Question 1

"People who make more money should pay higher taxes" is an example of

Accepted Answer

A)   the benefits principle.
B)   horizontal equity.
C)   vertical efficiency.
D)   the ability-to-pay principle.E) A) and B)
F) C) and D)

Question 2

Under a progressive tax, the fraction of income paid in taxes

Accepted Answer

A)   rises as income rises.
B)   is unchanged as income changes.
C)   falls as income rises.
D)   is proportional to the change in income.E) C) and D)
F) A) and B)

Question 3

Sales taxes, property taxes, and value-added taxes are examples of indirect taxes.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is exempt from taxation (a tax exemption) ?

Accepted Answer

A)   interest on a home mortgage
B)   interest from municipal bonds
C)   rent
D)   property taxesE) None of the above
F) A) and D)

Question 5

Employers can shift payroll taxes by substituting capital for labor.

Accepted Answer

A) True 
 B)False

Question 6

In 1984, the South Carolina State Supreme Court ruled that a 20 percent admission tax on X-rated movies was unconstitutional.When the affected cinemas sought a refund of collected taxes, they were denied on the grounds that the tax, although collected by the theater, was indeed paid by the theatergoers.The Supreme Court apparently believed

Accepted Answer

A)   the supply of X-rated movies was perfectly elastic.
B)   the demand for X-rated movies was perfectly inelastic.
C)   the legislation intended that the theatergoers pay the tax.
D)   the burden fell on the theatergoers-there are no excess burdens on the theater.E) C) and D)
F) A) and B)

Question 7

If the demand curve for a product is vertical, then

Accepted Answer

A)   consumers will refuse to bear any share of tax burden.
B)   producers will bear the larger share of the tax burden.
C)   consumers will bear the entire tax burden.
D)   producers and consumers will equally share the tax burden.E) A) and C)
F) B) and D)

Question 8

Two reasons why the Social Security system nearly went bankrupt in the early 1980s are: (i)  wages were indexed but benefits were not; (ii)  the percentage of elderly people in the country declined.

Accepted Answer

A)   i and ii
B)   i but not ii
C)   ii but not i
D)   neither i nor iiE) A) and B)
F) A) and C)

Question 9

Are property taxes progressive or regressive?

Accepted Answer

The nature of property taxes is controve...

Question 10

Above a certain income the marginal social security tax drops to zero.

Accepted Answer

A) True 
 B)False

Question 11

Members of the European Union (EU) , rely heavily on this form of indirect taxes.

Accepted Answer

A)   Value-added tax
B)   Excise tax
C)   Property tax
D)   Sales taxE) A) and D)
F) A) and C)

Question 12

A regressive tax is one in which the average tax rate falls as income rises.

Accepted Answer

A) True 
 B)False

Question 13

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 rateE) A) and B)
F) A) and C)

Question 14

The corporate tax applies to firms' total revenues.

Accepted Answer

A) True 
 B)False

Question 15

The authors of the text suggest that a comprehensive personal income tax with few loopholes would be efficient and equitable.What is their reasoning for this statement?

Accepted Answer

They argue that a personal income tax wi...

Question 16

The economic burden of an excise tax

Accepted Answer

A)   can usually be partially shifted from buyers onto sellers.
B)   equals the revenue from the tax.
C)   is less than the burden of an income tax that would raise the same revenue.
D)   is shared equally by buyers and sellers.E) All of the above
F) B) and D)

Question 17

Which of the following taxes is most likely to be shifted?

Accepted Answer

A)   a property tax on an owner-occupied residence
B)   a progressive income tax
C)   a flat-rate state income tax
D)   a general sales taxE) A) and B)
F) All of the above

Question 18

In 2005, the median income of renters was $26,317 and the median income of homeowners was $50,505.If imputed rent were added to household income or rent became deductible, the personal income tax would become

Accepted Answer

A)   more progressive.
B)   more regressive.
C)   about proportional.
D)   less progressive.E) B) and C)
F) A) and B)

Question 19

Suppose that the government imposes an excise tax on widgets.The portion of the tax borne by the buyer of widgets depends upon

Accepted Answer

A)   elasticity of demand.
B)   income of buyers.
C)   size of the tax that is imposed.
D)   cross elasticity of demand between widgets and floogles.E) All of the above
F) A) and C)

Question 20

The payroll tax receipts

Accepted Answer

A)   are used to reduce the national debt.
B)   are invested in private business for future payments.
C)   pay off current recipients of Social Security payments.
D)   go directly into a trust fund for investment in private businesses.E) A) and B)
F) A) and C)

Exam 18: Taxation and Resource Allocation

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

Correct Answer
verified

Above a certain income the marginal social security tax drops to zero.

Correct Answer
verified

The economic burden of an excise tax

Correct Answer
verified

The payroll tax receipts

Correct Answer
verified

Employers can shift payroll taxes by substituting capital for labor.

Correct Answer
verified

Under a progressive tax, the fraction of income paid in taxes

Correct Answer
verified

If the demand curve for a product is vertical, then

Correct Answer
verified

Suppose that the government imposes an excise tax on widgets.The portion of the tax borne by the buyer of widgets depends upon

Correct Answer
verified

"People who make more money should pay higher taxes" is an example of

Correct Answer
verified

Which of the following taxes is most likely to be shifted?

Correct Answer
verified

Are property taxes progressive or regressive?

Correct Answer
verified
The nature of property taxes is controve...
View Answer

The corporate tax applies to firms' total revenues.

Correct Answer
verified

Which of the following is exempt from taxation (a tax exemption) ?

Correct Answer
verified

Correct Answer
verified

Members of the European Union (EU) , rely heavily on this form of indirect taxes.

Correct Answer
verified

The authors of the text suggest that a comprehensive personal income tax with few loopholes would be efficient and equitable.What is their reasoning for this statement?

Correct Answer
verified
They argue that a personal income tax wi...
View Answer

In 2005, the median income of renters was $26,317 and the median income of homeowners was $50,505.If imputed rent were added to household income or rent became deductible, the personal income tax would become

Correct Answer
verified

Two reasons why the Social Security system nearly went bankrupt in the early 1980s are: (i) wages were indexed but benefits were not; (ii) the percentage of elderly people in the country declined.

Correct Answer
verified

Sales taxes, property taxes, and value-added taxes are examples of indirect taxes.

Correct Answer
verified

A regressive tax is one in which the average tax rate falls as income rises.

Correct Answer
verified

Exam 18: Taxation and Resource Allocation

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

Correct AnswerverifiedShow Answer

Above a certain income the marginal social security tax drops to zero.

Correct AnswerverifiedShow Answer

The economic burden of an excise tax

Correct AnswerverifiedShow Answer

The payroll tax receipts

Correct AnswerverifiedShow Answer

Employers can shift payroll taxes by substituting capital for labor.

Correct AnswerverifiedShow Answer

Under a progressive tax, the fraction of income paid in taxes

Correct AnswerverifiedShow Answer

If the demand curve for a product is vertical, then

Correct AnswerverifiedShow Answer

Suppose that the government imposes an excise tax on widgets.The portion of the tax borne by the buyer of widgets depends upon

Correct AnswerverifiedShow Answer

"People who make more money should pay higher taxes" is an example of

Correct AnswerverifiedShow Answer

Which of the following taxes is most likely to be shifted?

Correct AnswerverifiedShow Answer

Are property taxes progressive or regressive?

Correct AnswerverifiedThe nature of property taxes is controve...View AnswerShow Answer

The corporate tax applies to firms' total revenues.

Correct AnswerverifiedShow Answer

Which of the following is exempt from taxation (a tax exemption) ?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Members of the European Union (EU) , rely heavily on this form of indirect taxes.

Correct AnswerverifiedShow Answer

The authors of the text suggest that a comprehensive personal income tax with few loopholes would be efficient and equitable.What is their reasoning for this statement?

Correct AnswerverifiedThey argue that a personal income tax wi...View AnswerShow Answer

In 2005, the median income of renters was $26,317 and the median income of homeowners was $50,505.If imputed rent were added to household income or rent became deductible, the personal income tax would become

Correct AnswerverifiedShow Answer

Two reasons why the Social Security system nearly went bankrupt in the early 1980s are: (i) wages were indexed but benefits were not; (ii) the percentage of elderly people in the country declined.

Correct AnswerverifiedShow Answer

Sales taxes, property taxes, and value-added taxes are examples of indirect taxes.

Correct AnswerverifiedShow Answer

A regressive tax is one in which the average tax rate falls as income rises.

Correct AnswerverifiedShow Answer

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The nature of property taxes is controve...
View Answer

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Correct Answer
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Correct Answer
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They argue that a personal income tax wi...
View Answer

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Correct Answer
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