Question 1

In order to minimize deadweight loss generated by taxation, a tax should be placed on goods that are:

Accepted Answer

A)  price elastic.
B)  price inelastic.
C)  expensive.
D)  popular.E) All of the above
F) B) and D)

Question 2

A tax that takes the same percentage from all taxpayers is called a:

Accepted Answer

A)  progressive tax.
B)  regressive tax.
C)  proportional tax.
D)  lump-sum tax.E) None of the above
F) A) and B)

Question 3

While corporations bear the statutory incidence of the corporate income tax, its economic incidence is borne by:

Accepted Answer

A)  shareholders.
B)  employees.
C)  customers.
D)  All of these likely bear some of the economic incidence.E) C) and D)
F) B) and D)

Question 4

Entitlement spending:

Accepted Answer

A)  is public expenditure that is mandated and regulated by permanent laws.
B)  rises and falls with the number of people who are eligible recipients.
C)  cannot be reduced without changing the laws outlining eligibility.
D)  All of these are true.E) A) and C)
F) A) and D)

Question 5

A lump-sum tax:

Accepted Answer

A)  takes the same percentage from all taxpayers, regardless of income.
B)  requires those with low incomes to pay a smaller percentage of their income than high-income people.
C)  is levied such that low-income taxpayers pay a greater proportion of their income than high-income taxpayers.
D)  taxes everyone the same amount, regardless of income.E) C) and D)
F) None of the above

Question 6

When raising taxes, the quantity effect tells us that:

Accepted Answer

A)  the government receives more revenue for each unit sold.
B)  a higher tax rate will cause fewer units to be sold.
C)  the government receives less revenue for each unit sold.
D)  a higher tax rate will cause more units to be supplied.E) A) and C)
F) B) and C)

Question 7

The Laffer curve demonstrates that raising tax rates:

Accepted Answer

A)  first increases and then eventually decreases tax revenues.
B)  always increases tax revenues.
C)  always decreases tax revenues.
D)  first decreases and then eventually increases tax revenues.E) B) and C)
F) A) and D)

Question 8

When considering the interplay of the price and quantity effect of different tax levels, we realize that:

Accepted Answer

A)  there is one tax level that maximizes tax revenues.
B)  tax revenues will continue to increase at all levels where the price effect outweighs the quantity effect.
C)  tax revenues will continue to decrease at all levels where the quantity effect outweighs the price effect.
D)  All of these statements are true.E) C) and D)
F) A) and D)

Question 9

The federal income tax _______ than a state sales tax.

Accepted Answer

A)  has a higher administrative burden
B)  has a lower administrative burden
C)  is less complex
D)  is more regressiveE) B) and D)
F) None of the above

Question 10

If the federal government brings in $1.1 trillion in tax revenues and spends $0.7 trillion, the government has a budget _______ of _______ trillion.

Accepted Answer

A)  deficit; $0.4
B)  surplus; $0.4
C)  deficit; $1.8
D)  surplus; $1.1E) B) and D)
F) A) and B)

Question 11

In general, raising taxes has:

Accepted Answer

A)  increasing returns to revenue.
B)  diminishing returns to revenue.
C)  increasing then decreasing returns to revenue.
D)  constant returns to revenue.E) A) and B)
F) All of the above

Question 12

A bridge that typically is traversed by 1,000 cars per day plans to implement a toll of $0.50 per car for passage, starting next week. The tax revenues generated in one day after the toll is implemented will be:

Accepted Answer

A)  $1,000.
B)  $500.
C)  less than $500.
D)  between $500 and $1,000.E) A) and B)
F) C) and D)

Question 13

Deficits and surpluses are commonly calculated as:

Accepted Answer

A)  debt per taxpayer.
B)  average debt per state.
C)  a percentage of national GDP.
D)  absolute values.E) All of the above
F) A) and B)

Question 14

Consider the Laffer curve for a hypothetical good as displayed in the graph shown.  Which of the following statements is correct? At a tax rate of 30 percent, the price effect outweighs the quantity effect.The efficient tax rate is 60 percent.At a tax rate of 80 percent, deadweight loss will increase if the tax rate is lowered.

Accepted Answer

A)  I only
B)  II only
C)  I and III only
D)  I and II onlyE) A) and D)
F) A) and C)

Question 15

Taxes change behavior in which of the following ways? Taxes alter the incentives faced by market participants. Taxes drive a wedge between the price paid by buyers and the price received by sellers. Taxes result in a lower equilibrium quantity of the good or service being consumed. Taxes increase consumer and producer surplus.

Accepted Answer

A)  I and III only
B)  II, III, and IV only
C)  II and IV only
D)  I, II, and III onlyE) None of the above
F) All of the above

Question 16

The table shown displays the marginal tax rates that correspond to each taxable income bracket for an individual.

What is the average tax rate for a person with $175,000 of taxable income?

Accepted Answer

A)  22 percent
B)  25 percent
C)  32 percent
D)  21 percentE) A) and C)
F) B) and C)

Question 17

Suppose there is currently a $500 tax on automobiles that generates $5 million in revenue per year. If the tax increases to $800 per automobile, the revenue the tax generates will increase to $10 million. This tells us that, in this range of tax rates, the quantity effect _______ the price effect.

Accepted Answer

A)  is greater than
B)  is less than
C)  is equal to
D)  may be greater than or less thanE) C) and D)
F) None of the above

Question 18

Imposing a tax in a market with highly inelastic demand will:

Accepted Answer

A)  cause more deadweight loss than imposing a tax in a market with elastic demand.
B)  generate higher revenues than imposing a tax in a market with elastic demand.
C)  be more equitable than imposing a tax in a market with elastic demand.
D)  None of these are true.E) A) and C)
F) B) and D)

Question 19

The statutory incidence of the tax refers to who:

Accepted Answer

A)  is legally obligated to pay the tax to the government.
B)  actually loses surplus as a result of the tax.
C)  bears the burden of any sort of tax.
D)  gains surplus as a result of the government redistributing tax revenue.E) A) and B)
F) A) and C)

Question 20

A tax on individuals' earnings is called a(n) :

Accepted Answer

A)  payroll tax.
B)  personal income tax.
C)  corporate income tax.
D)  excise tax.E) A) and C)
F) B) and D)

Exam 20: Taxation and the Public Budget

Suppose there is currently a $500 tax on automobiles that generates $5 million in revenue per year. If the tax increases to $800 per automobile, the revenue the tax generates will increase to $10 million. This tells us that, in this range of tax rates, the quantity effect _______ the price effect.

Correct Answer
verified

Correct Answer
verified

The federal income tax _______ than a state sales tax.

Correct Answer
verified

When raising taxes, the quantity effect tells us that:

Correct Answer
verified

Imposing a tax in a market with highly inelastic demand will:

Correct Answer
verified

If the federal government brings in $1.1 trillion in tax revenues and spends $0.7 trillion, the government has a budget _ of _ trillion.

Correct Answer
verified

Deficits and surpluses are commonly calculated as:

Correct Answer
verified

When considering the interplay of the price and quantity effect of different tax levels, we realize that:

Correct Answer
verified

A bridge that typically is traversed by 1,000 cars per day plans to implement a toll of $0.50 per car for passage, starting next week. The tax revenues generated in one day after the toll is implemented will be:

Correct Answer
verified

While corporations bear the statutory incidence of the corporate income tax, its economic incidence is borne by:

Correct Answer
verified

In order to minimize deadweight loss generated by taxation, a tax should be placed on goods that are:

Correct Answer
verified

A tax that takes the same percentage from all taxpayers is called a:

Correct Answer
verified

In general, raising taxes has:

Correct Answer
verified

The table shown displays the marginal tax rates that correspond to each taxable income bracket for an individual. What is the average tax rate for a person with $175,000 of taxable income?

Correct Answer
verified

Entitlement spending:

Correct Answer
verified

The statutory incidence of the tax refers to who:

Correct Answer
verified

A lump-sum tax:

Correct Answer
verified

A tax on individuals' earnings is called a(n) :

Correct Answer
verified

The Laffer curve demonstrates that raising tax rates:

Correct Answer
verified

Correct Answer
verified

Exam 20: Taxation and the Public Budget

Suppose there is currently a $500 tax on automobiles that generates $5 million in revenue per year. If the tax increases to $800 per automobile, the revenue the tax generates will increase to $10 million. This tells us that, in this range of tax rates, the quantity effect _______ the price effect.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The federal income tax _______ than a state sales tax.

Correct AnswerverifiedShow Answer

When raising taxes, the quantity effect tells us that:

Correct AnswerverifiedShow Answer

Imposing a tax in a market with highly inelastic demand will:

Correct AnswerverifiedShow Answer

If the federal government brings in $1.1 trillion in tax revenues and spends $0.7 trillion, the government has a budget _______ of _______ trillion.

Correct AnswerverifiedShow Answer

Deficits and surpluses are commonly calculated as:

Correct AnswerverifiedShow Answer

When considering the interplay of the price and quantity effect of different tax levels, we realize that:

Correct AnswerverifiedShow Answer

A bridge that typically is traversed by 1,000 cars per day plans to implement a toll of $0.50 per car for passage, starting next week. The tax revenues generated in one day after the toll is implemented will be:

Correct AnswerverifiedShow Answer

While corporations bear the statutory incidence of the corporate income tax, its economic incidence is borne by:

Correct AnswerverifiedShow Answer

In order to minimize deadweight loss generated by taxation, a tax should be placed on goods that are:

Correct AnswerverifiedShow Answer

A tax that takes the same percentage from all taxpayers is called a:

Correct AnswerverifiedShow Answer

In general, raising taxes has:

Correct AnswerverifiedShow Answer

The table shown displays the marginal tax rates that correspond to each taxable income bracket for an individual. What is the average tax rate for a person with $175,000 of taxable income?

Correct AnswerverifiedShow Answer

Entitlement spending:

Correct AnswerverifiedShow Answer

The statutory incidence of the tax refers to who:

Correct AnswerverifiedShow Answer

A lump-sum tax:

Correct AnswerverifiedShow Answer

A tax on individuals' earnings is called a(n) :

Correct AnswerverifiedShow Answer

The Laffer curve demonstrates that raising tax rates:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

If the federal government brings in $1.1 trillion in tax revenues and spends $0.7 trillion, the government has a budget _ of _ trillion.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified