Question 1

(Consider This) A value-added tax (VAT) :

Accepted Answer

A)   is another name for a retail sales tax but is otherwise the same.
B)   is like a sales tax but is only imposed on the difference between a firm's sales and its purchases from other firms.
C)   is like an income tax but is only imposed on the difference between a person's income and his or her consumption.
D)   only applies to imported goods.E) A) and B)
F) All of the above

Question 2

(Advanced analysis) Answer the question on the basis of the following information: The equations for the demand and supply curves for a particular product are P = 10 - .4Q and P = 2 + .4Q,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 + .4Q. Refer to the given information.The equilibrium quantity before the excise tax is imposed is:

Accepted Answer

A)   800 units.
B)   1,000 units.
C)   1,200 units.
D)   1,400 units.E) C) and D)
F) A) and B)

Question 3

In 2011,U.S.governments (local,state,and federal) employed approximately how many million workers?

Accepted Answer

A)   16.0.
B)   19.4.
C)   21.9.
D)   23.5.E) A) and D)
F) All of the above

Question 4

"Tax Freedom Day" in the United States typically occurs in mid-July.

Accepted Answer

A) True 
 B)False

Question 5

The incidence of a tax pertains to:

Accepted Answer

A)   the degree to which it alters the distribution of income.
B)   how easy it is to evade the tax.
C)   who actually bears the burden of a tax.
D)   the progressiveness or regressiveness of tax rates.E) B) and C)
F) All of the above

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

The benefits-received principle of taxation is used to support corporate and personal income taxes.

Accepted Answer

A) True 
 B)False

Question 8

Answer the question on the basis of the following data:   Taxable Income  Total Tax $1,000$02,0001003,0003004,0006005,0001,0006,0001,500\begin{array} { c c } 	ext { Taxable Income } & 	ext { Total Tax } \\hline\$ 1,000 & \$ 0 \2,000 & 100 \3,000 & 300 \4,000 & 600 \5,000 & 1,000 \6,000 & 1,500\end{array} Taxable Income $1,0002,0003,0004,0005,0006,000​ Total Tax $01003006001,0001,500​​  Refer to the given data.If your taxable income increases from $4,000 to $5,000,you will encounter a marginal tax rate of:

Accepted Answer

A)   40 percent.
B)   25 percent.
C)   15 percent.
D)   10 percent. E) A) and D)
F) A) and C)

Question 9

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) A) and D)

Question 10

According to the Organization for Economic Cooperation and Development (OECD) :

Accepted Answer

A)   the United States has the most progressive tax system among OECD nations.
B)   the United States has the least progressive tax system among OECD nations.
C)   the U.S.tax system has the same degree of progressivity as those of nations such as Canada,Japan,and France.
D)   the U.S.tax system has the same degree of progressivity as those of many developing nations.E) A) and B)
F) A) and C)

Question 11

Indy currently earns $50,000 in taxable income and pays $8,000 in taxes.Suppose that Indy faces a marginal tax rate of 25 percent and his boss offers him a raise of $2,000 per year.Indy should:

Accepted Answer

A)   accept the raise because his after-tax income will rise by $1,500.
B)   reject the raise because his after-tax income will fall by $3,000.
C)   reject the raise because his after-tax income will fall by $4,500.
D)   reject the raise because his after-tax income will fall by $6,000.E) None of the above
F) A) and B)

Question 12

As a proportion of domestic output,taxes in the United States:

Accepted Answer

A)   are lower than in most other industrially advanced countries.
B)   are higher than in most other industrially advanced countries.
C)   are approximately the same as in most other industrially advanced countries.
D)   doubled in the 1990s.E) B) and C)
F) A) and B)

Question 13

Suppose that government imposes a specific excise tax on product X of $2 per unit and that the price elasticity of supply of X is unitary (coefficient = 1) .If the incidence of the tax is such that the consumers of X pay $1.85 of the tax and the producers pay $0.15,we can conclude that the:

Accepted Answer

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

Question 14

(Advanced analysis) Answer the question on the basis of the following information: The equations for the demand and supply curves for a particular product are P = 10 - .4Q and P = 2 + .4Q,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 + .4Q. Refer to the given information.The efficiency loss of this tax is:

Accepted Answer

A)   $125.00.
B)   $62.50.
C)   $87.50.
D)   $1.00.E) B) and C)
F) C) and D)

Question 15

Approximately what percentage of local government expenditures goes to finance education?

Accepted Answer

A)   36.
B)   44.
C)   53.
D)   69.E) None of the above
F) C) and D)

Question 16

If the demand for a product is perfectly elastic and supply is upsloping,a $1 excise tax per unit on suppliers will:

Accepted Answer

A)   not raise price at all.
B)   lower price by $1.
C)   raise price by more than $1.
D)   raise price by $1.E) C) and D)
F) All of the above

Question 17

(Advanced analysis) Answer the question on the basis of the following information: The equations for the demand and supply curves for a particular product are P = 10 - .4Q and P = 2 + .4Q,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 + .4Q. Refer to the given information.The equilibrium quantity after the excise tax is imposed is:

Accepted Answer

A)   750 units.
B)   850 units.
C)   875 units.
D)   950 units.E) A) and C)
F) A) and D)

Question 18

In 2012,"Tax-Freedom Day" (the day average workers have earned enough to pay their tax bills) was:

Accepted Answer

A)   April 9.
B)   April 15.
C)   April 17.
D)   July 4.E) B) and C)
F) All of the above

Question 19

(Consider This) 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) All of the above
F) B) and C)

Question 20

Answer the question on the basis of the following data:   Taxable Income  Total Tax $1,000$02,0001003,0003004,0006005,0001,0006,0001,500\begin{array} { c c } 	ext { Taxable Income } & 	ext { Total Tax } \\hline\$ 1,000 & \$ 0 \2,000 & 100 \3,000 & 300 \4,000 & 600 \5,000 & 1,000 \6,000 & 1,500\end{array} Taxable Income $1,0002,0003,0004,0005,0006,000​ Total Tax $01003006001,0001,500​​  The tax represented is:

Accepted Answer

A)   optimal.
B)   proportional.
C)   regressive.
D)   progressive. E) A) and B)
F) A) and C)

Exam 19: Public Finance: Expenditures and Taxes

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

Correct Answer
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Suppose that government imposes a specific excise tax on product X of $2 per unit and that the price elasticity of supply of X is unitary (coefficient = 1) .If the incidence of the tax is such that the consumers of X pay $1.85 of the tax and the producers pay $0.15,we can conclude that the:

Correct Answer
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The average tax rate is:

Correct Answer
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Correct Answer
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Indy currently earns $50,000 in taxable income and pays $8,000 in taxes.Suppose that Indy faces a marginal tax rate of 25 percent and his boss offers him a raise of $2,000 per year.Indy should:

Correct Answer
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As a proportion of domestic output,taxes in the United States:

Correct Answer
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Correct Answer
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If the demand for a product is perfectly elastic and supply is upsloping,a $1 excise tax per unit on suppliers will:

Correct Answer
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In 2011,U.S.governments (local,state,and federal) employed approximately how many million workers?

Correct Answer
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(Consider This) Payout rates for state lotteries:

Correct Answer
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Approximately what percentage of local government expenditures goes to finance education?

Correct Answer
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(Consider This) A value-added tax (VAT) :

Correct Answer
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According to the Organization for Economic Cooperation and Development (OECD) :

Correct Answer
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Answer the question on the basis of the following data: $\begin{array} { c c } \text { Taxable Income } & \text { Total Tax } \\\hline\$ 1,000 & \$ 0 \\2,000 & 100 \\3,000 & 300 \\4,000 & 600 \\5,000 & 1,000 \\6,000 & 1,500\end{array}$ The tax represented is:

Correct Answer
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In 2012,"Tax-Freedom Day" (the day average workers have earned enough to pay their tax bills) was:

Correct Answer
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Correct Answer
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"Tax Freedom Day" in the United States typically occurs in mid-July.

Correct Answer
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The incidence of a tax pertains to:

Correct Answer
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The benefits-received principle of taxation is used to support corporate and personal income taxes.

Correct Answer
verified

Exam 19: Public Finance: Expenditures and Taxes

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

Correct AnswerverifiedShow Answer

Suppose that government imposes a specific excise tax on product X of $2 per unit and that the price elasticity of supply of X is unitary (coefficient = 1) .If the incidence of the tax is such that the consumers of X pay $1.85 of the tax and the producers pay $0.15,we can conclude that the:

Correct AnswerverifiedShow Answer

The average tax rate is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Indy currently earns $50,000 in taxable income and pays $8,000 in taxes.Suppose that Indy faces a marginal tax rate of 25 percent and his boss offers him a raise of $2,000 per year.Indy should:

Correct AnswerverifiedShow Answer

As a proportion of domestic output,taxes in the United States:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the demand for a product is perfectly elastic and supply is upsloping,a $1 excise tax per unit on suppliers will:

Correct AnswerverifiedShow Answer

In 2011,U.S.governments (local,state,and federal) employed approximately how many million workers?

Correct AnswerverifiedShow Answer

(Consider This) Payout rates for state lotteries:

Correct AnswerverifiedShow Answer

Approximately what percentage of local government expenditures goes to finance education?

Correct AnswerverifiedShow Answer

(Consider This) A value-added tax (VAT) :

Correct AnswerverifiedShow Answer

According to the Organization for Economic Cooperation and Development (OECD) :

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In 2012,"Tax-Freedom Day" (the day average workers have earned enough to pay their tax bills) was:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

"Tax Freedom Day" in the United States typically occurs in mid-July.

Correct AnswerverifiedShow Answer

The incidence of a tax pertains to:

Correct AnswerverifiedShow Answer

The benefits-received principle of taxation is used to support corporate and personal income taxes.

Correct AnswerverifiedShow Answer

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