Question 1

Taxation alters the behavior patterns of individuals.

Accepted Answer

A) True 
 B)False

Question 2

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 3

What is personal income tax?
 On which principle does the federal government levy this tax?

Accepted Answer

The personal income tax is a tax levied

Question 4

The shares of GDP taken in taxes by federal, state & local governments

Accepted Answer

A) have risen steadily in the past 40 years to about 22 percent. 
B) have dropped steadily in the past 40 years to about 6 or 7 percent. 
C) grew substantially until the early 1970s and have leveled off at about 10 to 11 percent. 
D) fell steadily until the early 1970s and has risen steadily since then. 
A) have risen steadily in the past 40 years to about 22 percent. 
B) have dropped steadily in the past 40 years to about 6 or 7 percent. 
C) grew substantially until the early 1970s and have leveled off at about 10 to 11 percent. 
D) fell steadily until the early 1970s and has risen steadily since then.

Question 5

State governments' main source of revenue is

Accepted Answer

A) property taxes. 
B) income taxes. 
C) excise taxes. 
D) sales taxes. 
A) property taxes. 
B) income taxes. 
C) excise taxes. 
D) sales taxes.

Question 6

In which of the following examples is excess burden not present?

Accepted Answer

A) Harriet decides to give up her Saturday hours at her law office after income tax rates rise. 
B) Rudolf still smokes three packs a day even after the excise tax on cigarettes rose 10 cents a pack. 
C) Wilma reduced the automatic payroll deduction to her savings account after the tax on interest was imposed. 
D) Harper decided to take a vacation in Bermuda rather than invest in stocks after the tax rate on capital gains was increased. 
A) Harriet decides to give up her Saturday hours at her law office after income tax rates rise. 
B) Rudolf still smokes three packs a day even after the excise tax on cigarettes rose 10 cents a pack. 
C) Wilma reduced the automatic payroll deduction to her savings account after the tax on interest was imposed. 
D) Harper decided to take a vacation in Bermuda rather than invest in stocks after the tax rate on capital gains was increased.

Question 7

Vertical equity refers to the notion that equally situated individuals should be taxed equally.

Accepted Answer

A) True 
 B)False

Question 8

Discuss the three principles of equity applied to taxation in the text.

Accepted Answer

1.The principle of horizontal equity hol

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Which of the following situations is a clear application of the benefits principle of taxation?

Accepted Answer

A) wealthier people are taxed more heavily 
B) heavier vehicles are charged higher tolls on turnpikes 
C) state government providing a free education to any child in the state 
D) sales of measles vaccine exempt from sales tax 
A) wealthier people are taxed more heavily 
B) heavier vehicles are charged higher tolls on turnpikes 
C) state government providing a free education to any child in the state 
D) sales of measles vaccine exempt from sales tax

Question 11

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 12

The concept of equity pertains to the fairness of a tax.

Accepted Answer

A) True 
 B)False

Question 13

Taxation may improve the social welfare when the taxed good

Accepted Answer

A) is socially undesirable (like, in some views, liquor and pornography). 
B) imposes negative externalities. 
C) is overproduced under a free-market system. 
D) All of the above are correct. 
A) is socially undesirable (like, in some views, liquor and pornography). 
B) imposes negative externalities. 
C) is overproduced under a free-market system. 
D) All of the above are correct.

Question 14

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 15

The head tax is regressive.

Accepted Answer

A) True 
 B)False

Question 16

Regarding taxation and efficiency, which of the following statements is not true?

Accepted Answer

A) ​Many inefficiencies arise from taxation. 
B) ​Many burdens arise from taxation. 
C) ​Some taxes lead to greater efficiency. 
D) ​All of the above statements are true. 
A) ​Many inefficiencies arise from taxation. 
B) ​Many burdens arise from taxation. 
C) ​Some taxes lead to greater efficiency. 
D) ​All of the above statements are true.

Question 17

The share of GDP going to federal taxes

Accepted Answer

A) has been about 16 to 20 percent for the past 40 years. 
B) has been about 35 percent for the past 40 years. 
C) was about 40 percent until the early 1980s and has dropped greatly since then. 
D) has risen steadily in the past 40 years to about 35 percent. 
A) has been about 16 to 20 percent for the past 40 years. 
B) has been about 35 percent for the past 40 years. 
C) was about 40 percent until the early 1980s and has dropped greatly since then. 
D) has risen steadily in the past 40 years to about 35 percent.

Question 18

Which of the following is an example of an indirect tax?

Accepted Answer

A) value-added tax 
B) income tax 
C) inheritance tax 
D) head tax 
A) value-added tax 
B) income tax 
C) inheritance tax 
D) head tax

Question 19

Direct taxes are levied directly on people or corporations.

Accepted Answer

A) True 
 B)False

Question 20

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.

Exam 17: Taxation and Resource Allocation

Taxation alters the behavior patterns of individuals.

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

What is personal income tax? On which principle does the federal government levy this tax?

The shares of GDP taken in taxes by federal, state & local governments

State governments' main source of revenue is

In which of the following examples is excess burden not present?

Vertical equity refers to the notion that equally situated individuals should be taxed equally.

Discuss the three principles of equity applied to taxation in the text.

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

Which of the following situations is a clear application of the benefits principle of taxation?

The economic burden of an excise tax

The concept of equity pertains to the fairness of a tax.

Taxation may improve the social welfare when the taxed good

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

The head tax is regressive.

Regarding taxation and efficiency, which of the following statements is not true?

The share of GDP going to federal taxes

Which of the following is an example of an indirect tax?

Direct taxes are levied directly on people or corporations.

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

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: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

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

He 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

Filters

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