Question 1

Compared to other countries, the U.S. federal government relies

Accepted Answer

A)  more heavily on direct taxes than do governments of other countries.
B)  less heavily on direct taxes than do governments of other countries.
C)  more heavily on indirect taxes than do governments of other countries.
D)  on direct taxes about as heavily as do governments of other countries.E) None of the above
F) B) and D)

Question 2

The share of GDP taken by taxes is considerably higher in the United States than in other countries.

Accepted Answer

A) True 
 B)False

Question 3

Economists generally think that the ____ tax is among the best ways to raise revenue.

Accepted Answer

A)  property
B)  personal income
C)  sales
D)  value-addedE) A) and D)
F) B) and C)

Question 4

If Jenny's taxes are $10,000 when she earns $50,000 and $12,000 when she earns $60,000, then

Accepted Answer

A)  Jenny faces a progressive tax.
B)  Jenny faces a regressive tax.
C)  Jenny faces a proportional tax.
D)  Jenny faces a rising marginal tax rate.E) All of the above
F) B) and D)

Question 5

Who actually pays an excise tax

Accepted Answer

A)  is determined by income bracket.
B)  is determined by who the law assigns the tax.
C)  is wage and salary earners but not people who have only investment income.
D)  is determined by the change in prices and outputs caused by the tax.E) B) and C)
F) A) and C)

Question 6

Since World War II, the share of corporate income tax collections in total federal revenue has been

Accepted Answer

A)  increasing rapidly.
B)  declining rapidly.
C)  increasing slowly.
D)  declining generally.E) A) and B)
F) All of the above

Question 7

Which is least likely to help in understanding who bears the tax incidence?

Accepted Answer

A)  Supply elasticity
B)  Demand elasticity
C)  Who the tax is levied on
D)  Whether or not supply is fixedE) None of the above
F) B) and D)

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

If a tax is regressive, 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.E) B) and D)
F) A) and B)

Question 10

Figure 18-1

According to the graph in Figure 18-1, the tax is which of the following?

Accepted Answer

A)  400
B)  600
C)  1,000
D)  200E) A) and B)
F) A) and C)

Question 11

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 propertyE) A) and B)
F) B) and D)

Question 12

State governments' main source of revenue is

Accepted Answer

A)  property taxes.
B)  income taxes.
C)  excise taxes.
D)  sales taxes.E) A) and B)
F) A) and C)

Question 13

Social Security payroll taxes are examples of

Accepted Answer

A)  progressive taxation.
B)  regressive taxation.
C)  proportional taxation.
D)  marginal taxes.E) B) and C)
F) C) and D)

Question 14

The benefits principle states that the users of a service should pay for that service.

Accepted Answer

A) True 
 B)False

Question 15

Explain the concept of efficiency as it relates to taxation.

Accepted Answer

A tax is said to be efficient if it has ...

Question 16

An excise tax is

Accepted Answer

A)  levied on accounting profits not economic profits.
B)  levied on salaries and wages but not investment income.
C)  levied on the purchase of specific goods.
D)  levied on purchases of goods in general excluding exempted goods that are considered necessities.E) A) and C)
F) All of the above

Question 17

The courts in some states have declared the financing of public schools by local property taxes unconstitutional because

Accepted Answer

A)  housing should never be the basis for taxation of any kind.
B)  taxes on real estate generate too much tax revenue.
C)  disparity in property values means some communities have more in tax revenues to spend on education than do communities containing less valuable property.
D)  the funds for public education should come from federal revenues, not from local property taxes.E) A) and B)
F) None of the above

Question 18

A tax has an excess burden whenever

Accepted Answer

A)  people are unable to alter their behavior to avoid paying it.
B)  government seeks to raise it.
C)  it raises a great deal of revenue.
D)  it induces people to change their behavior.E) All of the above
F) A) and C)

Question 19

Most loopholes in the income tax system

Accepted Answer

A)  are more likely to be exploited by the wealthy.
B)  make it more progressive.
C)  were created by the tax reforms instituted in 1986.
D)  do not affect the economic decisions of the people who benefit from them.E) None of the above
F) A) and C)

Question 20

Homeowners

Accepted Answer

A)  are subject to double taxation.
B)  benefit from several loopholes.
C)  have no particular advantages in the tax system.
D)  must pay tax on the "income" of living in a house.E) B) and C)
F) All of the above

Exam 17: Taxation and Resource Allocation

If a tax is regressive, the average tax rate

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A tax has an excess burden whenever

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If Jenny's taxes are $10,000 when she earns $50,000 and $12,000 when she earns $60,000, then

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Who actually pays an excise tax

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Which is least likely to help in understanding who bears the tax incidence?

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Compared to other countries, the U.S. federal government relies

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

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The share of GDP taken by taxes is considerably higher in the United States than in other countries.

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State governments' main source of revenue is

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Social Security payroll taxes are examples of

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Figure 18-1 According to the graph in Figure 18-1, the tax is which of the following?

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Economists generally think that the ____ tax is among the best ways to raise revenue.

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An excise tax is

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Explain the concept of efficiency as it relates to taxation.

Correct AnswerverifiedA tax is said to be efficient if it has ...View AnswerShow Answer

Most loopholes in the income tax system

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The courts in some states have declared the financing of public schools by local property taxes unconstitutional because

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The benefits principle states that the users of a service should pay for that service.

Correct AnswerverifiedShow Answer

Since World War II, the share of corporate income tax collections in total federal revenue has been

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Homeowners

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

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A tax is said to be efficient if it has ...
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