Question 1

If Bob earns $20,000 per year and Sue earns $100,000 a year,and there is a flat tax of 10 percent imposed,then Bob would pay __________,Sue would pay ___________,and this is a __________ tax.

Accepted Answer

A)   $2,000; $10,000; proportional
B)   $2,000; $10,000; progressive
C)   $2,000; $10,000; lump-sum tax
D)   $200; $1,000; flat taxE) B) and C)
F) None of the above

Question 2

1 to D2.According to the graph shown,the tax caused: A)  positive government revenue and decreased consumption. B)  zero government revenue and decreased consumption. C)  a transfer of revenue to surplus and increased consumption. D)  positive government revenue and increased consumption." class="answers-bank-image d-inline" rel="preload" > This graph depicts a tax being imposed,causing demand to shift from D1 to D2.According to the graph shown,the tax caused:

Accepted Answer

A)   positive government revenue and decreased consumption.
B)   zero government revenue and decreased consumption.
C)   a transfer of revenue to surplus and increased consumption.
D)   positive government revenue and increased consumption.E) None of the above
F) A) and D)

Question 3

When a government spends more than it earns in revenue,we say that it has a:

Accepted Answer

A)   budget surplus.
B)   budget deficit.
C)   budget crisis.
D)   federal debt.E) A) and C)
F) A) and B)

Question 4

While corporations bear the statutory incidence of corporate income tax,the economic incidence is likely borne by:

Accepted Answer

A)   shareholders.
B)   employees.
C)   customers.
D)   All of these likely bear some of the economic incidence.E) C) and D)
F) None of the above

Question 5

Concepts useful in evaluating the costs and benefits of alternative types of taxes are:

Accepted Answer

A)   efficiency, incidence and scarcity.
B)   revenue, scarcity, and shortage.
C)   incidence, scarcity, and shortage.
D)   efficiency, revenue and incidence.E) C) and D)
F) None of the above

Question 6

For a person earning $15,000,the marginal tax rate for the amount from 10,001 to $15,000 is:

Accepted Answer

A)   10%
B)   15%
C)   25%
D)   27.5%E) None of the above
F) A) and B)

Question 7

A capital gains tax is a tax on the:

Accepted Answer

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

Question 8

When a tax is imposed and some of the lost surplus becomes tax revenues,the group that benefits is:

Accepted Answer

A)   consumers.
B)   producers.
C)   recipients of government services.
D)   Only the government benefits from that lost surplus.E) A) and D)
F) B) and C)

Question 9

For a person earning $75000,the marginal tax amount from 40,001 to $75000 is:

Accepted Answer

A)   $5,000
B)   $7,500
C)   $8,750
D)   $14,250E) A) and C)
F) A) and B)

Question 10

An example of a lump-sum tax is a(n) :

Accepted Answer

A)   income tax.
B)   property tax.
C)   sales tax.
D)   head tax.E) A) and D)
F) A) and C)

Question 11

When a tax alters consumers' incentives,it is:

Accepted Answer

A)   always the explicit purpose of the policy.
B)   sometimes a side effect of a tax designed to raise revenue.
C)   called a sin tax.
D)   meant to encourage increased consumption.E) B) and C)
F) None of the above

Question 12

Considering a given increase in price due to a tax,the less price elastic the demand curve is,the:

Accepted Answer

A)   larger the drop in equilibrium quantity.
B)   smaller the amount of deadweight loss created.
C)   larger the amount of deadweight loss created.
D)   more surplus that is transferred to consumers.E) A) and C)
F) A) and D)

Question 13

For any given tax,imposing a tax in a market with a highly inelastic demand will:

Accepted Answer

A)   cause more deadweight loss than a market with an elastic demand.
B)   generate higher revenues than a market with an elastic demand.
C)   Both of these statements are true.
D)   Neither of these statements is true.E) B) and C)
F) A) and D)

Question 14

The tax rate that maximizes the government's revenues is:

Accepted Answer

A)   not always the level that is "best" for the economy.
B)   the level that is "best" for the economy.
C)   30 percent.
D)   85 percent.E) B) and D)
F) B) and C)

Question 15

When a tax is placed on sellers,the actual incidence:

Accepted Answer

A)   falls solely on the seller.
B)   falls solely on the buyer.
C)   may be shared between the seller and buyer.
D)   is higher because it is being placed on the seller.E) A) and B)
F) All of the above

Question 16

The surplus that is lost and not converted to tax revenue when a tax is imposed is:

Accepted Answer

A)   deadweight loss.
B)   value that disappears.
C)   not transferred to anyone else.
D)   All of these statements are true.E) A) and B)
F) A) and D)

Question 17

Research shows that people rearrange their income from different sources to reduce their:

Accepted Answer

A)   tax rate.
B)   necessary work hours.
C)   total bill.
D)   tax burden.E) All of the above
F) B) and C)

Question 18

The burden of a tax placed on buyers is:

Accepted Answer

A)   shared between buyers and sellers.
B)   the buyers' incidence.
C)   the sellers' incidence.
D)   higher if the tax is placed on buyers.E) All of the above
F) A) and D)

Question 19

If the primary goal in implementing a tax is to maximize efficiency and minimize deadweight loss,the government should impose a(n) :

Accepted Answer

A)   income tax.
B)   lump sum tax.
C)   sin tax.
D)   proportional tax.E) C) and D)
F) None of the above

Question 20

A tax on the value of a good or service being purchased is called the:

Accepted Answer

A)   sales tax.
B)   payroll tax.
C)   personal income tax.
D)   excise tax.E) None of the above
F) A) and B)

Exam 20: Taxation and the Public Budget

This graph depicts a tax being imposed,causing demand to shift from D1 to D2.According to the graph shown,the tax caused:

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Concepts useful in evaluating the costs and benefits of alternative types of taxes are:

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When a tax is imposed and some of the lost surplus becomes tax revenues,the group that benefits is:

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A capital gains tax is a tax on the:

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For any given tax,imposing a tax in a market with a highly inelastic demand will:

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A tax on the value of a good or service being purchased is called the:

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For a person earning $75000,the marginal tax amount from 40,001 to $75000 is:

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If Bob earns $20,000 per year and Sue earns $100,000 a year,and there is a flat tax of 10 percent imposed,then Bob would pay __________,Sue would pay ___________,and this is a __________ tax.

Correct AnswerverifiedShow Answer

When a tax is placed on sellers,the actual incidence:

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While corporations bear the statutory incidence of corporate income tax,the economic incidence is likely borne by:

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The burden of a tax placed on buyers is:

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When a government spends more than it earns in revenue,we say that it has a:

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Research shows that people rearrange their income from different sources to reduce their:

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If the primary goal in implementing a tax is to maximize efficiency and minimize deadweight loss,the government should impose a(n) :

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When a tax alters consumers' incentives,it is:

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For a person earning $15,000,the marginal tax rate for the amount from 10,001 to $15,000 is:

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An example of a lump-sum tax is a(n) :

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The surplus that is lost and not converted to tax revenue when a tax is imposed is:

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The tax rate that maximizes the government's revenues is:

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Considering a given increase in price due to a tax,the less price elastic the demand curve is,the:

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This graph depicts a tax being imposed,causing demand to shift from D₁ to D₂.According to the graph shown,the tax caused:

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If Bob earns $20,000 per year and Sue earns $100,000 a year,and there is a flat tax of 10 percent imposed,then Bob would pay ____,Sue would pay _,and this is a ______ tax.

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