Question 1

If the supply of a product is perfectly elastic and demand is downsloping, an excise tax of $2 per unit will increase price by

Accepted Answer

A)  more than $2.
B)  less than $2.
C)  $2 and increase equilibrium output.
D)  $2 and reduce equilibrium output.E) A) and B)
F) B) and C)

Question 2

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) A) and B)

Question 3

The government is like business firms in that it provides goods and services to households and businesses.

Accepted Answer

A) True 
 B)False

Question 4

In 2014, based on data from the OECD, the government's total tax revenue as a percentage of total output was highest in which of the following nations?

Accepted Answer

A)  Germany
B)  France
C)  United States
D)  MexicoE) A) and D)
F) All of the above

Question 5

In 2013, the top 5 percent of income-tax filers paid what portion of the total U.S.federal income tax?

Accepted Answer

A)  close to 60 percent
B)  about 30 percent
C)  less than 20 percent
D)  more than 80 percentE) A) and B)
F) A) and C)

Question 6

The basic source of state government's revenue is the property tax.

Accepted Answer

A) True 
 B)False

Question 7

The marginal tax rate is the tax rate that applies to additional income.

Accepted Answer

A) True 
 B)False

Question 8

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) B) and D)
F) A) and B)

Question 9

The largest category of federal spending is for

Accepted Answer

A)  health care.
B)  science, space, and technology.
C)  pensions and income security.
D)  national defense.E) A) and B)
F) None of the above

Question 10

Government borrowing

Accepted Answer

A)  is the primary means of financing public expenditures.
B)  provides a stimulus to government spending with no opportunity cost.
C)  may crowd out private sector investment.
D)  is prohibited by the U.S.constitution.E) A) and B)
F) A) and C)

Question 11

If each taxpayer paid the same lump-sum amount regardless of income level, the tax system would be

Accepted Answer

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

Question 12

The so-called Tax Freedom Day of each year recognizes the day that

Accepted Answer

A)  the federal government requires taxpayers to submit their taxes to the Internal Revenue Service.
B)  charitable contributions were made legal under the tax codes of the United States government.
C)  the U.S.Supreme Court ruled that double taxation of income was illegal for corporations and businesses.
D)  the average worker had earned enough income to pay his or her share of government spending for that year.E) B) and C)
F) A) and B)

Question 13

If taxes are $2,000 when income is $15,000 and they are $3,000 when income is $19,000, then the marginal tax rate is

Accepted Answer

A)  20 percent.
B)  25 percent.
C)  30 percent.
D)  40 percent.E) A) and D)
F) A) and C)

Question 14

Which of the following best reflects the ability-to-pay philosophy of taxation?

Accepted Answer

A)  a tax on residential property
B)  a progressive income tax
C)  an excise tax on gasoline
D)  an excise tax on coffeeE) All of the above
F) A) and C)

Question 15

Property taxes are

Accepted Answer

A)  collected primarily at the federal level.
B)  the largest source of tax revenue for local governments.
C)  the primary source of federal revenue-sharing funds.
D)  used primarily by states to finance state welfare programs.E) None of the above
F) All of the above

Question 16

The largest expenditure of the U.S.federal government is for

Accepted Answer

A)  education.
B)  national defense.
C)  pensions and income security.
D)  interest on public debt.E) C) and D)
F) A) and D)

Question 17

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) C) and D)
F) A) and D)

Question 18

If the demand for a product is perfectly inelastic and the supply curve is upsloping, a $1 excise tax per unit of output will

Accepted Answer

A)  raise the price by less than $1.
B)  raise the price by more than $1.
C)  raise the price by $1.
D)  lower the price by $1.E) A) and B)
F) A) and C)

Question 19

An income tax is progressive if the

Accepted Answer

A)  absolute amount paid as taxes varies directly with income.
B)  percentage of income paid as taxes is the same regardless of the size of income.
C)  percentage of income paid as taxes increases as income increases.
D)  tax rate varies inversely with income.E) B) and C)
F) None of the above

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 20: Public Finance: Expenditures and Taxes

The marginal tax rate is the tax rate that applies to additional income.

Correct AnswerverifiedShow Answer

If the demand for a product is perfectly inelastic and the supply curve is upsloping, a $1 excise tax per unit of output will

Correct AnswerverifiedShow Answer

Property taxes are

Correct AnswerverifiedShow Answer

The incidence of taxation refers to

Correct AnswerverifiedShow Answer

The basic source of state government's revenue is the property tax.

Correct AnswerverifiedShow Answer

The average tax rate is

Correct AnswerverifiedShow Answer

Which of the following best reflects the ability-to-pay philosophy of taxation?

Correct AnswerverifiedShow Answer

If taxes are $2,000 when income is $15,000 and they are $3,000 when income is $19,000, then the marginal tax rate is

Correct AnswerverifiedShow Answer

If the supply of a product is perfectly elastic and demand is downsloping, an excise tax of $2 per unit will increase price by

Correct AnswerverifiedShow Answer

An income tax is progressive if the

Correct AnswerverifiedShow Answer

The largest category of federal spending is for

Correct AnswerverifiedShow Answer

The government is like business firms in that it provides goods and services to households and businesses.

Correct AnswerverifiedShow Answer

The largest expenditure of the U.S.federal government is for

Correct AnswerverifiedShow Answer

Which of the following statements about payroll taxes is false?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In 2013, the top 5 percent of income-tax filers paid what portion of the total U.S.federal income tax?

Correct AnswerverifiedShow Answer

Government borrowing

Correct AnswerverifiedShow Answer

In 2014, based on data from the OECD, the government's total tax revenue as a percentage of total output was highest in which of the following nations?

Correct AnswerverifiedShow Answer

If each taxpayer paid the same lump-sum amount regardless of income level, the tax system would be

Correct AnswerverifiedShow Answer

The so-called Tax Freedom Day of each year recognizes the day that

Correct AnswerverifiedShow Answer

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