Question 1

Only a few states use state-run lotteries to increase their revenues and pay for expenditures.

Accepted Answer

A) True 
 B)False

Question 2

If the tax on gasoline is increased, gas stations are most likely to pass most of this increase to the consumer if the demand is

Accepted Answer

A)  unitary elastic.
B)  very inelastic.
C)  slightly elastic.
D)  perfectly elastic.E) A) and B)
F) A) and C)

Question 3

Which of the following statements about state lotteries is false?

Accepted Answer

A)  State lotteries are monopolies, with competing private lotteries banned.
B)  State lotteries are highly controversial, with critics and defenders still debating their merits.
C)  Fewer than half of the states in the U.S.have state lotteries because of their controversial nature.
D)  The payout rates of state lotteries are substantially lower than in private betting operations like casinos.E) None of the above
F) A) and B)

Question 4

Assume the supply curve for product X is perfectly elastic and that government imposes a $2-per-unit excise tax.We can conclude that the resulting

Accepted Answer

A)  increase in output will be greater the less elastic the demand curve.
B)  decrease in output will be greater the less elastic the demand curve.
C)  decrease in output will be greater the more elastic the demand curve.
D)  increase in output will be greater the more elastic the demand curve.E) B) and C)
F) A) and B)

Question 5

With a tax of $4,000 on $24,000 taxable income, the average tax rate is

Accepted Answer

A)  16.67 percent.
B)  20 percent.
C)  23.45 percent.
D)  25 percent.E) A) and D)
F) B) and C)

Question 6

Assume that you pay $10,000 of tax on a taxable income of $50,000.If your taxable income were $150,000, your tax payment would be $25,000.This suggests the tax is

Accepted Answer

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

Question 7

From 1960 to 2015, government purchases in the United States have shrunk as a percentage of GDP, but transfer payments have expanded greatly.

Accepted Answer

A) True 
 B)False

Question 8

Suppose that a $0.75 tax is placed on gasoline.Under what circumstances will gasoline sellers end up shouldering the full burden of the tax?

Accepted Answer

A)  if supply is perfectly inelastic and demand is downward-sloping
B)  if demand is perfectly inelastic and supply is upward-sloping
C)  if supply is upward-sloping and demand is perfectly elastic
D)  The consumer and the seller always share the burden of the tax.E) A) and B)
F) A) and D)

Question 9

The marginal tax rate is

Accepted Answer

A)  the difference between the total tax rate and the average tax rate.
B)  the percentage of total income paid as taxes.
C)  equal to the change in taxes/change in taxable income.
D)  equal to the total taxes/total taxable income.E) C) and D)
F) All of the above

Question 10

The U.S.tax and transfer study done by economists Chamberlain and Prante of the Tax Foundation notes that in 2012 households in the top income quintile received about

Accepted Answer

A)  75 cents in government spending for every dollar they paid in taxes.
B)  60 cents in government spending for every dollar they paid in taxes.
C)  30 cents in government spending for every dollar they paid in taxes.
D)  10 cents in government spending for every dollar they paid in taxes.E) C) and D)
F) B) and C)

Question 11

Assume that in year 1 your average tax rate is 20 percent on a taxable income of $20,000.If the marginal tax rate on the next $10,000 of taxable income is 30 percent, what will be the average tax rate if your taxable income rises to $30,000?

Accepted Answer

A)  7 percent
B)  30 percent
C)  about 16 percent
D)  about 23 percentE) A) and B)
F) None of the above

Question 12

A major distinction between government purchases and government transfer payments is that

Accepted Answer

A)  government purchases divert resources from private uses to public uses, while transfer payments do not.
B)  transfer payments divert resources from private uses to public uses, while government purchases do not.
C)  government purchases have to be approved by Congress, while transfer payments do not.
D)  government purchases of goods and services have increased more rapidly during the past 20 years than have transfer payments.E) B) and D)
F) B) and C)

Question 13

Approximately what percentage of the federal government's tax revenues are generated from personal income taxes (in 2015) ?

Accepted Answer

A)  75 percent
B)  28 percent
C)  33 percent
D)  47 percentE) A) and B)
F) None of the above

Question 14

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 15

The tax revenues of local governments are typically

Accepted Answer

A)  more than their expenditures.
B)  equal to their expenditures.
C)  slightly less than their expenditures.
D)  less than one-half of their expenditures.E) None of the above
F) B) and C)

Question 16

Assume the Environmental Protection Agency imposes an excise tax on polluting firms.In which of the following situations would we expect the additional costs to be borne most heavily by consumers?

Accepted Answer

A)  Demand is highly elastic and supply is highly inelastic.
B)  Demand and supply are both highly elastic.
C)  Demand and supply are both highly inelastic.
D)  Demand is highly inelastic and supply is highly elastic.E) B) and C)
F) C) and D)

Question 17

The ability-to-pay principle of taxation

Accepted Answer

A)  has been declared unconstitutional because it deprives individuals of property without due process of law.
B)  suggests that people should pay taxes in proportion to the benefits they derive from public goods and services.
C)  suggests that taxes should vary directly with people's income and wealth.
D)  suggests that taxes should vary inversely with people's income and wealth.E) A) and D)
F) A) and C)

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

In 2013, the top 1 percent of all taxpayers in the United States paid what percentage of the federal income tax?

Accepted Answer

A)  23.4 percent
B)  37.8 percent
C)  39.6 percent
D)  58.5 percentE) C) and D)
F) A) and B)

Question 20

Social Security contributions are part of

Accepted Answer

A)  excise taxes.
B)  payroll taxes.
C)  reverse taxes.
D)  indirect taxes.E) A) and C)
F) B) and D)

Exam 20: Public Finance: Expenditures and Taxes

With a tax of $4,000 on $24,000 taxable income, the average tax rate is

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Assume that in year 1 your average tax rate is 20 percent on a taxable income of $20,000.If the marginal tax rate on the next $10,000 of taxable income is 30 percent, what will be the average tax rate if your taxable income rises to $30,000?

Correct AnswerverifiedShow Answer

The U.S.tax and transfer study done by economists Chamberlain and Prante of the Tax Foundation notes that in 2012 households in the top income quintile received about

Correct AnswerverifiedShow Answer

The marginal tax rate is

Correct AnswerverifiedShow Answer

Which of the following statements about state lotteries is false?

Correct AnswerverifiedShow Answer

If the tax on gasoline is increased, gas stations are most likely to pass most of this increase to the consumer if the demand is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The tax revenues of local governments are typically

Correct AnswerverifiedShow Answer

In 2013, the top 1 percent of all taxpayers in the United States paid what percentage of the federal income tax?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Social Security contributions are part of

Correct AnswerverifiedShow Answer

Assume the Environmental Protection Agency imposes an excise tax on polluting firms.In which of the following situations would we expect the additional costs to be borne most heavily by consumers?

Correct AnswerverifiedShow Answer

Suppose that a $0.75 tax is placed on gasoline.Under what circumstances will gasoline sellers end up shouldering the full burden of the tax?

Correct AnswerverifiedShow Answer

Only a few states use state-run lotteries to increase their revenues and pay for expenditures.

Correct AnswerverifiedShow Answer

A major distinction between government purchases and government transfer payments is that

Correct AnswerverifiedShow Answer

Approximately what percentage of the federal government's tax revenues are generated from personal income taxes (in 2015) ?

Correct AnswerverifiedShow Answer

Assume that you pay $10,000 of tax on a taxable income of $50,000.If your taxable income were $150,000, your tax payment would be $25,000.This suggests the tax is

Correct AnswerverifiedShow Answer

Assume the supply curve for product X is perfectly elastic and that government imposes a $2-per-unit excise tax.We can conclude that the resulting

Correct AnswerverifiedShow Answer

The ability-to-pay principle of taxation

Correct AnswerverifiedShow Answer

From 1960 to 2015, government purchases in the United States have shrunk as a percentage of GDP, but transfer payments have expanded greatly.

Correct AnswerverifiedShow Answer

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