Question 1

The incidence of taxation refers to

Accepted Answer

A)  who in society actually pays a tax.
B)  the structure of basic income tax rates.
C)  whether taxes are progressive or regressive.
D)  whether or not the benefits-received principle applies.E) None of the above
F) All of the above

Question 2

Suppose that government imposes a specific excise tax on product X of $2 per unit and that the price elasticity of demand for X is unitary (coefficient = 1) . If the incidence of the tax is such that the producers of X pay $1.75 of the tax and the consumers pay $0.25, we can conclude that the

Accepted Answer

A)  supply of X is inelastic.
B)  supply of X is elastic.
C)  supply of X is unitary elastic.
D)  demand for X is elastic.E) A) and B)
F) A) and C)

Question 3

With a tax of $4,000 on $20,000 of income and $6,000 on $30,000 of income, the average tax rate is

Accepted Answer

A)  constant at 10 percent.
B)  lower than the marginal tax rate.
C)  equal to the marginal tax rate.
D)  higher than the marginal tax rate, which is equal to zero.E) C) and D)
F) A) and D)

Question 4

In the diagram, solid arrows reflect real flows, while broken arrows are monetary flows. Flow (5) might represent

Accepted Answer

A)  personal income tax revenues.
B)  the provision of public schools by local governments.
C)  the purchase of laptop computers by the state of Iowa.
D)  wage payments to police officers and firefighters.E) A) and C)
F) All of the above B

Question 5

(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. Government's revenue from this tax is

Accepted Answer

A)  $875.
B)  $750.
C)  $1,500.
D)  $1,500E) All of the above
F) B) and D)

Question 6

The interest on public debt is more than 10 percent of federal government expenditures.

Accepted Answer

A) True 
 B)False

Question 7

When an excise tax or sales tax is imposed on a product, the sellers are always able to shift the burden of the tax on to the buyers.

Accepted Answer

A) True 
 B)False

Question 8

The Social Security tax is regressive because

Accepted Answer

A)  the Social Security tax rate applied does not rise with the salary level.
B)  no Social Security tax is collected for incomes in excess of a "cap" income level.
C)  each individual must pay a set percentage of his or her income in Social Security taxes.
D)  as income increases, the Social Security tax rate increases at a decreasing rate.E) A) and B)
F) C) and D)

Question 9

Which of the following statements about payroll taxes is false?

Accepted Answer

A)  They provide funds for Social Security.
B)  They include Medicare taxes.
C)  Both employers and employees pay these taxes.
D)  They are lump-sum taxes not based on wages/salaries.E) A) and B)
F) A) and C) D

Question 10

The U.S. tax-transfer system (as distinct from the tax system alone) is

Accepted Answer

A)  progressive.
B)  proportional.
C)  bimodal.
D)  regressive.E) B) and C)
F) All of the above

Question 11

The state and local tax structure is largely progressive.

Accepted Answer

A) True 
 B)False

Question 12

(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) B) and C)
F) C) and D)

Question 13

In 2012, approximately what percentage of household income was transferred from the top two quintiles to the lowest three quintiles?

Accepted Answer

A)  zero
B)  10
C)  15
D)  22E) A) and B)
F) A) and C)

Question 14

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) A) and B)
F) All of the above

Question 15

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

Accepted Answer

A)  a general sales tax
B)  a flat-rate state income tax
C)  a progressive federal income tax
D)  a property tax on an owner-occupied residenceE) A) and B)
F) C) and D)

Question 16

Refer to the income tax schedule given in the table. If your taxable income is $4,000, your average tax rate will be

Accepted Answer

A)  30 percent.
B)  15 percent.
C)  10 percent.
D)  20 percent.E) None of the above
F) B) and C)

Question 17

With respect to local finance,

Accepted Answer

A)  death and gift taxes are the major source of revenue and most expenditures are for hospitals and health services.
B)  the corporate income tax is 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 highway construction and maintenance is the major type of expenditure.E) A) and C)
F) A) and D) C

Question 18

Which of the following is not a significant source of revenue for the U.S. federal government?

Accepted Answer

A)  personal income taxes
B)  corporate income taxes
C)  property taxes
D)  payroll taxesE) A) and C)
F) All of the above

Question 19

The table gives data for the market for a product. What is the equilibrium price and quantity in this market?

Accepted Answer

A)  $6 and 60, respectively
B)  $5 and 30, respectively
C)  $3 and 30, respectively
D)  $30 and 3, respectivelyE) B) and D)
F) All of the above

Question 20

Suppose that government imposes a specific excise tax on product X of $2 per unit and that the price elasticity of demand for X is unitary (coefficient = 1) . If the incidence of the tax is such that consumers pay $1.8 of the tax and the producers pay $0.2, we can conclude that the

Accepted Answer

A)  supply of X is elastic.
B)  supply of X is inelastic.
C)  supply of X is unitary elastic.
D)  demand for X is elastic.E) None of the above
F) All of the above

Exam 20: Public Finance: Expenditures and Taxes

The incidence of taxation refers to

Correct Answer
verified

Suppose that government imposes a specific excise tax on product X of $2 per unit and that the price elasticity of demand for X is unitary (coefficient = 1) . If the incidence of the tax is such that the producers of X pay $1.75 of the tax and the consumers pay $0.25, we can conclude that the

Correct Answer
verified

With a tax of $4,000 on $20,000 of income and $6,000 on $30,000 of income, the average tax rate is

Correct Answer
verified

In the diagram, solid arrows reflect real flows, while broken arrows are monetary flows. Flow (5) might represent

Correct Answer
verified
B

Correct Answer
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The interest on public debt is more than 10 percent of federal government expenditures.

Correct Answer
verified

When an excise tax or sales tax is imposed on a product, the sellers are always able to shift the burden of the tax on to the buyers.

Correct Answer
verified

The Social Security tax is regressive because

Correct Answer
verified

Which of the following statements about payroll taxes is false?

Correct Answer
verified
D

The U.S. tax-transfer system (as distinct from the tax system alone) is

Correct Answer
verified

The state and local tax structure is largely progressive.

Correct Answer
verified

Correct Answer
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In 2012, approximately what percentage of household income was transferred from the top two quintiles to the lowest three quintiles?

Correct Answer
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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

Correct Answer
verified

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

Correct Answer
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Refer to the income tax schedule given in the table. If your taxable income is $4,000, your average tax rate will be

Correct Answer
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With respect to local finance,

Correct Answer
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C

Which of the following is not a significant source of revenue for the U.S. federal government?

Correct Answer
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The table gives data for the market for a product. What is the equilibrium price and quantity in this market?

Correct Answer
verified

Suppose that government imposes a specific excise tax on product X of $2 per unit and that the price elasticity of demand for X is unitary (coefficient = 1) . If the incidence of the tax is such that consumers pay $1.8 of the tax and the producers pay $0.2, we can conclude that the

Correct Answer
verified

Exam 20: Public Finance: Expenditures and Taxes

The incidence of taxation refers to

Correct AnswerverifiedShow Answer

Suppose that government imposes a specific excise tax on product X of $2 per unit and that the price elasticity of demand for X is unitary (coefficient = 1) . If the incidence of the tax is such that the producers of X pay $1.75 of the tax and the consumers pay $0.25, we can conclude that the

Correct AnswerverifiedShow Answer

With a tax of $4,000 on $20,000 of income and $6,000 on $30,000 of income, the average tax rate is

Correct AnswerverifiedShow Answer

In the diagram, solid arrows reflect real flows, while broken arrows are monetary flows. Flow (5) might represent

Correct AnswerverifiedB

Correct AnswerverifiedShow Answer

The interest on public debt is more than 10 percent of federal government expenditures.

Correct AnswerverifiedShow Answer

When an excise tax or sales tax is imposed on a product, the sellers are always able to shift the burden of the tax on to the buyers.

Correct AnswerverifiedShow Answer

The Social Security tax is regressive because

Correct AnswerverifiedShow Answer

Which of the following statements about payroll taxes is false?

Correct AnswerverifiedD

The U.S. tax-transfer system (as distinct from the tax system alone) is

Correct AnswerverifiedShow Answer

The state and local tax structure is largely progressive.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In 2012, approximately what percentage of household income was transferred from the top two quintiles to the lowest three quintiles?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Refer to the income tax schedule given in the table. If your taxable income is $4,000, your average tax rate will be

Correct AnswerverifiedShow Answer

With respect to local finance,

Correct AnswerverifiedC

Which of the following is not a significant source of revenue for the U.S. federal government?

Correct AnswerverifiedShow Answer

The table gives data for the market for a product. What is the equilibrium price and quantity in this market?

Correct AnswerverifiedShow Answer

Suppose that government imposes a specific excise tax on product X of $2 per unit and that the price elasticity of demand for X is unitary (coefficient = 1) . If the incidence of the tax is such that consumers pay $1.8 of the tax and the producers pay $0.2, we can conclude that the

Correct AnswerverifiedShow Answer

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B

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D

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C

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