Question 1

The payroll tax is a

Accepted Answer

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

Question 2

The corporate income tax is

Accepted Answer

A) a tax on corporate profit, not revenue. 
B) the single largest source of federal revenue. 
C) a payroll tax paid partially by employees and partially by employers. 
D) has increased as a proportion of federal tax revenue since 1950. 
A) a tax on corporate profit, not revenue. 
B) the single largest source of federal revenue. 
C) a payroll tax paid partially by employees and partially by employers. 
D) has increased as a proportion of federal tax revenue since 1950.

Question 3

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 4

If demand is more elastic,the portion of an excise tax borne by a buyer will

Accepted Answer

A) increase. 
B) decrease. 
C) be unchanged. 
D) increase for normal goods, decrease for inferior goods. 
A) increase. 
B) decrease. 
C) be unchanged. 
D) increase for normal goods, decrease for inferior goods.

Question 5

A tax loophole is

Accepted Answer

A) an illegal method by which individuals or corporations avoid paying the taxes they legally owe. 
B) a provision in the tax code that allows individuals or corporations to reduce their tax burdens legally by meeting certain conditions. 
C) a tax surcharge on incomes within certain ranges. 
D) a provision in the tax code that allows individuals or corporations to shift the economic incidence of a particular tax on to someone else. 
A) an illegal method by which individuals or corporations avoid paying the taxes they legally owe. 
B) a provision in the tax code that allows individuals or corporations to reduce their tax burdens legally by meeting certain conditions. 
C) a tax surcharge on incomes within certain ranges. 
D) a provision in the tax code that allows individuals or corporations to shift the economic incidence of a particular tax on to someone else.

Question 6

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 7

Direct taxes are levied directly on people or corporations.

Accepted Answer

A) True 
 B)False

Question 8

The benefits principle is often used to justify

Accepted Answer

A) the progressive income tax. 
B) a flat income tax. 
C) a regressive excise tax. 
D) earmarking the proceeds from taxes for specific public services. 
A) the progressive income tax. 
B) a flat income tax. 
C) a regressive excise tax. 
D) earmarking the proceeds from taxes for specific public services.

Question 9

Employers can shift payroll taxes by substituting capital for labor.

Accepted Answer

A) True 
 B)False

Question 10

If a tax is proportional,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 11

The corporate income tax is

Accepted Answer

A) an indirect tax. 
B) a regressive tax. 
C) the second largest source of revenue for the federal government. 
D) a direct tax. 
A) an indirect tax. 
B) a regressive tax. 
C) the second largest source of revenue for the federal government. 
D) a direct tax.

Question 12

Tax loopholes are equally available to all taxpayers.

Accepted Answer

A) True 
 B)False

Question 13

The total burden of a tax equals tax receipts plus excess burden.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following government entities relies most heavily on sales taxes?

Accepted Answer

A) local government 
B) state government 
C) federal government 
D) the Social Security Administration 
A) local government 
B) state government 
C) federal government 
D) the Social Security Administration

Question 15

Which of the following is a direct tax?

Accepted Answer

A) excise tax 
B) tax on corporate profits 
C) property tax 
D) sales tax 
A) excise tax 
B) tax on corporate profits 
C) property tax 
D) sales tax

Question 16

A tax system under which an individual pays a higher fraction of his income in taxes at higher levels of income is formally described as

Accepted Answer

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

Question 17

The federal income tax began in the United States with the

Accepted Answer

A) Morrill Act of 1862. 
B) addition of the Bill of Rights to the Constitution in 1791. 
C) passage of the 16th Amendment to the Constitution in 1913. 
D) New Deal legislation of the 1930s. 
A) Morrill Act of 1862. 
B) addition of the Bill of Rights to the Constitution in 1791. 
C) passage of the 16th Amendment to the Constitution in 1913. 
D) New Deal legislation of the 1930s.

Question 18

Tax loopholes

Accepted Answer

A) reduce the progressivity of the federal income tax. 
B) encourage particular patterns of behavior. 
C) include exemption of interest earned on municipal bonds. 
D) All of the above are correct. 
A) reduce the progressivity of the federal income tax. 
B) encourage particular patterns of behavior. 
C) include exemption of interest earned on municipal bonds. 
D) All of the above are correct.

Question 19

No tax can lead the economy to higher levels of efficiency.

Accepted Answer

A) True 
 B)False

Question 20

The ____ is the fraction of each additional dollar of income that is paid in taxes.

Accepted Answer

A) deferred tax rate 
B) cumulative tax rate 
C) average tax rate 
D) marginal tax rate 
A) deferred tax rate 
B) cumulative tax rate 
C) average tax rate 
D) marginal tax rate

Exam 18: Taxation and Resource Allocation

The payroll tax is a

The corporate income tax is

Examples of indirect taxes are

If demand is more elastic,the portion of an excise tax borne by a buyer will

A tax loophole is

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

Direct taxes are levied directly on people or corporations.

The benefits principle is often used to justify

Employers can shift payroll taxes by substituting capital for labor.

If a tax is proportional,the average tax rate

The corporate income tax is

Tax loopholes are equally available to all taxpayers.

The total burden of a tax equals tax receipts plus excess burden.

Which of the following government entities relies most heavily on sales taxes?

Which of the following is a direct tax?

A tax system under which an individual pays a higher fraction of his income in taxes at higher levels of income is formally described as

The federal income tax began in the United States with the

Tax loopholes

No tax can lead the economy to higher levels of efficiency.

The ____ is the fraction of each additional dollar of income that is paid in taxes.

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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