Question 1

If Bob is taxed for each soda he buys, he faces a direct tax.

Accepted Answer

A) True 
 B)False

Question 2

Mrs. Dodge has $8 million in income and pays no income taxes. Her income is most likely

Accepted Answer

A)  capital gains.
B)  interest on corporate bonds.
C)  interest on municipal bonds.
D)  offset by mortgage interest.E) B) and D)
F) All of the above

Question 3

Which of the following government entities relies most heavily on sales taxes?

Accepted Answer

A)  Local government
B)  State government
C)  Federal government
D)  The Social Security AdministrationE) A) and B)
F) A) and C)

Question 4

The idea of horizontal equity in taxation implies that

Accepted Answer

A)  equally situated individuals should be taxed equally.
B)  unequally situated individuals should be taxed unequally.
C)  benefits should be given first to those individuals who need them most.
D)  the greatest tax burden should be borne by the wealthiest individuals.E) A) and B)
F) A) and C)

Question 5

A tax that does not change consumers' behavior creates no

Accepted Answer

A)  economic burden.
B)  excess burden.
C)  tax revenue.
D)  tax incidence.E) None of the above
F) B) and C)

Question 6

The second largest source of revenue for the federal government is the

Accepted Answer

A)  import tax.
B)  payroll tax.
C)  export tax.
D)  federal property tax.E) C) and D)
F) None of the above

Question 7

Most state governments finance their budgets through ____, and most local governments finance their budgets through ____.

Accepted Answer

A)  income taxes; property taxes
B)  property taxes; sales taxes
C)  sales taxes; property taxes
D)  income taxes; sales taxesE) All of the above
F) C) and D)

Question 8

Americans generally pay

Accepted Answer

A)  a lower percentage of their incomes in taxes than citizens of other industrialized countries.
B)  a lower percentage of their incomes in taxes than citizens of other industrialized countries, with the exceptions of Sweden and the Netherlands.
C)  about the same percentage of their incomes in taxes as citizens of other industrialized countries.
D)  a higher percentage of their incomes in taxes than citizens of other industrialized countries.E) A) and B)
F) A) and C)

Question 9

The term "fiscal federalism" refers to

Accepted Answer

A)  deficit financing of government programs.
B)  the power of Congress to tax and to determine how tax revenues are spent.
C)  transferring money between levels of government (for example, from a state government to a local government) .
D)  the system under which governments ask citizens to vote on major revenue-raising measures (for example, on issues of municipal bonds) .E) All of the above
F) A) and B)

Question 10

The most important indirect taxes in the United States are

Accepted Answer

A)  federal and state income taxes.
B)  inheritance taxes.
C)  corporate profits taxes.
D)  sales and property taxes.E) B) and C)
F) C) and D)

Question 11

How is state and local government funded and how does such funding differ from federal government funding?

Accepted Answer

State and local governments rely heavily...

Question 12

Since the end of World War II, corporate income taxes have accounted for

Accepted Answer

A)  an increasing share of federal revenue.
B)  a steady share of federal revenue.
C)  a declining share of federal revenue.
D)  a rising share of revenue until 1980, and then a falling share.E) A) and B)
F) A) and C)

Question 13

Figure 18-2

Figure 18-2 shows the widget market before and after an excise tax is imposed. What percentage of the tax per widget is borne by consumers, considering the true economic incidence of the tax?

Accepted Answer

A)  0 percent
B)  20 percent
C)  50 percent
D)  80 percentE) B) and D)
F) B) and C)

Question 14

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) B) and C)
F) A) and D)

Question 15

The federal government receives most of its revenue from three sources: personal income tax, corporate income tax, and payroll tax.

Accepted Answer

A) True 
 B)False

Question 16

Direct taxes are levied on specific economic activities.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is a direct tax?

Accepted Answer

A)  Excise tax
B)  Tax on corporate profits
C)  Property tax
D)  Sales taxE) All of the above
F) B) and C)

Question 18

An excise tax

Accepted Answer

A)  is a sales tax on the purchase of a particular good or service.
B)  is a tax on the profits earned from the sale of an asset.
C)  represents a surcharge on corporate profits beyond the normal corporate tax rate.
D)  is a tax on income-earning rental property.E) A) and C)
F) B) and D)

Question 19

If Gordon's average tax rate is 10 percent when he earns $100 and his average tax rate is 10.25 percent when he earns $101, then

Accepted Answer

A)  his marginal tax rate is 0.25 percent.
B)  his marginal tax rate is 35.25 percent.
C)  his marginal tax rate is 25.25 percent.
D)  his marginal tax rate is 25 percent.E) C) and D)
F) A) and D)

Question 20

A proportional tax is one in which the fraction of income paid in taxes rises as a person's income increases.

Accepted Answer

A) True 
 B)False

Exam 17: Taxation and Resource Allocation

The second largest source of revenue for the federal government is the

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If Bob is taxed for each soda he buys, he faces a direct tax.

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Most state governments finance their budgets through ____, and most local governments finance their budgets through ____.

Correct AnswerverifiedShow Answer

The idea of horizontal equity in taxation implies that

Correct AnswerverifiedShow Answer

Since the end of World War II, corporate income taxes have accounted for

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A tax that does not change consumers' behavior creates no

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An excise tax

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Figure 18-2 Figure 18-2 shows the widget market before and after an excise tax is imposed. What percentage of the tax per widget is borne by consumers, considering the true economic incidence of the tax?

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Which of the following is a direct tax?

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How is state and local government funded and how does such funding differ from federal government funding?

Correct AnswerverifiedState and local governments rely heavily...View AnswerShow Answer

The term "fiscal federalism" refers to

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Which of the following government entities relies most heavily on sales taxes?

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The most important indirect taxes in the United States are

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If Gordon's average tax rate is 10 percent when he earns $100 and his average tax rate is 10.25 percent when he earns $101, then

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

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The federal government receives most of its revenue from three sources: personal income tax, corporate income tax, and payroll tax.

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Americans generally pay

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A proportional tax is one in which the fraction of income paid in taxes rises as a person's income increases.

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Direct taxes are levied on specific economic activities.

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Mrs. Dodge has $8 million in income and pays no income taxes. Her income is most likely

Correct AnswerverifiedShow Answer

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Most state governments finance their budgets through , and most local governments finance their budgets through .

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State and local governments rely heavily...
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