Question 1

Which of the following offers theories to explain why the government, like the private sector, may also "fail"?

Accepted Answer

A)  Social economics. 
B)  Public choice theory. 
C)  Rational expectations theory. 
D)  Keynesian economics. 
A)  Social economics. 
B)  Public choice theory. 
C)  Rational expectations theory. 
D)  Keynesian economics.

Question 2

"He who pays a tax should receive the benefit from the expenditure financed by the tax." This statement reflects which of the following principles for a tax?

Accepted Answer

A)  Fairness of contribution. 
B)  Ability-to-pay. 
C)  Benefits-received. 
D)  Inexperience-to-collect. 
A)  Fairness of contribution. 
B)  Ability-to-pay. 
C)  Benefits-received. 
D)  Inexperience-to-collect.

Question 3

According to public choice theory, rational voter ignorance occurs because ____________.

Accepted Answer

A)  ​voters have nothing at stake in elections 
B)  ​the marginal benefit of voters acquiring information is very high 
C)  ​the marginal benefit of voters acquiring information exceeds the marginal cost of becoming informed 
D)  ​the marginal benefit of voters acquiring information is smaller than the marginal cost becoming informed 
A)  ​voters have nothing at stake in elections 
B)  ​the marginal benefit of voters acquiring information is very high 
C)  ​the marginal benefit of voters acquiring information exceeds the marginal cost of becoming informed 
D)  ​the marginal benefit of voters acquiring information is smaller than the marginal cost becoming informed

Question 4

The largest revenue source in the U.S. federal tax system is the corporate income tax.

Accepted Answer

A) True 
 B)False

Question 5

Exhibit 16-3  Income for two persons   In Exhibit 16-3, if the income tax system is currently progressive, we know that:

Accepted Answer

A)  Meredith has a larger tax bill than Hillary, although they pay the same tax rate. 
B)  Hillary has a larger tax bill than Meredith, although they pay the same tax rate. 
C)  Meredith has a larger tax bill than Hillary and pays a higher tax rate. 
D)  Hillary has a larger tax bill than Meredith and pays a higher tax rate. 
E)  Meredith and Hillary's tax bills are equal. 
A)  Meredith has a larger tax bill than Hillary, although they pay the same tax rate. 
B)  Hillary has a larger tax bill than Meredith, although they pay the same tax rate. 
C)  Meredith has a larger tax bill than Hillary and pays a higher tax rate. 
D)  Hillary has a larger tax bill than Meredith and pays a higher tax rate. 
E)  Meredith and Hillary's tax bills are equal.

Question 6

Exhibit 16-4  Marginal tax rate lines   In Exhibit 16-4, line A represents a(n):

Accepted Answer

A)  regressive tax. 
B)  progressive tax. 
C)  proportional tax. 
D)  ability-to-pay tax. 
A)  regressive tax. 
B)  progressive tax. 
C)  proportional tax. 
D)  ability-to-pay tax.

Question 7

The ability-to-pay philosophy of taxation argues for a progressive form of taxation.

Accepted Answer

A) True 
 B)False

Question 8

A proportional tax charges the same percentage of income, regardless of the size of income.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is a regressive tax?

Accepted Answer

A)  A state tax of 5 percent of income. 
B)  A local sales tax of 5 percent. 
C)  The federal individual income tax. 
D)  A federal flat tax of 30 percent. 
A)  A state tax of 5 percent of income. 
B)  A local sales tax of 5 percent. 
C)  The federal individual income tax. 
D)  A federal flat tax of 30 percent.

Question 10

The three major revenue sources for the federal government in order of decreasing percentages are individual income taxes, corporate taxes, and social security insurance.

Accepted Answer

A) True 
 B)False

Question 11

Since the 1950s, total expenditures in the United States nearly tripled to about 60 percent of GDP.

Accepted Answer

A) True 
 B)False

Question 12

Exhibit 16-4  Marginal tax rate lines   In Exhibit 16-4, if A represents state and local taxes and B represents federal income taxes, what is the result of imposing both types of taxes?

Accepted Answer

A)  regressive tax. 
B)  progressive tax. 
C)  proportional tax. 
D)  ability-to-pay tax. 
A)  regressive tax. 
B)  progressive tax. 
C)  proportional tax. 
D)  ability-to-pay tax.

Question 13

Which of the following is the largest source of revenue for the federal government?

Accepted Answer

A)  corporate income tax 
B)  payroll tax 
C)  personal income tax 
D)  user charges 
A)  corporate income tax 
B)  payroll tax 
C)  personal income tax 
D)  user charges

Question 14

The ability-to-pay philosophy of taxation argues for a progressive form of taxation.

Accepted Answer

A) True 
 B)False

Question 15

The income security program category for federal government outlays includes spending for:

Accepted Answer

A)  Social Security. 
B)  Medicare. 
C)  Welfare. 
D)  Unemployment compensation. 
E)  All of the above. 
A)  Social Security. 
B)  Medicare. 
C)  Welfare. 
D)  Unemployment compensation. 
E)  All of the above.

Question 16

The term "public sector" refers only to federal government purchases of goods and services.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following taxes contributed the greatest percentage of total federal government tax revenues in recent years?

Accepted Answer

A)  Individual income taxes. 
B)  Corporate income taxes. 
C)  Social Security taxes. 
D)  Excise taxes. 
A)  Individual income taxes. 
B)  Corporate income taxes. 
C)  Social Security taxes. 
D)  Excise taxes.

Question 18

Generally, most economists feel that a sales tax is:

Accepted Answer

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

Question 19

Which of the following categories accounted for the lowest percent of the total federal government expenditures in recent years?

Accepted Answer

A)  Income security. 
B)  National defense. 
C)  Education and health. 
D)  Interest on the national debt. 
A)  Income security. 
B)  National defense. 
C)  Education and health. 
D)  Interest on the national debt.

Question 20

A progressive income tax means the percentage of income paid in taxes decreases as income increases.

Accepted Answer

A) True 
 B)False

Exam 16: The Public Sector

Which of the following offers theories to explain why the government, like the private sector, may also "fail"?

"He who pays a tax should receive the benefit from the expenditure financed by the tax." This statement reflects which of the following principles for a tax?

According to public choice theory, rational voter ignorance occurs because ____________.

The largest revenue source in the U.S. federal tax system is the corporate income tax.

Exhibit 16-3 Income for two persons In Exhibit 16-3, if the income tax system is currently progressive, we know that:

Exhibit 16-4 Marginal tax rate lines In Exhibit 16-4, line A represents a(n):

The ability-to-pay philosophy of taxation argues for a progressive form of taxation.

A proportional tax charges the same percentage of income, regardless of the size of income.

Which of the following is a regressive tax?

The three major revenue sources for the federal government in order of decreasing percentages are individual income taxes, corporate taxes, and social security insurance.

Since the 1950s, total expenditures in the United States nearly tripled to about 60 percent of GDP.

Exhibit 16-4 Marginal tax rate lines In Exhibit 16-4, if A represents state and local taxes and B represents federal income taxes, what is the result of imposing both types of taxes?

Which of the following is the largest source of revenue for the federal government?

The ability-to-pay philosophy of taxation argues for a progressive form of taxation.

The income security program category for federal government outlays includes spending for:

The term "public sector" refers only to federal government purchases of goods and services.

Which of the following taxes contributed the greatest percentage of total federal government tax revenues in recent years?

Generally, most economists feel that a sales tax is:

Which of the following categories accounted for the lowest percent of the total federal government expenditures in recent years?

A progressive income tax means the percentage of income paid in taxes decreases as income increases.

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

Fiscal Policy

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Filters