Question 1

The concept of vertical equity is that

Accepted Answer

A) income should be taxed instead of property. 
B) property should be taxed instead of income. 
C) there should be little movement up or down the social scale. 
D) persons who are unequal should be treated unequally. 
A) income should be taxed instead of property. 
B) property should be taxed instead of income. 
C) there should be little movement up or down the social scale. 
D) persons who are unequal should be treated unequally.

Question 2

Employers can shift payroll taxes by substituting capital for labor.

Accepted Answer

A) True 
 B)False

Question 3

A progressive 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 4

In the area of taxation, the trade-off between equity and efficiency

Accepted Answer

A) never occurs since efficient taxes are often the most progressive. 
B) is relevant as efficient taxes are often regressive. 
C) is irrelevant. 
D) is relevant because efficient taxes are often progressive. 
A) never occurs since efficient taxes are often the most progressive. 
B) is relevant as efficient taxes are often regressive. 
C) is irrelevant. 
D) is relevant because efficient taxes are often progressive.

Question 5

Faced with a shortage of funds to pay claims, the workman's compensation systems in many states have been forced to raise the workman's compensation tax rate substantially.The tax is paid by employers.Employers have complained that they cannot afford the tax and threaten to go out of business.Assuming the supply of labor is very inelastic, one can argue that ultimately the burden of this tax actually will rest

Accepted Answer

A) mostly on workers. 
B) mostly on employers. 
C) about 50/50 on workers and employers, like the Social Security tax. 
D) all on employers by statute. 
A) mostly on workers. 
B) mostly on employers. 
C) about 50/50 on workers and employers, like the Social Security tax. 
D) all on employers by statute.

Question 6

Economists generally think that the ____ tax is among the best ways to raise revenue.

Accepted Answer

A) property 
B) personal income 
C) sales 
D) value-added 
A) property 
B) personal income 
C) sales 
D) value-added

Question 7

Explain the concept of efficiency as it relates to taxation.

Accepted Answer

A tax is said to be efficient if it has

Question 8

Homeowners

Accepted Answer

A) are subject to double taxation. 
B) benefit from several loopholes. 
C) have no particular advantages in the tax system. 
D) must pay tax on the "income" of living in a house. 
A) are subject to double taxation. 
B) benefit from several loopholes. 
C) have no particular advantages in the tax system. 
D) must pay tax on the "income" of living in a house.

Question 9

If a tax is progressive, the average tax rate

Accepted Answer

A) remains the same as income rises. 
B) rises as income rises. 
C) falls as income rises. 
D) falls with passage of time. 
A) remains the same as income rises. 
B) rises as income rises. 
C) falls as income rises. 
D) falls with passage of time.

Question 10

Briefly and concisely define the following terms:
a.fiscal federalism
b.horizontal equity
c.vertical equity
d.benefits principle of taxation

Accepted Answer

a.Fiscal federalism is a system of inter

Question 11

If a tax is regressive, the average tax rate

Accepted Answer

A) remains the same as income rises. 
B) rises as income rises. 
C) falls as income rises. 
D) falls as income falls. 
A) remains the same as income rises. 
B) rises as income rises. 
C) falls as income rises. 
D) falls as income falls.

Question 12

Michigan recently did away with property taxes.Alternative funding for schools could come from

Accepted Answer

A) a lottery system. 
B) an increase in sales tax and income tax. 
C) an increase in corporate taxes. 
D) All of the above are correct. 
A) a lottery system. 
B) an increase in sales tax and income tax. 
C) an increase in corporate taxes. 
D) All of the above are correct.

Question 13

The system of grants from one level of government to another is an example of fiscal federalism.

Accepted Answer

A) True 
 B)False

Question 14

An efficient tax is one that raises the desired tax revenue but creates the least possible

Accepted Answer

A) total burden. 
B) excess burden. 
C) tax incidence. 
D) tax shifting. 
A) total burden. 
B) excess burden. 
C) tax incidence. 
D) tax shifting.

Question 15

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

Accepted Answer

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

Question 16

The United States Social Security system

Accepted Answer

A) pays benefits in direct accordance to what each individual has paid into the system. 
B) has paid the current generation of recipients less in benefits than it paid in payroll taxes. 
C) has paid the current generation of recipients more than it paid in payroll taxes. 
D) paid the earlier generations more and the current generation less than each paid in payroll taxes. 
A) pays benefits in direct accordance to what each individual has paid into the system. 
B) has paid the current generation of recipients less in benefits than it paid in payroll taxes. 
C) has paid the current generation of recipients more than it paid in payroll taxes. 
D) paid the earlier generations more and the current generation less than each paid in payroll taxes.

Question 17

An excise tax on gasoline is regressive if

Accepted Answer

A) rich people buy more gasoline than poor people. 
B) the demand for gasoline is elastic. 
C) the tax causes people to buy less gasoline. 
D) poor people spend a larger portion of their incomes on gasoline than rich people. 
A) rich people buy more gasoline than poor people. 
B) the demand for gasoline is elastic. 
C) the tax causes people to buy less gasoline. 
D) poor people spend a larger portion of their incomes on gasoline than rich people.

Question 18

A comprehensive income tax with few loopholes is efficient because labor

Accepted Answer

A) supply is very little affected by taxation. 
B) demand is very little affected by taxation. 
C) supply is highly responsive to taxation. 
D) demand is highly responsive to taxation. 
A) supply is very little affected by taxation. 
B) demand is very little affected by taxation. 
C) supply is highly responsive to taxation. 
D) demand is highly responsive to taxation.

Question 19

Figure 18-2
  
-Figure 18-2 shows the widget market before and after an excise tax is imposed.The tax per widget equals ____.

Accepted Answer

A) $5 
B) $20 
C) $25 
D) $30 
A) $5 
B) $20 
C) $25 
D) $30

Question 20

What is the flypaper theory of tax incidence?
 This theory is typically wrong.Why?

Accepted Answer

This is an axiom which maintains that th

Exam 17: Taxation and Resource Allocation

The concept of vertical equity is that

Employers can shift payroll taxes by substituting capital for labor.

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

In the area of taxation, the trade-off between equity and efficiency

Economists generally think that the ____ tax is among the best ways to raise revenue.

Explain the concept of efficiency as it relates to taxation.

Homeowners

If a tax is progressive, the average tax rate

Briefly and concisely define the following terms: a.fiscal federalism b.horizontal equity c.vertical equity d.benefits principle of taxation

If a tax is regressive, the average tax rate

Michigan recently did away with property taxes.Alternative funding for schools could come from

The system of grants from one level of government to another is an example of fiscal federalism.

An efficient tax is one that raises the desired tax revenue but creates the least possible

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

The United States Social Security system

An excise tax on gasoline is regressive if

A comprehensive income tax with few loopholes is efficient because labor

Figure 18-2 -Figure 18-2 shows the widget market before and after an excise tax is imposed.The tax per widget equals ____.

What is the flypaper theory of tax incidence? This theory is typically wrong.Why?

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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