Question 1

Assuming the basic purpose is to raise additional revenue, should government levy an excise tax on cigarettes whose demand is highly inelastic or on a product whose demand is highly elastic? Are there any other reasons to levy such a tax?

Accepted Answer

Revenue-seeking legislatures place heavy...

Question 2

The largest category of federal government expenditures is national defense.

Accepted Answer

A) True 
 B)False

Question 3

The benefits-received principle of taxation is most evident in

Accepted Answer

A)  inheritance taxes.
B)  excise taxes on gasoline.
C)  the personal income tax.
D)  the corporate income tax.E) C) and D)
F) B) and D)

Question 4

The circular flow model with government included would show that government

Accepted Answer

A)  controls economic resources and sells them in the resource market.
B)  produces goods and services and sells them in the product market to generate net taxes.
C)  provides goods and services to businesses and households and pays for them with net taxes.
D)  obtains revenues in the product market and uses them to cover costs in the resource market.E) A) and B)
F) C) and D)

Question 5

Refer to the graph. Assume the market for this product started out at the intersection of D ₂ and S ₁. Then supply shifted from S ₁ to S ₂ due to an excise tax imposed on the product. If demand subsequently shifts from D ₂ to D ₁, then which of the following will decrease?

Accepted Answer

A)  the tax per unit of the product
B)  the tax revenue
C)  the deadweight loss due to the tax
D)  the portion of the tax per unit that is shouldered by the buyersE) All of the above
F) B) and D)

Question 6

The burden of a specific sales tax falls entirely on the consumer when the

Accepted Answer

A)  elasticity of supply is zero.
B)  demand curve is perfectly elastic.
C)  price elasticity of demand is greater than the elasticity of supply.
D)  price elasticity of demand is zero.E) None of the above
F) A) and D)

Question 7

Which of the following claims is not made by defenders of lotteries?

Accepted Answer

A)  Lotteries are a relatively painless way to fund important government services.
B)  Lotteries help reduce organized crime by providing an alternative to illegal gambling.
C)  Lotteries are preferable to taxes because they are voluntary.
D)  Lotteries are progressive in nature, with higher income families playing more frequently.E) B) and C)
F) B) and D)

Question 8

Payout rates for state lotteries

Accepted Answer

A)  are considerably lower than payout rates from casinos.
B)  are considerably higher than payout rates from casinos.
C)  are roughly equal to the payout rates from casinos.
D)  cannot be compared with casino payout rates because states do not typically disclose their payout rates.E) None of the above
F) B) and C)

Question 9

Just like businesses, the public sector uses resources in order to produce goods and services.

Accepted Answer

A) True 
 B)False

Question 10

Property taxes are

Accepted Answer

A)  collected primarily at the federal level.
B)  the largest source of tax revenue for local governments.
C)  the primary source of federal revenue-sharing funds.
D)  used primarily by states to finance state welfare programs.E) A) and B)
F) A) and C)

Question 11

Which of the following statements about government borrowing is not true?

Accepted Answer

A)  It provides the government the ability to maintain spending levels during economic downturns.
B)  "Crowding out" of private investments is a major opportunity cost of government borrowing.
C)  Its opportunity cost is likely to be quite high during an economic downturn.
D)  A bigger budget deficit will result in a bigger amount of government borrowing.E) A) and C)
F) A) and B)

Question 12

Most of the state and local government employees are in what area?

Accepted Answer

A)  health care
B)  education
C)  administration
D)  highwaysE) B) and D)
F) B) and C)

Question 13

If the demand for a product is perfectly inelastic, the incidence of an excise tax will be

Accepted Answer

A)  entirely on the buyer.
B)  mostly on the buyer.
C)  entirely on the seller.
D)  mostly on the seller.E) All of the above
F) None of the above

Question 14

In the diagram, solid arrows reflect real flows, while broken arrows are monetary flows. Flow (2) might represent

Accepted Answer

A)  the provision of national defense by government.
B)  a government subsidy to farmers.
C)  corporate income tax payments.
D)  welfare payments to low-income families.E) A) and B)
F) A) and C)

Question 15

The graph illustrates the market for a product on which an excise tax has been imposed by government. What was the price of the product before the tax was imposed, and what is the price with the tax?

Accepted Answer

A)  $8 and $5, respectively
B)  $11 and $8, respectively
C)  $8 and $11, respectively
D)  $5 and $8, respectivelyE) B) and C)
F) B) and D)

Question 16

According to the Organization for Economic Cooperation and Development (OECD) ,

Accepted Answer

A)  the United States has the most progressive tax system among OECD nations.
B)  the United States has the least progressive tax system among OECD nations.
C)  the U.S. tax system has the same degree of progressivity as those of nations such as Canada, Japan, and France.
D)  the U.S. tax system has the same degree of progressivity as those of many developing nations.E) A) and B)
F) All of the above

Question 17

(Advanced analysis) The equations for the demand and supply curves for a particular product are P = 10 − 0.4 Q and P = 2 + 0.4 Q, where P is price and Q is quantity expressed in units of 100. After an excise tax is imposed on the product, the supply equation is P = 3 + 0.4 Q. The equilibrium quantity after the excise tax is imposed is

Accepted Answer

A)  875 units.
B)  800 units.
C)  1,200 units.
D)  1,000 units.E) A) and D)
F) A) and C)

Question 18

Excise taxes of the federal government include the following items, except a(n)

Accepted Answer

A)  alcoholic beverage tax.
B)  tobacco tax.
C)  general sales tax.
D)  gasoline tax.E) A) and D)
F) B) and C)

Question 19

In the diagram, if box E represents government, box C businesses, box D the resource market, and box B the product market, then government purchases of computers, office supplies, and military hardware would be illustrated by arrows

Accepted Answer

A)  5 and 6.
B)  7 and 8.
C)  9 and 10.
D)  10 and 11.E) A) and B)
F) None of the above

Question 20

Approximately what percentage of local government expenditures goes to finance education?

Accepted Answer

A)  31
B)  43
C)  23
D)  56E) A) and D)
F) A) and C)

Exam 20: Public Finance: Expenditures and Taxes

Correct Answer
verified

Refer to the graph. Assume the market for this product started out at the intersection of D ₂ and S ₁. Then supply shifted from S ₁ to S ₂ due to an excise tax imposed on the product. If demand subsequently shifts from D ₂ to D ₁, then which of the following will decrease?

Correct Answer
verified

According to the Organization for Economic Cooperation and Development (OECD) ,

Correct Answer
verified

In the diagram, if box E represents government, box C businesses, box D the resource market, and box B the product market, then government purchases of computers, office supplies, and military hardware would be illustrated by arrows

Correct Answer
verified

The burden of a specific sales tax falls entirely on the consumer when the

Correct Answer
verified

The largest category of federal government expenditures is national defense.

Correct Answer
verified

Assuming the basic purpose is to raise additional revenue, should government levy an excise tax on cigarettes whose demand is highly inelastic or on a product whose demand is highly elastic? Are there any other reasons to levy such a tax?

Correct Answer
verified
Revenue-seeking legislatures place heavy...
View Answer

In the diagram, solid arrows reflect real flows, while broken arrows are monetary flows. Flow (2) might represent

Correct Answer
verified

Excise taxes of the federal government include the following items, except a(n)

Correct Answer
verified

Which of the following statements about government borrowing is not true?

Correct Answer
verified

The benefits-received principle of taxation is most evident in

Correct Answer
verified

Approximately what percentage of local government expenditures goes to finance education?

Correct Answer
verified

If the demand for a product is perfectly inelastic, the incidence of an excise tax will be

Correct Answer
verified

Which of the following claims is not made by defenders of lotteries?

Correct Answer
verified

The circular flow model with government included would show that government

Correct Answer
verified

Property taxes are

Correct Answer
verified

Just like businesses, the public sector uses resources in order to produce goods and services.

Correct Answer
verified

The graph illustrates the market for a product on which an excise tax has been imposed by government. What was the price of the product before the tax was imposed, and what is the price with the tax?

Correct Answer
verified

Most of the state and local government employees are in what area?

Correct Answer
verified

Payout rates for state lotteries

Correct Answer
verified

Exam 20: Public Finance: Expenditures and Taxes

Correct AnswerverifiedShow Answer

Refer to the graph. Assume the market for this product started out at the intersection of D ₂ and S ₁. Then supply shifted from S ₁ to S ₂ due to an excise tax imposed on the product. If demand subsequently shifts from D ₂ to D ₁, then which of the following will decrease?

Correct AnswerverifiedShow Answer

According to the Organization for Economic Cooperation and Development (OECD) ,

Correct AnswerverifiedShow Answer

In the diagram, if box E represents government, box C businesses, box D the resource market, and box B the product market, then government purchases of computers, office supplies, and military hardware would be illustrated by arrows

Correct AnswerverifiedShow Answer

The burden of a specific sales tax falls entirely on the consumer when the

Correct AnswerverifiedShow Answer

The largest category of federal government expenditures is national defense.

Correct AnswerverifiedShow Answer

Assuming the basic purpose is to raise additional revenue, should government levy an excise tax on cigarettes whose demand is highly inelastic or on a product whose demand is highly elastic? Are there any other reasons to levy such a tax?

Correct AnswerverifiedRevenue-seeking legislatures place heavy...View AnswerShow Answer

In the diagram, solid arrows reflect real flows, while broken arrows are monetary flows. Flow (2) might represent

Correct AnswerverifiedShow Answer

Excise taxes of the federal government include the following items, except a(n)

Correct AnswerverifiedShow Answer

Which of the following statements about government borrowing is not true?

Correct AnswerverifiedShow Answer

The benefits-received principle of taxation is most evident in

Correct AnswerverifiedShow Answer

Approximately what percentage of local government expenditures goes to finance education?

Correct AnswerverifiedShow Answer

If the demand for a product is perfectly inelastic, the incidence of an excise tax will be

Correct AnswerverifiedShow Answer

Which of the following claims is not made by defenders of lotteries?

Correct AnswerverifiedShow Answer

The circular flow model with government included would show that government

Correct AnswerverifiedShow Answer

Property taxes are

Correct AnswerverifiedShow Answer

Just like businesses, the public sector uses resources in order to produce goods and services.

Correct AnswerverifiedShow Answer

The graph illustrates the market for a product on which an excise tax has been imposed by government. What was the price of the product before the tax was imposed, and what is the price with the tax?

Correct AnswerverifiedShow Answer

Most of the state and local government employees are in what area?

Correct AnswerverifiedShow Answer

Payout rates for state lotteries

Correct AnswerverifiedShow Answer

Correct Answer
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Revenue-seeking legislatures place heavy...
View Answer

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Correct Answer
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