Question 1

In Country X, the government requires employers to collect 9 percent of every employee's compensation as payroll tax.This is an example of

Accepted Answer

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

Question 2

A tax that creates an excess burden may nevertheless improve efficiency if

Accepted Answer

A) consumption of the good has been generating beneficial externalities. 
B) consumption of the good has been generating no externalities. 
C) consumption of the good has been generating detrimental externalities. 
D) the good has been supplied by a monopolist. 
A) consumption of the good has been generating beneficial externalities. 
B) consumption of the good has been generating no externalities. 
C) consumption of the good has been generating detrimental externalities. 
D) the good has been supplied by a monopolist.

Question 3

Under a progressive tax, the fraction of income paid in taxes

Accepted Answer

A) rises as income rises. 
B) is unchanged as income changes. 
C) falls as income rises. 
D) is proportional to the change in income. 
A) rises as income rises. 
B) is unchanged as income changes. 
C) falls as income rises. 
D) is proportional to the change in income.

Question 4

State and local governments typically spend most of their budgets on providing

Accepted Answer

A) education. 
B) public goods. 
C) public welfare programs. 
D) police protection and administrative services. 
A) education. 
B) public goods. 
C) public welfare programs. 
D) police protection and administrative services.

Question 5

Which of the following best reflects the ability-to-pay philosophy of taxation?

Accepted Answer

A) an excise tax on coffee 
B) an excise tax on gasoline 
C) a progressive income tax 
D) a tax on residential property 
A) an excise tax on coffee 
B) an excise tax on gasoline 
C) a progressive income tax 
D) a tax on residential property

Question 6

Define the following terms and explain their importance to the study of economics:
a.regressive tax
b.proportional tax
c.progressive tax
d.direct tax
e.indirect tax

Accepted Answer

a.A regressive tax is one in which the a

Question 7

A proportional tax is one in which the fraction of income paid in taxes rises as a person's income increases.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Taxes are either

Accepted Answer

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

Question 10

The courts in some states have declared the financing of public schools by local property taxes unconstitutional because

Accepted Answer

A) housing should never be the basis for taxation of any kind. 
B) taxes on real estate generate too much tax revenue. 
C) disparity in property values means some communities have more in tax revenues to spend on education than do communities containing less valuable property. 
D) the funds for public education should come from federal revenues, not from local property taxes. 
A) housing should never be the basis for taxation of any kind. 
B) taxes on real estate generate too much tax revenue. 
C) disparity in property values means some communities have more in tax revenues to spend on education than do communities containing less valuable property. 
D) the funds for public education should come from federal revenues, not from local property taxes.

Question 11

Sales taxes, property taxes, and value-added taxes are examples of indirect taxes.

Accepted Answer

A) True 
 B)False

Question 12

Most loopholes in the income tax system

Accepted Answer

A) are more likely to be exploited by the wealthy. 
B) make it more progressive. 
C) were created by the tax reforms instituted in 1986. 
D) do not affect the economic decisions of the people who benefit from them. 
A) are more likely to be exploited by the wealthy. 
B) make it more progressive. 
C) were created by the tax reforms instituted in 1986. 
D) do not affect the economic decisions of the people who benefit from them.

Question 13

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

Accepted Answer

A) a federal excise tax on grapefruit 
B) a sales tax on some foodstuffs 
C) a personal income tax 
D) a state tax on football tickets 
A) a federal excise tax on grapefruit 
B) a sales tax on some foodstuffs 
C) a personal income tax 
D) a state tax on football tickets

Question 14

In 1984, the South Carolina State Supreme Court ruled that a 20 percent admission tax on X-rated movies was unconstitutional.When the affected cinemas sought a refund of collected taxes, they were denied on the grounds that the tax, although collected by the theater, was indeed paid by the theatergoers.The Supreme Court apparently believed

Accepted Answer

A) the supply of X-rated movies was perfectly elastic. 
B) the demand for X-rated movies was perfectly inelastic. 
C) the legislation intended that the theatergoers pay the tax. 
D) the burden fell on the theatergoers-there are no excess burdens on the theater. 
A) the supply of X-rated movies was perfectly elastic. 
B) the demand for X-rated movies was perfectly inelastic. 
C) the legislation intended that the theatergoers pay the tax. 
D) the burden fell on the theatergoers-there are no excess burdens on the theater.

Question 15

Examples of indirect taxes are

Accepted Answer

A) income taxes levied by some states. 
B) sales taxes and property taxes. 
C) poll taxes. 
D) corporate profits taxes. 
A) income taxes levied by some states. 
B) sales taxes and property taxes. 
C) poll taxes. 
D) corporate profits taxes.

Question 16

Officially, the payroll tax is referred to as

Accepted Answer

A) the trust fund tax. 
B) Social Security tax. 
C) contributions for social insurance. 
D) investment in Social Security. 
A) the trust fund tax. 
B) Social Security tax. 
C) contributions for social insurance. 
D) investment in Social Security.

Question 17

Interest income on municipal bonds

Accepted Answer

A) is subject to a portion of federal income tax. 
B) is taxable on amounts greater than $15,000 per year. 
C) is payable quarterly, at time of coupon redemption. 
D) is exempt from federal income tax. 
A) is subject to a portion of federal income tax. 
B) is taxable on amounts greater than $15,000 per year. 
C) is payable quarterly, at time of coupon redemption. 
D) is exempt from federal income tax.

Question 18

Since the end of World War II, corporate income taxes have accounted for

Accepted Answer

A) an increasing share of federal revenue. 
B) a steady share of federal revenue. 
C) a declining share of federal revenue. 
D) a rising share of revenue until 1980, and then a falling share. 
A) an increasing share of federal revenue. 
B) a steady share of federal revenue. 
C) a declining share of federal revenue. 
D) a rising share of revenue until 1980, and then a falling share.

Question 19

Many environmentalists have advocated a substantial increase in the gasoline tax to cut down the federal deficit and to reduce pollution due to auto emissions.Such a tax increase would be devastating to people who commute significant distances to work.In fact, it would provide an incentive to relocate closer to work or change jobs.Economists refer to such effects of taxes as the

Accepted Answer

A) burden of a tax. 
B) regressive incidence of a tax. 
C) incidence of a tax. 
D) excess burden of a tax. 
A) burden of a tax. 
B) regressive incidence of a tax. 
C) incidence of a tax. 
D) excess burden of a tax.

Question 20

If the supply of a good is perfectly inelastic, then suppliers will bear the full burden of an excise tax

Accepted Answer

A) no matter how elastic the demand for the good is. 
B) only if demand is perfectly elastic. 
C) only if demand is perfectly inelastic. 
D) only if the government forbids them to raise the price of the good. 
A) no matter how elastic the demand for the good is. 
B) only if demand is perfectly elastic. 
C) only if demand is perfectly inelastic. 
D) only if the government forbids them to raise the price of the good.

Exam 17: Taxation and Resource Allocation

In Country X, the government requires employers to collect 9 percent of every employee's compensation as payroll tax.This is an example of

A tax that creates an excess burden may nevertheless improve efficiency if

Under a progressive tax, the fraction of income paid in taxes

State and local governments typically spend most of their budgets on providing

Which of the following best reflects the ability-to-pay philosophy of taxation?

Define the following terms and explain their importance to the study of economics: a.regressive tax b.proportional tax c.progressive tax d.direct tax e.indirect tax

A proportional tax is one in which the fraction of income paid in taxes rises as a person's income increases.

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

Taxes are either

The courts in some states have declared the financing of public schools by local property taxes unconstitutional because

Sales taxes, property taxes, and value-added taxes are examples of indirect taxes.

Most loopholes in the income tax system

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

Examples of indirect taxes are

Officially, the payroll tax is referred to as

Interest income on municipal bonds

Since the end of World War II, corporate income taxes have accounted for

If the supply of a good is perfectly inelastic, then suppliers will bear the full burden of an excise tax

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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