Question 1

What is personal income tax? On which principle does the federal government levy this tax?

Accepted Answer

The personal income tax is a tax levied

Question 2

An excess burden is present when taxpayers alter their behavior on account of taxation.

Accepted Answer

A) True 
 B)False

Question 3

When demand for a product is very inelastic,the burden of a tax falls mainly on

Accepted Answer

A) producers. 
B) consumers. 
C) tax collectors. 
D) people who drop out of the market. 
A) producers. 
B) consumers. 
C) tax collectors. 
D) people who drop out of the market.

Question 4

The idea of horizontal equity in taxation implies that

Accepted Answer

A) equally situated individuals should be taxed equally. 
B) unequally situated individuals should be taxed unequally. 
C) benefits should be given first to those individuals who need them most. 
D) the greatest tax burden should be borne by the wealthiest individuals. 
A) equally situated individuals should be taxed equally. 
B) unequally situated individuals should be taxed unequally. 
C) benefits should be given first to those individuals who need them most. 
D) the greatest tax burden should be borne by the wealthiest individuals.

Question 5

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 6

Many Americans believe that taxes have been gobbling up an ever-increasing share of the U.S.economy.Is this observation correct? Explain.

Accepted Answer

Available data suggests that the share o

Question 7

The incidence of a payroll tax

Accepted Answer

A) depends upon whether it is levied on the employer or employee. 
B) is the same whether it is levied on the employer or the employee. 
C) is more heavily on the employee as demand for labor becomes more elastic. 
D) is more heavily on the employer as demand for labor becomes less elastic. 
A) depends upon whether it is levied on the employer or employee. 
B) is the same whether it is levied on the employer or the employee. 
C) is more heavily on the employee as demand for labor becomes more elastic. 
D) is more heavily on the employer as demand for labor becomes less elastic.

Question 8

Tax deductions were significantly ____ under the Tax Reform Act of 1986.

Accepted Answer

A) increased 
B) decreased 
C) expanded 
D) left unchanged for individual taxpayers 
A) increased 
B) decreased 
C) expanded 
D) left unchanged for individual taxpayers

Question 9

Cities and towns mainly rely for revenue on

Accepted Answer

A) property taxes. 
B) income taxes. 
C) excise taxes. 
D) payroll taxes. 
A) property taxes. 
B) income taxes. 
C) excise taxes. 
D) payroll taxes.

Question 10

The head tax is regressive.

Accepted Answer

A) True 
 B)False

Question 11

The way in which most persons pay their personal income tax is in the form of

Accepted Answer

A) quarterly payments throughout the year. 
B) annual payment by April 15. 
C) monthly payments as part of mortgage payments. 
D) payroll withholding during the year. 
A) quarterly payments throughout the year. 
B) annual payment by April 15. 
C) monthly payments as part of mortgage payments. 
D) payroll withholding during the year.

Question 12

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 13

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 14

The economic burden of an excise tax

Accepted Answer

A) can usually be partially shifted from buyers onto sellers. 
B) equals the revenue from the tax. 
C) is less than the burden of an income tax that would raise the same revenue. 
D) is shared equally by buyers and sellers. 
A) can usually be partially shifted from buyers onto sellers. 
B) equals the revenue from the tax. 
C) is less than the burden of an income tax that would raise the same revenue. 
D) is shared equally by buyers and sellers.

Question 15

The payroll tax system is a proportional tax for all income earners.

Accepted Answer

A) True 
 B)False

Question 16

When we say most Americans are in the 15-percent tax bracket,we mean federal taxes are about 15 percent of the income of most Americans.

Accepted Answer

A) True 
 B)False

Question 17

The marginal tax rate has less effect on economic incentives than does the average tax rate.

Accepted Answer

A) True 
 B)False

Question 18

Two reasons why the Social Security system nearly went bankrupt in the early 1980s are: (i)wages were indexed but benefits were not; (ii)the percentage of elderly people in the country declined.

Accepted Answer

A) i and ii 
B) i but not ii 
C) ii but not i 
D) neither i nor ii 
A) i and ii 
B) i but not ii 
C) ii but not i 
D) neither i nor ii

Question 19

Corporate taxes are a direct tax.

Accepted Answer

A) True 
 B)False

Question 20

The federal income tax is an example of a

Accepted Answer

A) progressive tax. 
B) regressive tax. 
C) proportional tax. 
D) value-added tax. 
A) progressive tax. 
B) regressive tax. 
C) proportional tax. 
D) value-added tax.

Exam 18: Taxation and Resource Allocation

What is personal income tax? On which principle does the federal government levy this tax?

An excess burden is present when taxpayers alter their behavior on account of taxation.

When demand for a product is very inelastic,the burden of a tax falls mainly on

The idea of horizontal equity in taxation implies that

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

Many Americans believe that taxes have been gobbling up an ever-increasing share of the U.S.economy.Is this observation correct? Explain.

The incidence of a payroll tax

Tax deductions were significantly ____ under the Tax Reform Act of 1986.

Cities and towns mainly rely for revenue on

The head tax is regressive.

The way in which most persons pay their personal income tax is in the form of

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

If a tax is progressive,the average tax rate

The economic burden of an excise tax

The payroll tax system is a proportional tax for all income earners.

When we say most Americans are in the 15-percent tax bracket,we mean federal taxes are about 15 percent of the income of most Americans.

The marginal tax rate has less effect on economic incentives than does the average tax rate.

Two reasons why the Social Security system nearly went bankrupt in the early 1980s are: (i)wages were indexed but benefits were not; (ii)the percentage of elderly people in the country declined.

Corporate taxes are a direct tax.

The federal income tax is an example of a

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

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