay these taxes. 
D) They are lump-sum taxes not based on wages/salaries. D

Question 3

In the diagram, solid arrows reflect real flows, while broken arrows are monetary flows. Flow (5)might represent

Accepted Answer

A) personal income tax revenues. 
B) the provision of public schools by local governments. 
C) the purchase of laptop computers by the state of Iowa. 
D) wage payments to police officers and firefighters. 
A) personal income tax revenues. 
B) the provision of public schools by local governments. 
C) the purchase of laptop computers by the state of Iowa. 
D) wage payments to police officers and firefighters. B

Question 4

Suppose that government imposes a specific excise tax on product X of $2 per unit and that the price elasticity of demand for X is unitary (coefficient = 1). If the incidence of the tax is such that the producers of X pay $1.75 of the tax and the consumers pay $0.25, we can conclude that the

Accepted Answer

A) supply of X is inelastic. 
B) supply of X is elastic. 
C) supply of X is unitary elastic. 
D) demand for X is elastic. 
A) supply of X is inelastic. 
B) supply of X is elastic. 
C) supply of X is unitary elastic. 
D) demand for X is elastic.

Question 5

The U.S. tax-transfer system (as distinct from the tax system alone)is

Accepted Answer

A) progressive. 
B) proportional. 
C) bimodal. 
D) regressive. 
A) progressive. 
B) proportional. 
C) bimodal. 
D) regressive.

Question 6

The Social Security tax is regressive because

Accepted Answer

A) the Social Security tax rate applied does not rise with the salary level. 
B) no Social Security tax is collected for incomes in excess of a "cap" income level. 
C) each individual must pay a set percentage of his or her income in Social Security taxes. 
D) as income increases, the Social Security tax rate increases at a decreasing rate. 
A) the Social Security tax rate applied does not rise with the salary level. 
B) no Social Security tax is collected for incomes in excess of a "cap" income level. 
C) each individual must pay a set percentage of his or her income in Social Security taxes. 
D) as income increases, the Social Security tax rate increases at a decreasing rate.

Question 7

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

Accepted Answer

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

Question 8

The incidence of taxation refers to

Accepted Answer

A) who in society actually pays a tax. 
B) the structure of basic income tax rates. 
C) whether taxes are progressive or regressive. 
D) whether or not the benefits-received principle applies. 
A) who in society actually pays a tax. 
B) the structure of basic income tax rates. 
C) whether taxes are progressive or regressive. 
D) whether or not the benefits-received principle applies.

Question 9

With a tax of $4,000 on $20,000 of income and $6,000 on $30,000 of income, the average tax rate is

Accepted Answer

A) constant at 10 percent. 
B) lower than the marginal tax rate. 
C) equal to the marginal tax rate. 
D) higher than the marginal tax rate, which is equal to zero. 
A) constant at 10 percent. 
B) lower than the marginal tax rate. 
C) equal to the marginal tax rate. 
D) higher than the marginal tax rate, which is equal to zero.

Question 10

(Advanced analysis)The equations for the demand and supply curves for a particular product are P = 10 − 0.4 Q and P = 2 + 0.4 Q, where P is price and Q is quantity expressed in units of 100. After an excise tax is imposed on the product, the supply equation is P = 3 + 0.4 Q. Government's revenue from this tax is

Accepted Answer

A) $875. 
B) $750. 
C) $1,500. 
D) $1,500 
A) $875. 
B) $750. 
C) $1,500. 
D) $1,500

Question 11

Which of the following is not a significant source of revenue for the U.S. federal government?

Accepted Answer

A) personal income taxes 
B) corporate income taxes 
C) property taxes 
D) payroll taxes 
A) personal income taxes 
B) corporate income taxes 
C) property taxes 
D) payroll taxes

Question 12

Refer to the income tax schedule given in the table. If your taxable income is $4,000, your average tax rate will be

Accepted Answer

A) 30 percent. 
B) 15 percent. 
C) 10 percent. 
D) 20 percent. 
A) 30 percent. 
B) 15 percent. 
C) 10 percent. 
D) 20 percent.

Question 13

The table gives data for the market for a product. What is the equilibrium price and quantity in this market?

Accepted Answer

A) $6 and 60, respectively 
B) $5 and 30, respectively 
C) $3 and 30, respectively 
D) $30 and 3, respectively 
A) $6 and 60, respectively 
B) $5 and 30, respectively 
C) $3 and 30, respectively 
D) $30 and 3, respectively

Question 14

When an excise tax or sales tax is imposed on a product, the sellers are always able to shift the burden of the tax on to the buyers.

Accepted Answer

A) True 
 B)False

Question 15

Revenues flowing to the government from government-run or government-sponsored businesses, such as public utilities and state lotteries, are known as

Accepted Answer

A) proprietary income. 
B) transfer payments. 
C) tax revenue. 
D) subsidies. 
A) proprietary income. 
B) transfer payments. 
C) tax revenue. 
D) subsidies.

Question 16

(Advanced analysis)The equations for the demand and supply curves for a particular product are P = 10 − 0.4 Q and P = 2 + 0.4 Q, where P is price and Q is quantity expressed in units of 100. After an excise tax is imposed on the product, the supply equation is P = 3 + 0.4 Q. The equilibrium quantity after the excise tax is imposed is

Accepted Answer

A) 875 units. 
B) 800 units. 
C) 1,200 units. 
D) 1,000 units. 
A) 875 units. 
B) 800 units. 
C) 1,200 units. 
D) 1,000 units.

Question 17

The interest on public debt is more than 10 percent of federal government expenditures.

Accepted Answer

A) True 
 B)False

Question 18

In 2012, approximately what percentage of household income was transferred from the top two quintiles to the lowest three quintiles?

Accepted Answer

A) zero 
B) 10 
C) 15 
D) 22 
A) zero 
B) 10 
C) 15 
D) 22

Question 19

Suppose that government imposes a specific excise tax on product X of $2 per unit and that the price elasticity of demand for X is unitary (coefficient = 1). If the incidence of the tax is such that consumers pay $1.8 of the tax and the producers pay $0.2, we can conclude that the

Accepted Answer

A) supply of X is elastic. 
B) supply of X is inelastic. 
C) supply of X is unitary elastic. 
D) demand for X is elastic. 
A) supply of X is elastic. 
B) supply of X is inelastic. 
C) supply of X is unitary elastic. 
D) demand for X is elastic.

Question 20

The state and local tax structure is largely progressive.

Accepted Answer

A) True 
 B)False

Exam 20: Public Finance: Expenditures and Taxes

With respect to local finance,

Which of the following statements about payroll taxes is false?

In the diagram, solid arrows reflect real flows, while broken arrows are monetary flows. Flow (5)might represent

Suppose that government imposes a specific excise tax on product X of $2 per unit and that the price elasticity of demand for X is unitary (coefficient = 1). If the incidence of the tax is such that the producers of X pay $1.75 of the tax and the consumers pay $0.25, we can conclude that the

The U.S. tax-transfer system (as distinct from the tax system alone)is

The Social Security tax is regressive because

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

The incidence of taxation refers to

With a tax of $4,000 on $20,000 of income and $6,000 on $30,000 of income, the average tax rate is

Which of the following is not a significant source of revenue for the U.S. federal government?

Refer to the income tax schedule given in the table. If your taxable income is $4,000, your average tax rate will be

The table gives data for the market for a product. What is the equilibrium price and quantity in this market?

When an excise tax or sales tax is imposed on a product, the sellers are always able to shift the burden of the tax on to the buyers.

Revenues flowing to the government from government-run or government-sponsored businesses, such as public utilities and state lotteries, are known as

The interest on public debt is more than 10 percent of federal government expenditures.

In 2012, approximately what percentage of household income was transferred from the top two quintiles to the lowest three quintiles?

Suppose that government imposes a specific excise tax on product X of $2 per unit and that the price elasticity of demand for X is unitary (coefficient = 1). If the incidence of the tax is such that consumers pay $1.8 of the tax and the producers pay $0.2, we can conclude that the

The state and local tax structure is largely progressive.

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, RD, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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