Question 1

Explain the purpose of payroll taxes.Is it a proportional form of tax?

Accepted Answer

The payroll tax is a tax levied on the e

Question 2

Why do many economists rate the income tax high in efficiency and equity terms?

Accepted Answer

The income tax could potentially reduce

Question 3

The corporate income tax is

Accepted Answer

A) a tax on corporate profit, not revenue. 
B) the single largest source of federal revenue. 
C) a payroll tax paid partially by employees and partially by employers. 
D) has increased as a proportion of federal tax revenue since 1950. 
A) a tax on corporate profit, not revenue. 
B) the single largest source of federal revenue. 
C) a payroll tax paid partially by employees and partially by employers. 
D) has increased as a proportion of federal tax revenue since 1950.

Question 4

Which is the correct order of importance in terms of revenue collected among the following federal taxes?

Accepted Answer

A) (1) corporate income taxes (2) value-added taxes (3) excise taxes 
B) (1) personal income taxes (2) corporate income taxes (3) sales taxes 
C) (1) payroll taxes (2) personal income taxes (3) federal excise taxes 
D) (1) personal income taxes (2) payroll taxes (3) corporate income taxes 
A) (1) corporate income taxes (2) value-added taxes (3) excise taxes 
B) (1) personal income taxes (2) corporate income taxes (3) sales taxes 
C) (1) payroll taxes (2) personal income taxes (3) federal excise taxes 
D) (1) personal income taxes (2) payroll taxes (3) corporate income taxes

Question 5

The corporate tax applies to firms' total revenues.

Accepted Answer

A) True 
 B)False

Question 6

Horizontal equity means that equally situated individuals should be taxed equally.

Accepted Answer

A) True 
 B)False

Question 7

The payroll tax represents

Accepted Answer

A) the largest source of revenue in the federal budget. 
B) the second largest source of revenue in the federal budget. 
C) the third largest source of revenue in the federal budget. 
D) the largest source of revenue in state government budgets. 
A) the largest source of revenue in the federal budget. 
B) the second largest source of revenue in the federal budget. 
C) the third largest source of revenue in the federal budget. 
D) the largest source of revenue in state government budgets.

Question 8

Taxation can promote good social policy while minimizing economic inefficiency.

Accepted Answer

A) True 
 B)False

Question 9

A tax system under which an individual pays a higher fraction of his income in taxes at higher levels of income is formally described as

Accepted Answer

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

Question 10

A tax has an excess burden whenever

Accepted Answer

A) people are unable to alter their behavior to avoid paying it. 
B) government seeks to raise it. 
C) it raises a great deal of revenue. 
D) it induces people to change their behavior. 
A) people are unable to alter their behavior to avoid paying it. 
B) government seeks to raise it. 
C) it raises a great deal of revenue. 
D) it induces people to change their behavior.

Question 11

If Linda' annual income is $160,000 and she pays $35,000 in taxes and Paul's annual income is $100,000 and he pays $25,000 in taxes, the tax system is

Accepted Answer

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

Question 12

Horizontal equity is the concept that

Accepted Answer

A) equally situated individuals should be taxed equally. 
B) persons with the same income should be taxed equally. 
C) equal property value should be taxed equally. 
D) persons living in the same neighborhood should be taxed equally. 
A) equally situated individuals should be taxed equally. 
B) persons with the same income should be taxed equally. 
C) equal property value should be taxed equally. 
D) persons living in the same neighborhood should be taxed equally.

Question 13

Suppose that the government imposes an excise tax on widgets.The portion of the tax borne by the buyer of widgets depends upon

Accepted Answer

A) elasticity of demand. 
B) income of buyers. 
C) size of the tax that is imposed. 
D) cross elasticity of demand between widgets and floogles. 
A) elasticity of demand. 
B) income of buyers. 
C) size of the tax that is imposed. 
D) cross elasticity of demand between widgets and floogles.

Question 14

The burden of a tax is

Accepted Answer

A) the amount of revenue that the government raises from the tax. 
B) what it would cost in alternative tax revenue to provide the same level of service. 
C) greater as the total revenue from the tax decreases. 
D) the amount the taxpayer would have to be given to be just as well off in the presence of the tax as in its absence. 
A) the amount of revenue that the government raises from the tax. 
B) what it would cost in alternative tax revenue to provide the same level of service. 
C) greater as the total revenue from the tax decreases. 
D) the amount the taxpayer would have to be given to be just as well off in the presence of the tax as in its absence.

Question 15

No tax can lead the economy to higher levels of efficiency.

Accepted Answer

A) True 
 B)False

Question 16

The federal government of the United States relies heavily on value-added taxes.

Accepted Answer

A) True 
 B)False

Question 17

In 2005, the median income of renters was $26,317 and the median income of homeowners was $50,505.If imputed rent were added to household income or rent became deductible, the personal income tax would become

Accepted Answer

A) more progressive. 
B) more regressive. 
C) about proportional. 
D) less progressive. 
A) more progressive. 
B) more regressive. 
C) about proportional. 
D) less progressive.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

The sales tax is generally considered to be a regressive tax.

Accepted Answer

A) True 
 B)False

Question 20

Vertical equity in income taxation refers to the notion that persons with different levels of income should be taxed differently.

Accepted Answer

A) True 
 B)False

Exam 17: Taxation and Resource Allocation

Explain the purpose of payroll taxes.Is it a proportional form of tax?

Why do many economists rate the income tax high in efficiency and equity terms?

The corporate income tax is

Which is the correct order of importance in terms of revenue collected among the following federal taxes?

The corporate tax applies to firms' total revenues.

Horizontal equity means that equally situated individuals should be taxed equally.

The payroll tax represents

Taxation can promote good social policy while minimizing economic inefficiency.

A tax system under which an individual pays a higher fraction of his income in taxes at higher levels of income is formally described as

A tax has an excess burden whenever

If Linda' annual income is $160,000 and she pays $35,000 in taxes and Paul's annual income is $100,000 and he pays $25,000 in taxes, the tax system is

Horizontal equity is the concept that

Suppose that the government imposes an excise tax on widgets.The portion of the tax borne by the buyer of widgets depends upon

The burden of a tax is

No tax can lead the economy to higher levels of efficiency.

The federal government of the United States relies heavily on value-added taxes.

In 2005, the median income of renters was $26,317 and the median income of homeowners was $50,505.If imputed rent were added to household income or rent became deductible, the personal income tax would become

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

The sales tax is generally considered to be a regressive tax.

Vertical equity in income taxation refers to the notion that persons with different levels of income should be taxed differently.

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

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