Question 1

Payments to Social Security recipients would decline if the retirement age were lowered.

Accepted Answer

A) True 
 B)False  False

Question 2

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. D

Question 3

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. D

Question 4

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 5

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 6

When taxes alter individual behavior as people attempt to avoid the tax,efficiency

Accepted Answer

A) losses are probable. 
B) gains are possible. 
C) gains are impossible. 
D) losses are impossible. 
A) losses are probable. 
B) gains are possible. 
C) gains are impossible. 
D) losses are impossible.

Question 7

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 8

The total burden of a tax is the

Accepted Answer

A) absolute number of dollars an individual pays. 
B) percentage of income a person pays. 
C) number of dollars a person must be given after taxation to make him as well off as he was before taxation. 
D) revenue lost to loopholes. 
A) absolute number of dollars an individual pays. 
B) percentage of income a person pays. 
C) number of dollars a person must be given after taxation to make him as well off as he was before taxation. 
D) revenue lost to loopholes.

Question 9

Loopholes have the effect of

Accepted Answer

A) encouraging particular patterns of behavior and favoring particular types of people. 
B) eroding the progressivity of the income tax. 
C) altering the pattern of economic incentives. 
D) All of the above are correct. 
A) encouraging particular patterns of behavior and favoring particular types of people. 
B) eroding the progressivity of the income tax. 
C) altering the pattern of economic incentives. 
D) All of the above are correct.

Question 10

Direct taxes are levied on specific economic activities.

Accepted Answer

A) True 
 B)False

Question 11

When a tax is imposed on an item,it can generally be said that the incidence of the tax is

Accepted Answer

A) entirely on the buyer. 
B) entirely on the seller. 
C) on both the buyer and seller. 
D) not determined in this manner. 
A) entirely on the buyer. 
B) entirely on the seller. 
C) on both the buyer and seller. 
D) not determined in this manner.

Question 12

One major problem with Social Security is that it is a "pay as you go" system.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

-According to the graph in Figure 18-1,the increase in the amount that consumers pay as a result of the tax is

Accepted Answer

A) 1000 
B) 600 
C) 400 
D) indeterminate 
A) 1000 
B) 600 
C) 400 
D) indeterminate

Question 15

A head tax is

Accepted Answer

A) always regressive. 
B) an indirect tax on the value of property. 
C) the primary tax used by U.S. municipalities to raise revenue. 
D) All of the above are correct. 
A) always regressive. 
B) an indirect tax on the value of property. 
C) the primary tax used by U.S. municipalities to raise revenue. 
D) All of the above are correct.

Question 16

The Social Security system in the United States today is

Accepted Answer

A) actuarially sound. 
B) composed of a private pension fund into which workers have paid and who will withdraw their invested funds upon retirement. 
C) currently in no danger of running out of money in the long run. 
D) no longer a "pay as you go" system. 
A) actuarially sound. 
B) composed of a private pension fund into which workers have paid and who will withdraw their invested funds upon retirement. 
C) currently in no danger of running out of money in the long run. 
D) no longer a "pay as you go" system.

Question 17

When the average tax rate rises as income rises,this is known as progressive taxation.

Accepted Answer

A) True 
 B)False

Question 18

The share of national income going to state and local taxes

Accepted Answer

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

Question 19

-According to the graph in Figure 18-1,the tax is which of the following?

Accepted Answer

A) 400 
B) 600 
C) 1,000 
D) 200 
A) 400 
B) 600 
C) 1,000 
D) 200

Question 20

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

Exam 18: Taxation and Resource Allocation

Payments to Social Security recipients would decline if the retirement age were lowered.

State governments' main source of revenue is

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

The United States Social Security system

When taxes alter individual behavior as people attempt to avoid the tax,efficiency

Interest income on municipal bonds

The total burden of a tax is the

Loopholes have the effect of

Direct taxes are levied on specific economic activities.

When a tax is imposed on an item,it can generally be said that the incidence of the tax is

One major problem with Social Security is that it is a "pay as you go" system.

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

-According to the graph in Figure 18-1,the increase in the amount that consumers pay as a result of the tax is

A head tax is

The Social Security system in the United States today is

When the average tax rate rises as income rises,this is known as progressive taxation.

The share of national income going to state and local taxes

-According to the graph in Figure 18-1,the tax is which of the following?

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

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 I: the Price System

The Shortcomings of Free Markets

The Markets Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

International Trade and Comparative Advantage

Filters