Question 1

Natural monopolies occur when a single or a few firms can take advantage of economies of scale and supply the entire industry output.

Accepted Answer

A) True 
 B)False  True

Question 2

Tax evasion is

Accepted Answer

A) an illegal act. 
B) prevalent in the United States. 
C) failing to pay legally due taxes. 
D) all of the above. 
A) an illegal act. 
B) prevalent in the United States. 
C) failing to pay legally due taxes. 
D) all of the above. D

Question 3

In 2009,President Obama proposed raising the income tax on those making over $250,000 per year.Discuss the merits of this plan.

Accepted Answer

The debate is still ongoing.Some argue that this group creates jobs and is comprised of small business owners.Increasing taxes will stall job creation and thus slow the economy.Others argue that increases would be minimal and would lead to greater wealth creation for all and thus stimulate the economy.

Question 4

"For goods that are unrelated in consumption,efficiency requires that tax rates be inversely proportional to elasticities." This is the definition of

Accepted Answer

A) the benefits-received principle. 
B) the Ramsey Rule. 
C) the second best principle. 
D) the inverse elasticity rule. 
A) the benefits-received principle. 
B) the Ramsey Rule. 
C) the second best principle. 
D) the inverse elasticity rule.

Question 5

Natural monopolies have U-shaped cost curves.

Accepted Answer

A) True 
 B)False

Question 6

A time endowment is

Accepted Answer

A) the number of hours in a day. 
B) a gift of time that a person receives. 
C) the maximum number of hours in a year that a person can work. 
D) the largest amount of time that can be spent at leisure. 
E) all of the above. 
A) the number of hours in a day. 
B) a gift of time that a person receives. 
C) the maximum number of hours in a year that a person can work. 
D) the largest amount of time that can be spent at leisure. 
E) all of the above.

Question 7

Income is a poor measure of relative position when attempting to determine horizontal equity.

Accepted Answer

A) True 
 B)False

Question 8

A natural monopoly has

Accepted Answer

A) many producers of the same product. 
B) easy access to the market. 
C) a single firm providing the industry's output. 
D) one buyer of output. 
A) many producers of the same product. 
B) easy access to the market. 
C) a single firm providing the industry's output. 
D) one buyer of output.

Question 9

It is easier to under-report income in industries that deal with a lot of cash.

Accepted Answer

A) True 
 B)False

Question 10

Vertical equity incorporates the notion that

Accepted Answer

A) those earning higher incomes should pay more in taxes. 
B) those earning equal incomes should pay the same in taxes. 
C) taxes paid should be unassociated with income levels. 
D) there should be no excess burden created by a tax. 
A) those earning higher incomes should pay more in taxes. 
B) those earning equal incomes should pay the same in taxes. 
C) taxes paid should be unassociated with income levels. 
D) there should be no excess burden created by a tax.

Question 11

If a tax is efficient,it will necessarily be equitable.

Accepted Answer

A) True 
 B)False

Question 12

Deciding to engage in tax evasion requires consideration of all of the following,except the

Accepted Answer

A) probability of being caught. 
B) probability of conviction if caught. 
C) probability of winning extra money. 
D) costs of defending oneself. 
A) probability of being caught. 
B) probability of conviction if caught. 
C) probability of winning extra money. 
D) costs of defending oneself.

Question 13

-Refer to Figure 16.3 .When the MCz line crosses the Dz line,profits for the firm are

Accepted Answer

A) 0. 
B) greater than 1. 
C) less than 0. 
D) ($\infty$). 
A) 0. 
B) greater than 1. 
C) less than 0. 
D) ($\infty$).

Question 14

A situation in which the government cannot implement an optimal tax policy because the policy is inconsistent with the government's incentives over time is known as

Accepted Answer

A) government tax problem. 
B) time inconsistency of optimal policy. 
C) the double?counting game. 
D) Wagner's Law. 
A) government tax problem. 
B) time inconsistency of optimal policy. 
C) the double?counting game. 
D) Wagner's Law.

Question 15

When the minimum marginal penalty for tax evasion is greater than the maximum marginal tax rate,theory suggests that tax evasion will be

Accepted Answer

A) greater than 1. 
B) ($\infty$). 
C) 0. 
D) 100. 
A) greater than 1. 
B) ($\infty$). 
C) 0. 
D) 100.

Question 16

Neutral taxation is taxing different commodities at the same tax rate.

Accepted Answer

A) True 
 B)False

Question 17

-Refer to Figure 16.1.Assume that the equation of Dx is P = 50 - 2Qd.
(A)If the original price of the good was $10 and a $4 tax was imposed,what is the tax income? What is the excess burden?
(B)How much marginal excess burden will be created if an additional dollar of tax is levied?
(C)How much additional tax is collected?

Accepted Answer

(A)If the original price of the good was

Question 18

Tax avoidance is

Accepted Answer

A) illegal in the United States. 
B) changing your behavior so as to reduce your tax liability. 
C) the same as tax evasion. 
D) a minor source of concern in the United States. 
A) illegal in the United States. 
B) changing your behavior so as to reduce your tax liability. 
C) the same as tax evasion. 
D) a minor source of concern in the United States.

Question 19

Optimal user fees are paid only by the consumers of the good or service produced.

Accepted Answer

A) True 
 B)False

Question 20

Changing tax regimes can sometimes be difficult and lead to inequities.

Accepted Answer

A) True 
 B)False

Exam 16: Efficient and Equitable Taxation

Natural monopolies occur when a single or a few firms can take advantage of economies of scale and supply the entire industry output.

Tax evasion is

In 2009,President Obama proposed raising the income tax on those making over $250,000 per year.Discuss the merits of this plan.

"For goods that are unrelated in consumption,efficiency requires that tax rates be inversely proportional to elasticities." This is the definition of

Natural monopolies have U-shaped cost curves.

A time endowment is

Income is a poor measure of relative position when attempting to determine horizontal equity.

A natural monopoly has

It is easier to under-report income in industries that deal with a lot of cash.

Vertical equity incorporates the notion that

If a tax is efficient,it will necessarily be equitable.

Deciding to engage in tax evasion requires consideration of all of the following,except the

-Refer to Figure 16.3 .When the MCz line crosses the Dz line,profits for the firm are

A situation in which the government cannot implement an optimal tax policy because the policy is inconsistent with the government's incentives over time is known as

When the minimum marginal penalty for tax evasion is greater than the maximum marginal tax rate,theory suggests that tax evasion will be

Neutral taxation is taxing different commodities at the same tax rate.

Tax avoidance is

Optimal user fees are paid only by the consumers of the good or service produced.

Changing tax regimes can sometimes be difficult and lead to inequities.

Introduction

Tools of Positive Analysis

Tools of Normative Analysis

Public Goods

Externalities

Political Economy

Education

Cost-Benefit Analysis

The Health Care Market

Government and the Market for Health Care

Social Security

Income Redistribution: Conceptual Issues

Expenditure Programs for the Poor

Taxation and Income Distribution

Taxation and Efficiency

The Personal Income Tax

Personal Taxation and Behavior

The Corporation Tax

Deficit Finance

Fundamental Tax Reform: Taxes on Consumption and Wealth

Public Finance in a Federal System

Filters

-Refer to Figure 16.3 .When the MC_z line crosses the D_z line,profits for the firm are