Question 1

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 2

The average tax rate can be calculated by which of the following formulas?

Accepted Answer

A) The change in taxes due divided by the change in taxable income 
B) The change in taxable income divided by the change in taxes due 
C) Total taxes due divided by total taxable income 
D) Total taxable income divided by total taxes due 
A) The change in taxes due divided by the change in taxable income 
B) The change in taxable income divided by the change in taxes due 
C) Total taxes due divided by total taxable income 
D) Total taxable income divided by total taxes due C

Question 3

In what type of analysis could an increase in the tax rate lead to a decrease in tax revenues?

Accepted Answer

A) Ad valorem taxation 
B) Excise taxation 
C) Dynamic tax analysis 
D) Static tax analysis 
A) Ad valorem taxation 
B) Excise taxation 
C) Dynamic tax analysis 
D) Static tax analysis C

Question 4

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 5

Suppose the income tax rate schedule is 0 percent on the first $10,000;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 any income over $70,000.Family A earns $28,000 a year and Family B earns $65,000 a year.Both receive a ten percent raise.What is the marginal tax rate of each and what is the extra tax paid by each after the raise?

Accepted Answer

A) Family A: 10 percent marginal tax rate and $280 in extra taxes;Family B-30 percent marginal tax rate and $1950 in extra taxes. 
B) Family A: 10 percent marginal tax rate and $420 in extra taxes;Family B-30 percent marginal tax rate and $2275 in extra taxes. 
C) Family A: 20 percent marginal tax rate and $360 in extra taxes;Family B-40 percent marginal tax rate and $2100 in extra taxes. 
D) Family A: 20 percent marginal tax rate and $560 in extra taxes.Family B-40 percent marginal tax rate and $2600 in extra taxes. 
A) Family A: 10 percent marginal tax rate and $280 in extra taxes;Family B-30 percent marginal tax rate and $1950 in extra taxes. 
B) Family A: 10 percent marginal tax rate and $420 in extra taxes;Family B-30 percent marginal tax rate and $2275 in extra taxes. 
C) Family A: 20 percent marginal tax rate and $360 in extra taxes;Family B-40 percent marginal tax rate and $2100 in extra taxes. 
D) Family A: 20 percent marginal tax rate and $560 in extra taxes.Family B-40 percent marginal tax rate and $2600 in extra taxes.

Question 6

The government imposes a unit excise tax on bubble gum.What happens as a result?

Accepted Answer

A) The equilibrium quantity of bubble gum increases. 
B) At the original market price,there will be a bubble gum shortage. 
C) At the original market price,there is a bubble gum shortage and so price rises. 
D) There will be no change in either the market price or equilibrium quantity as long as the excise tax rate is 5 percent or less. 
A) The equilibrium quantity of bubble gum increases. 
B) At the original market price,there will be a bubble gum shortage. 
C) At the original market price,there is a bubble gum shortage and so price rises. 
D) There will be no change in either the market price or equilibrium quantity as long as the excise tax rate is 5 percent or less.

Question 7

When the profits of a corporation are taxed and the dividends paid to stockholders are also taxed,

Accepted Answer

A) the government is engaging in double taxation. 
B) the government is engaging in capital gains taxation. 
C) the government is engaging in regressive taxation. 
D) the government is engaging in progressive taxation. 
A) the government is engaging in double taxation. 
B) the government is engaging in capital gains taxation. 
C) the government is engaging in regressive taxation. 
D) the government is engaging in progressive taxation.

Question 8

If you were to face a marginal tax rate of 15 percent,how much would your tax bill increase when your income increased by $2,000?

Accepted Answer

A) $30 
B) $300 
C) $450 
D) $600 
A) $30 
B) $300 
C) $450 
D) $600

Question 9

In a progressive income tax system,

Accepted Answer

A) the marginal tax rate exceeds the average tax rate. 
B) the average tax rate exceeds the marginal tax rate. 
C) high income earners pay a lower percentage of their income in taxes than do low income earners. 
D) the tax rate depends solely on how long an individual has been in the labor force. 
A) the marginal tax rate exceeds the average tax rate. 
B) the average tax rate exceeds the marginal tax rate. 
C) high income earners pay a lower percentage of their income in taxes than do low income earners. 
D) the tax rate depends solely on how long an individual has been in the labor force.

Question 10

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 11

Assume a family that earns $20,000 pays $1,500 in income taxes,while a family that earns $40,000 pays $3,200 in income taxes.In this situation,the income tax system is

Accepted Answer

A) progressive. 
B) regressive. 
C) proportional. 
D) one of the above but we cannot tell which one without more information. 
A) progressive. 
B) regressive. 
C) proportional. 
D) one of the above but we cannot tell which one without more information.

Question 12

Corporate profits are

Accepted Answer

A) taxed at too low a rate. 
B) taxed only when a stockholder sells his or her shares of stock. 
C) taxed twice-once by the corporate tax system,and again by personal tax system when they are paid to stockholders as dividends. 
D) taxed three times-once by the corporate tax system,again by the personal tax system,and again as capital gains. 
A) taxed at too low a rate. 
B) taxed only when a stockholder sells his or her shares of stock. 
C) taxed twice-once by the corporate tax system,and again by personal tax system when they are paid to stockholders as dividends. 
D) taxed three times-once by the corporate tax system,again by the personal tax system,and again as capital gains.

Question 13

What is meant by the term "tax incidence"? What is the tax incidence of the personal income tax? What is the tax incidence of the corporate income tax?

Accepted Answer

Tax incidence refers to the distribution

Question 14

Using supply and demand analysis,graphically show what an excise tax does to equilibrium price and quantity.On your graph show the part of the tax paid by the consumer and the part paid by the producer.

Accepted Answer

Total tax = @#IMG-DLM& - @#IMG-DLM& Cons

Question 15

Ad valorem taxes

Accepted Answer

A) are not used in the United States. 
B) are assessed as a percentage of a good's price. 
C) are based on income levels. 
D) are applied only to imports. 
A) are not used in the United States. 
B) are assessed as a percentage of a good's price. 
C) are based on income levels. 
D) are applied only to imports.

Question 16

Static tax analysis assumes that

Accepted Answer

A) an increase in a tax rate may lead to a decrease in the tax base. 
B) an increase in a tax rate will lead to an increase in the tax base. 
C) an increase in a tax rate will leave the tax base unchanged. 
D) the tax base will always remain unchanged. 
A) an increase in a tax rate may lead to a decrease in the tax base. 
B) an increase in a tax rate will lead to an increase in the tax base. 
C) an increase in a tax rate will leave the tax base unchanged. 
D) the tax base will always remain unchanged.

Question 17

If a state government wants to collect the maximum tax revenue from a unit excise tax,which of the following would they tax?

Accepted Answer

A) cigarettes 
B) beef hamburgers 
C) luxury cars 
D) concert t-shirts 
A) cigarettes 
B) beef hamburgers 
C) luxury cars 
D) concert t-shirts

Question 18

A tax rate system characterized by higher marginal tax rates as income increases is known as

Accepted Answer

A) a progressive tax system. 
B) a regressive tax system. 
C) a proportional tax system. 
D) a flat-rate tax system. 
A) a progressive tax system. 
B) a regressive tax system. 
C) a proportional tax system. 
D) a flat-rate tax system.

Question 19

An excise tax on gasoline causes

Accepted Answer

A) supply of gasoline to shift to the left. 
B) a reduction in the quantity of gasoline demanded. 
C) the market clearing price of gasoline to rise. 
D) All of the above are correct. 
A) supply of gasoline to shift to the left. 
B) a reduction in the quantity of gasoline demanded. 
C) the market clearing price of gasoline to rise. 
D) All of the above are correct.

Question 20

Suppose you are making $50,000 per year and paying $5,000 per year in income taxes.You get a $10,000 per year raise and your income taxes are now $6,500 per year.Based on this information,the income tax system is

Accepted Answer

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

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

The average tax rate can be calculated by which of the following formulas?

In what type of analysis could an increase in the tax rate lead to a decrease in tax revenues?

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

The government imposes a unit excise tax on bubble gum.What happens as a result?

When the profits of a corporation are taxed and the dividends paid to stockholders are also taxed,

If you were to face a marginal tax rate of 15 percent,how much would your tax bill increase when your income increased by $2,000?

In a progressive income tax system,

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.

Assume a family that earns $20,000 pays $1,500 in income taxes,while a family that earns $40,000 pays $3,200 in income taxes.In this situation,the income tax system is

Corporate profits are

What is meant by the term "tax incidence"? What is the tax incidence of the personal income tax? What is the tax incidence of the corporate income tax?

Using supply and demand analysis,graphically show what an excise tax does to equilibrium price and quantity.On your graph show the part of the tax paid by the consumer and the part paid by the producer.

Ad valorem taxes

Static tax analysis assumes that

If a state government wants to collect the maximum tax revenue from a unit excise tax,which of the following would they tax?

A tax rate system characterized by higher marginal tax rates as income increases is known as

An excise tax on gasoline causes

Suppose you are making $50,000 per year and paying $5,000 per year in income taxes.You get a $10,000 per year raise and your income taxes are now $6,500 per year.Based on this information,the income tax system is

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

The Macroeconomy: Unemployment, inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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Exam 6: Funding the Public Sector

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

The average tax rate can be calculated by which of the following formulas?

In what type of analysis could an increase in the tax rate lead to a decrease in tax revenues?

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

The government imposes a unit excise tax on bubble gum.What happens as a result?

When the profits of a corporation are taxed and the dividends paid to stockholders are also taxed,

If you were to face a marginal tax rate of 15 percent,how much would your tax bill increase when your income increased by $2,000?

In a progressive income tax system,

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.

Assume a family that earns $20,000 pays $1,500 in income taxes,while a family that earns $40,000 pays $3,200 in income taxes.In this situation,the income tax system is

Corporate profits are

What is meant by the term "tax incidence"? What is the tax incidence of the personal income tax? What is the tax incidence of the corporate income tax?

Using supply and demand analysis,graphically show what an excise tax does to equilibrium price and quantity.On your graph show the part of the tax paid by the consumer and the part paid by the producer.

Ad valorem taxes

Static tax analysis assumes that

If a state government wants to collect the maximum tax revenue from a unit excise tax,which of the following would they tax?

A tax rate system characterized by higher marginal tax rates as income increases is known as

An excise tax on gasoline causes

Suppose you are making $50,000 per year and paying $5,000 per year in income taxes.You get a $10,000 per year raise and your income taxes are now $6,500 per year.Based on this information,the income tax system is

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

The Macroeconomy: Unemployment, inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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