Question 1

In the real world, lump-sum taxes are:

Accepted Answer

A)  rarely used.
B)  commonly used.
C)  applied only to the very wealthy.
D)  common only in developing nations.E) A) and D)
F) A) and C)

Question 2

Taxing the market for alcohol at the same rate as the market for juice will likely:

Accepted Answer

A)  cause less deadweight loss in the market for alcohol than it would in the market for juice.
B)  cause more inefficiency in the market for alcohol than it would in the market for juice.
C)  cause the quantity of alcohol demanded to greatly decrease.
D)  affect the markets for alcohol and juice similarly in terms of revenue and inefficiency.E) C) and D)
F) None of the above

Question 3

Which taxes are used to pay for Social Security and Medicare in the United States?

Accepted Answer

A)  Income
B)  Sales
C)  Corporate income
D)  PayrollE) All of the above
F) None of the above

Question 4

How much deadweight loss a tax causes is primarily determined by:

Accepted Answer

A)  how responsive buyers and sellers are to a price change.
B)  how much tax revenue the government generates.
C)  whether the tax is imposed on the buyer or seller.
D)  the ability of the government to impose the tax.E) B) and D)
F) A) and C)

Question 5

The market for cigarettes likely has a _______ demand.

Accepted Answer

A)  highly elastic
B)  slightly elastic
C)  highly inelastic
D)  slightly inelasticE) A) and D)
F) B) and D) C

Question 6

The burden a tax places on buyers and sellers is:

Accepted Answer

A)  independent of whether buyers or sellers are charged the tax.
B)  always split in half between each party.
C)  never shared between each party.
D)  depends on whether buyers or sellers are charged with the tax.E) A) and B)
F) C) and D)

Question 7

A lump-sum tax: is the most efficient form of taxation. charges the same amount to each taxpayer. is a regressive tax.

Accepted Answer

A)  II only
B)  II and III only
C)  I and III only
D)  I, II, and IIIE) C) and D)
F) A) and B)

Question 8

The effort used to collect and manage the revenue from taxes is called:

Accepted Answer

A)  an externality.
B)  deadweight loss.
C)  administrative burden.
D)  transfer of surplus.E) A) and D)
F) A) and B)

Question 9

Inherent in designing a tax system is the trade-off between:

Accepted Answer

A)  surplus and revenue.
B)  supply and demand.
C)  efficiency and equity.
D)  price and quantity.E) A) and C)
F) A) and B)

Question 10

When raising taxes, the price effect tells us that:

Accepted Answer

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

Question 11

The U.S. Social Security system pays current retirees using:

Accepted Answer

A)  funds contributed from current employees.
B)  money the retirees have contributed to the payroll tax throughout their working lives.
C)  funds from current general government revenues.
D)  money the retirees have contributed in taxes into general government revenue surpluses.E) B) and D)
F) A) and B)

Question 12

For any given tax, the revenue generated is:

Accepted Answer

A)  larger in markets with price elastic demand and supply.
B)  the same regardless of price elasticity.
C)  always maximized in markets with price elastic demand and supply.
D)  smaller in markets with price-elastic demand and supply.E) B) and D)
F) B) and C)

Question 13

When tax rates fall, people tend to:

Accepted Answer

A)  greatly increase the amount of time they work.
B)  slightly increase the amount of time they work.
C)  slightly decrease the amount of time they work.
D)  decrease the amount of time they work, although to what degree is still being researched.E) All of the above
F) A) and B)

Question 14

When evaluating the costs and benefits of alternative types of taxes, economists find it useful to consider: efficiency. revenue. incidence.

Accepted Answer

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

Question 15

Suppose Javier earns $50,000 per year and pays $500 in taxes, while Camilla earns $100,000 per year and pays $20,000 in taxes. This tax system must be:

Accepted Answer

A)  regressive.
B)  progressive.
C)  proportional.
D)  lump-sum.E) 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 $75,000 of taxable income?

Accepted Answer

A)  10 percent
B)  15 percent
C)  19 percent
D)  17 percentE) A) and D)
F) B) and C) C

Question 17

The tax rate that maximizes government revenue is:

Accepted Answer

A)  not always the level that is "best" for the economy.
B)  always the level that is "best" for the economy.
C)  also the rate that minimizes deadweight loss.
D)  also the rate that maximizes total surplus.E) All of the above
F) None of the above

Question 18

A new toll of $0.50 per car is put into effect on a roadway, and 1,000 cars have since used the roadway. What is the total tax revenue?

Accepted Answer

A)  $500
B)  $2,000
C)  $1,000
D)  $5,000E) B) and C)
F) B) and D)

Question 19

An income tax is charged on:

Accepted Answer

A)  the earnings of individuals and corporations.
B)  income earned from buying and selling investments.
C)  the wages paid to an employee.
D)  the value of a good or service being purchased.E) All of the above
F) B) and C)

Question 20

A capital gains tax is charged on:

Accepted Answer

A)  the earnings of individuals and corporations.
B)  income earned from buying and selling assets at a higher price.
C)  the wages paid to an employee.
D)  the value of a good or service being purchased.E) B) and C)
F) All of the above

Exam 20: Taxation and the Public Budget

In the real world, lump-sum taxes are:

Correct AnswerverifiedShow Answer

Taxing the market for alcohol at the same rate as the market for juice will likely:

Correct AnswerverifiedShow Answer

Which taxes are used to pay for Social Security and Medicare in the United States?

Correct AnswerverifiedShow Answer

How much deadweight loss a tax causes is primarily determined by:

Correct AnswerverifiedShow Answer

The market for cigarettes likely has a _______ demand.

Correct AnswerverifiedC

The burden a tax places on buyers and sellers is:

Correct AnswerverifiedShow Answer

A lump-sum tax: is the most efficient form of taxation. charges the same amount to each taxpayer. is a regressive tax.

Correct AnswerverifiedShow Answer

The effort used to collect and manage the revenue from taxes is called:

Correct AnswerverifiedShow Answer

Inherent in designing a tax system is the trade-off between:

Correct AnswerverifiedShow Answer

When raising taxes, the price effect tells us that:

Correct AnswerverifiedShow Answer

The U.S. Social Security system pays current retirees using:

Correct AnswerverifiedShow Answer

For any given tax, the revenue generated is:

Correct AnswerverifiedShow Answer

When tax rates fall, people tend to:

Correct AnswerverifiedShow Answer

When evaluating the costs and benefits of alternative types of taxes, economists find it useful to consider: efficiency. revenue. incidence.

Correct AnswerverifiedD

Suppose Javier earns $50,000 per year and pays $500 in taxes, while Camilla earns $100,000 per year and pays $20,000 in taxes. This tax system must be:

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 $75,000 of taxable income?

Correct AnswerverifiedC

The tax rate that maximizes government revenue is:

Correct AnswerverifiedShow Answer

A new toll of $0.50 per car is put into effect on a roadway, and 1,000 cars have since used the roadway. What is the total tax revenue?

Correct AnswerverifiedShow Answer

An income tax is charged on:

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A capital gains tax is charged on:

Correct AnswerverifiedShow Answer

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C

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D

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C

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