Question 1

Corporate profits are taxed twice because

Accepted Answer

A) taxes are collected on profits before profits are distributed to shareholders. 
B) the government wants to minimize the amount of tax paid on capital gains. 
C) it is economically efficient to reduce the amount of retained earnings. 
D) capital gains are not indexed to the rate of inflation. 
A) taxes are collected on profits before profits are distributed to shareholders. 
B) the government wants to minimize the amount of tax paid on capital gains. 
C) it is economically efficient to reduce the amount of retained earnings. 
D) capital gains are not indexed to the rate of inflation. A

Question 2

If a unit excise tax is placed on a good for which the demand is very unresponsive to a price change,then

Accepted Answer

A) the government generally pays the majority of the tax. 
B) the consumers generally pay the majority of the tax. 
C) the producers generally pay the majority of the tax. 
D) producers and consumers pay equal portions of the tax. 
A) the government generally pays the majority of the tax. 
B) the consumers generally pay the majority of the tax. 
C) the producers generally pay the majority of the tax. 
D) producers and consumers pay equal portions of the tax. B

Question 3

A sales tax is

Accepted Answer

A) a tax assessed on personal income. 
B) a tax assessed on the prices paid for numerous goods and services. 
C) a tax assessed on a public good. 
D) the total tax base. 
A) a tax assessed on personal income. 
B) a tax assessed on the prices paid for numerous goods and services. 
C) a tax assessed on a public good. 
D) the total tax base. B

Question 4

What are the three sources of funding for the public sector? Can the government rely on all of these sources in the long run? Explain.

Accepted Answer

The three sources are (1)explicit user f

Question 5

Current concern about Social Security is that

Accepted Answer

A) the fund is growing too rapidly and would trigger inflation. 
B) the fund might be depleted before long and might not be there for workers who retire later. 
C) the government is planning to phase out the program. 
D) none of the above 
A) the fund is growing too rapidly and would trigger inflation. 
B) the fund might be depleted before long and might not be there for workers who retire later. 
C) the government is planning to phase out the program. 
D) none of the above

Question 6

Jamal earns $160,000 per year and Josephina earns $80,000 per year.If Jamal pays $16,000 in income taxes and Josephina pays $5,000 in income taxes,the income tax system would be

Accepted Answer

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

Question 7

Imposing a unit excise tax on the final sale of a good or service can be displayed graphically as

Accepted Answer

A) a vertical shift upward of the demand curve. 
B) a vertical shift upward of the supply curve. 
C) a vertical shift downward of the demand curve. 
D) a vertical shift downward of the supply curve. 
A) a vertical shift upward of the demand curve. 
B) a vertical shift upward of the supply curve. 
C) a vertical shift downward of the demand curve. 
D) a vertical shift downward of the supply curve.

Question 8

Suppose the tax rate on the first $10,000 of income is 0 percent; 10 percent on the next $20,000; 20 percent on the next $20,000; 30 percent on the next $20,000; and 40 percent on income over $70,000.Family A has an income of $120,000 and Family B an income of $55,000.What is the tax bill of each?

Accepted Answer

A) $48,000 for A and $16,500 for B 
B) $32,000 for A and $6600 for B 
C) $32,000 for A and $7500 for B 
D) $34,000 for A and $7500 for B 
A) $48,000 for A and $16,500 for B 
B) $32,000 for A and $6600 for B 
C) $32,000 for A and $7500 for B 
D) $34,000 for A and $7500 for B

Question 9

Local government expenditures depend on which taxes?

Accepted Answer

A) Revenues from licenses and permits 
B) Local property,sales,and excise taxes 
C) Capital gains taxes 
D) Social Security taxes 
A) Revenues from licenses and permits 
B) Local property,sales,and excise taxes 
C) Capital gains taxes 
D) Social Security taxes

Question 10

The reason a corporation has retained earnings is to

Accepted Answer

A) pay unemployment taxes. 
B) make investments that will increase the value of the stock. 
C) avoid the double taxation of corporate profits. 
D) be able to make unemployment payments. 
A) pay unemployment taxes. 
B) make investments that will increase the value of the stock. 
C) avoid the double taxation of corporate profits. 
D) be able to make unemployment payments.

Question 11

A unit tax of $0.60 will always

Accepted Answer

A) shift the supply curve upward by more than $0.60. 
B) shift the supply curve upward by less than $0.60. 
C) shift the supply curve up by exactly $0.60. 
D) leave the supply curve unchanged. 
A) shift the supply curve upward by more than $0.60. 
B) shift the supply curve upward by less than $0.60. 
C) shift the supply curve up by exactly $0.60. 
D) leave the supply curve unchanged.

Question 12

When the purchase price of an asset is less than its sale price,then there is a

Accepted Answer

A) budget deficit. 
B) corporate income tax. 
C) capital gain. 
D) capital loss. 
A) budget deficit. 
B) corporate income tax. 
C) capital gain. 
D) capital loss.

Question 13

If the marginal tax rate is less than the average tax rate,the tax system is

Accepted Answer

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

Question 14

How is the market for gasoline affected if the excise tax on gasoline is reduced?

Accepted Answer

A) The supply of gasoline decreases. 
B) The supply of gasoline increases. 
C) The equilibrium quantity of gasoline decreases. 
D) The equilibrium price of gasoline increases. 
A) The supply of gasoline decreases. 
B) The supply of gasoline increases. 
C) The equilibrium quantity of gasoline decreases. 
D) The equilibrium price of gasoline increases.

Question 15

A government is thinking about increasing the sales tax rate.Should it use static or dynamic tax analysis? Explain why one approach is better than the other.

Accepted Answer

The government should use dynamic tax an

Question 16

For all employee earnings subject to Social Security taxes,what is the current Social Security tax rate for employers?

Accepted Answer

A) 0.8% 
B) 2.9% 
C) 4.2% 
D) 6.2% 
A) 0.8% 
B) 2.9% 
C) 4.2% 
D) 6.2%

Question 17

In a proportional income tax system,

Accepted Answer

A) marginal tax rates are the same regardless of the level of taxable income. 
B) marginal tax rates increase as the level of taxable income increases. 
C) marginal tax rates decline as the level of taxable income declines. 
D) everyone pays the same dollar amount in taxes. 
A) marginal tax rates are the same regardless of the level of taxable income. 
B) marginal tax rates increase as the level of taxable income increases. 
C) marginal tax rates decline as the level of taxable income declines. 
D) everyone pays the same dollar amount in taxes.

Question 18

Briefly compare the three tax systems based on the relationship between the marginal tax rate and the average tax rate as income rises.

Accepted Answer

The three tax systems are proportional,p

Question 19

Social Security taxes are regressive because

Accepted Answer

A) they apply only to rich people. 
B) they are not applied to income beyond a certain amount. 
C) they are applied to welfare recipients. 
D) they are applied to retired people only. 
A) they apply only to rich people. 
B) they are not applied to income beyond a certain amount. 
C) they are applied to welfare recipients. 
D) they are applied to retired people only.

Question 20

Some economists argue that corporate income taxes are typically not paid by firms,but by

Accepted Answer

A) stockholders,employees,and consumers. 
B) the government. 
C) bond holders. 
D) the board of directors of the firm. 
A) stockholders,employees,and consumers. 
B) the government. 
C) bond holders. 
D) the board of directors of the firm.

Exam 5: Funding the Public Sector

Corporate profits are taxed twice because

If a unit excise tax is placed on a good for which the demand is very unresponsive to a price change,then

A sales tax is

What are the three sources of funding for the public sector? Can the government rely on all of these sources in the long run? Explain.

Current concern about Social Security is that

Jamal earns $160,000 per year and Josephina earns $80,000 per year.If Jamal pays $16,000 in income taxes and Josephina pays $5,000 in income taxes,the income tax system would be

Imposing a unit excise tax on the final sale of a good or service can be displayed graphically as

Suppose the tax rate on the first $10,000 of income is 0 percent; 10 percent on the next $20,000; 20 percent on the next $20,000; 30 percent on the next $20,000; and 40 percent on income over $70,000.Family A has an income of $120,000 and Family B an income of $55,000.What is the tax bill of each?

Local government expenditures depend on which taxes?

The reason a corporation has retained earnings is to

A unit tax of $0.60 will always

When the purchase price of an asset is less than its sale price,then there is a

If the marginal tax rate is less than the average tax rate,the tax system is

How is the market for gasoline affected if the excise tax on gasoline is reduced?

A government is thinking about increasing the sales tax rate.Should it use static or dynamic tax analysis? Explain why one approach is better than the other.

For all employee earnings subject to Social Security taxes,what is the current Social Security tax rate for employers?

In a proportional income tax system,

Briefly compare the three tax systems based on the relationship between the marginal tax rate and the average tax rate as income rises.

Social Security taxes are regressive because

Some economists argue that corporate income taxes are typically not paid by firms,but by

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Demand and Supply Elasticity

Consumer Choice

Rents, profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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