Question 1

The average tax rate is:

Accepted Answer

A)   equal to the marginal tax rate if the tax is progressive.
B)   the total tax rate minus the marginal tax rate.
C)   the ratio of total taxes paid to total taxable income.
D)   the tax rate that applies to incremental dollars of income.E) B) and C)
F) C) and D)

Question 2

Economists agree that corporations always shift the corporate income tax to consumers by raising product prices.

Accepted Answer

A) True 
 B)False

Question 3

Sales taxes are proportional in relation to income because the same tax rate applies regardless of the size of a purchase.

Accepted Answer

A) True 
 B)False

Question 4

Revenues flowing to the government from government-run or government-sponsored businesses,such as public utilities and state lotteries,are known as:

Accepted Answer

A)   proprietary income.
B)   transfer payments.
C)   tax revenue.
D)   subsidies.E) None of the above
F) A) and B)

Question 5

In 2007,the top 1 percent of all taxpayers in the United States faced an overall federal tax rate of:

Accepted Answer

A)   29.5 percent.
B)   33.0 percent.
C)   45.1 percent.
D)   60.9 percent.E) B) and D)
F) B) and C)

Question 6

The opportunity cost of borrowing funds to finance government deficits is:

Accepted Answer

A)   greatest when the economy is doing well.
B)   greatest when the economy is in a recession.
C)   the same regardless of the state of the economy.
D)   zero because government bonds are essentially risk free.E) None of the above
F) A) and B)

Question 7

A highly progressive tax takes relatively more from the rich than it does from the poor.

Accepted Answer

A) True 
 B)False

Question 8

The more inelastic is demand and supply,the:

Accepted Answer

A)   larger is the efficiency loss of an excise tax.
B)   smaller is the efficiency loss of an excise tax.
C)   higher the proportion of an excise tax paid by consumers.
D)   smaller the proportion of an excise tax paid by producers.E) A) and B)
F) A) and C)

Question 9

(Applying the Analysis) 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) A) and B)
F) A) and C)

Question 10

Assume the demand for automobile tires is highly inelastic and that the supply is highly elastic.The burden of a $2 excise tax on each tire will be:

Accepted Answer

A)   borne by resource suppliers who provide the inputs for manufacturing tires.
B)   shared about equally by buyers and sellers of tires.
C)   borne primarily by buyers of tires.
D)   borne primarily by sellers of tires.E) B) and C)
F) A) and D)

Question 11

In 2008,U.S.governments (local,state,and federal) employed approximately how many million workers?

Accepted Answer

A)   9.2
B)   13.0
C)   19.4
D)   22.5E) A) and C)
F) All of the above

Question 12

With respect to state finance,for most states:

Accepted Answer

A)   estate taxes are the major source of revenue and most expenditures are for health services.
B)   corporate income taxes are the major source of revenue and natural resource development is the major type of expenditure.
C)   property taxes are the basic source of revenue and education is the major type of expenditure.
D)   sales and excise taxes are the major source of revenue and education is the major type of expenditure.E) A) and D)
F) B) and D)

Question 13

A tax is progressive if the average tax rate rises as income increases.

Accepted Answer

A) True 
 B)False

Question 14

The largest source of local government's revenue is the sales tax.

Accepted Answer

A) True 
 B)False

Question 15

The maximum federal marginal tax rate on taxable personal income is currently (2010) :

Accepted Answer

A)   50 percent.
B)   35 percent.
C)   45 percent.
D)   28 percent.E) All of the above
F) B) and C)

Question 16

In 2010,the marginal tax rates of the federal personal income tax:

Accepted Answer

A)   are less than corresponding average tax rates.
B)   rise from 5 to 50 percent.
C)   fall from 20 to 10 percent.
D)   rise from 10 to 35 percent.E) A) and B)
F) None of the above

Question 17

t is the supply curve after an excise tax is imposed.The total tax collection from this excise tax will be area: A)  ABCE + ECF. B)  ABCE. C)  ECF. D)  0BCG." class="answers-bank-image d-inline" rel="preload" > Refer to the above figure in which S is the before-tax supply curve and St is the supply curve after an excise tax is imposed.The total tax collection from this excise tax will be area:

Accepted Answer

A)   ABCE + ECF.
B)   ABCE.
C)   ECF.
D)   0BCG.E) A) and B)
F) A) and C)

Question 18

The efficiency loss of a tax is:

Accepted Answer

A)   the net value of sacrificed output caused by the tax.
B)   that portion of the tax paid by producers minus the portion paid by consumers.
C)   that portion of the tax paid by consumers minus the portion paid by producers.
D)   the total tax revenue minus the output loss caused by the tax.E) C) and D)
F) None of the above

Question 19

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

Accepted Answer

A)   General sales taxes
B)   Flat-rate state income taxes
C)   Progressive federal income taxes
D)   Property taxes on an owner-occupied residenceE) None of the above
F) B) and D)

Question 20

The federal gasoline tax is assessed on a per-gallon basis and the proceeds are used for highway maintenance and improvements.This tax is consistent with the:

Accepted Answer

A)   ability-to-pay principle of taxation.
B)   benefits-received principle of taxation.
C)   single-tax theory of taxation.
D)   pay-as-you go ("Paygo") theory of taxation.E) A) and C)
F) All of the above

Exam 12: Public Finance: Expenditures and Taxes

In 2007,the top 1 percent of all taxpayers in the United States faced an overall federal tax rate of:

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The largest source of local government's revenue is the sales tax.

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Refer to the above figure in which S is the before-tax supply curve and St is the supply curve after an excise tax is imposed.The total tax collection from this excise tax will be area:

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Sales taxes are proportional in relation to income because the same tax rate applies regardless of the size of a purchase.

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With respect to state finance,for most states:

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

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The efficiency loss of a tax is:

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Revenues flowing to the government from government-run or government-sponsored businesses,such as public utilities and state lotteries,are known as:

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A tax is progressive if the average tax rate rises as income increases.

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The federal gasoline tax is assessed on a per-gallon basis and the proceeds are used for highway maintenance and improvements.This tax is consistent with the:

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In 2008,U.S.governments (local,state,and federal) employed approximately how many million workers?

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The average tax rate is:

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Economists agree that corporations always shift the corporate income tax to consumers by raising product prices.

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The opportunity cost of borrowing funds to finance government deficits is:

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(Applying the Analysis) Payout rates for state lotteries:

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Assume the demand for automobile tires is highly inelastic and that the supply is highly elastic.The burden of a $2 excise tax on each tire will be:

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The maximum federal marginal tax rate on taxable personal income is currently (2010) :

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In 2010,the marginal tax rates of the federal personal income tax:

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A highly progressive tax takes relatively more from the rich than it does from the poor.

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The more inelastic is demand and supply,the:

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Refer to the above figure in which S is the before-tax supply curve and S_t is the supply curve after an excise tax is imposed.The total tax collection from this excise tax will be area:

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