Question 1

To calculate tax revenue, we:

Accepted Answer

A)  divide total revenue by the tax per unit.
B)  multiply total revenue by the tax per unit.
C)  multiply the tax per unit by the number of units being taxed.
D)  multiply the tax per unit by the price of the good being taxed.E) None of the above
F) C) and D)

Question 2

Corporate taxes in the United States are:

Accepted Answer

A)  regressive.
B)  proportional.
C)  progressive.
D)  a flat tax that adjusts with inflation.E) None of the above
F) All of the above

Question 3

We can describe who bears the burden of a tax by using the concept of:

Accepted Answer

A)  marginal burden.
B)  incidence.
C)  payee.
D)  marginal tax rate.E) B) and D)
F) All of the above

Question 4

Discretionary spending involves public expenditures that:

Accepted Answer

A)  have to be approved each year.
B)  are planned in the federal budget and do not need annual approval.
C)  are mandated and regulated by permanent laws.
D)  entitle people to benefits by virtue of age, income, or some other factor.E) None of the above
F) A) and B)

Question 5

A payroll tax is charged on:

Accepted Answer

A)  the earnings of individuals.
B)  income earned from buying and selling investments.
C)  the wages paid to an employee.
D)  the value of a good or service being purchased.E) A) and B)
F) B) and C)

Question 6

Which of the following is an example of a tax-funded program primarily intended to stimulate economic growth?

Accepted Answer

A)  Maintenance of public highways
B)  Provision of housing to those in need
C)  Provision of basic healthcare
D)  Provision of national defenseE) B) and C)
F) All of the above

Question 7

The marginal tax rate is charged on:

Accepted Answer

A)  the last dollar a taxpayer earns.
B)  income earned from buying and selling investments.
C)  the earnings of individuals.
D)  the value of a good or service being purchased.E) A) and B)
F) A) and D)

Question 8

The graph shown depicts a tax being imposed, causing demand to shift from D1 to D2.  Which area of the graph represents the deadweight loss associated with the tax?

Accepted Answer

A)  CBD
B)  ABC
C)  ABCD
D)  P1DCP2E) A) and B)
F) A) and C)

Question 9

If the federal government brings in $3 trillion in tax revenues and spends $4 trillion, the government has a budget _______ of _______ trillion.

Accepted Answer

A)  surplus; $1
B)  deficit; $1
C)  surplus; $7
D)  deficit; $0.75E) A) and C)
F) B) and D)

Question 10

The difference between the loss of surplus to taxpayers and the tax revenue collected is called:

Accepted Answer

A)  an externality.
B)  deadweight loss.
C)  consumer surplus.
D)  producer surplus.E) A) and B)
F) A) and C)

Question 11

The graph shown depicts a tax being imposed, causing demand to shift from D1 to D2.  What change does this tax cause?

Accepted Answer

A)  Positive government revenue and decreased consumption
B)  Zero government revenue and decreased consumption
C)  A transfer of revenue to surplus and increased consumption
D)  Positive government revenue and increased consumptionE) A) and D)
F) All of the above

Question 12

Consider the Laffer curve for a hypothetical good as displayed in the graph shown.  If the current tax rate is 90 percent: the quantity effect currently outweighs the price effect.the government could increase revenue by lowering the tax rate.deadweight loss will increase if the tax rate is lowered.

Accepted Answer

A)  I and III only
B)  II only
C)  I, II, and III
D)  I and II onlyE) C) and D)
F) All of the above

Question 13

How much deadweight loss a tax causes depends on all of the following except:

Accepted Answer

A)  how responsive buyers and sellers are to a price change.
B)  the price elasticity of supply.
C)  the price elasticity of demand.
D)  who the tax is imposed upon.E) A) and B)
F) A) and C)

Question 14

Suppose Javier earns $50,000 per year and pays $500 in taxes, while Camilla earns $100,000 per year and pays $20,000 in taxes. In this scenario, Javier's effective tax rate is _______ and Camilla's effective tax rate is _______.

Accepted Answer

A)  2 percent; 20 percent
B)  5 percent; 20 percent
C)  5 percent; 10 percent
D)  10 percent; 10 percentE) None of the above
F) A) and B)

Question 15

A helpful way to put government revenues into context is to think about them:

Accepted Answer

A)  as an average amount paid per taxpayer.
B)  as a percentage of the country's GDP.
C)  by comparing the percentage of a country's GDP collected in taxes to other countries' percentage of GDP.
D)  All of these approaches can be helpful in understanding tax revenues.E) C) and D)
F) B) and D)

Question 16

The _______ tells us that when the government raises taxes, fewer units will be sold.

Accepted Answer

A)  quantity
B)  price
C)  government spending
D)  qualityE) None of the above
F) B) and C)

Question 17

The burden of a tax placed on buyers is:

Accepted Answer

A)  shared between buyers and sellers.
B)  the buyers' incidence.
C)  the sellers' incidence.
D)  higher than the burden of a tax placed on sellers.E) A) and C)
F) A) and B)

Question 18

In general, the _______ complicated and _______ efficient the design of a tax system is, the more equitable its incidence.

Accepted Answer

A)  less; more
B)  more; less
C)  more; more
D)  less; lessE) C) and D)
F) All of the above

Question 19

Deadweight loss as a result of taxation occurs because the:

Accepted Answer

A)  quantity of the good that is bought and sold is above the market equilibrium quantity.
B)  price that is charged to the consumer is lower than the price the seller receives.
C)  price that is charged to the consumer is above the market equilibrium quantity.
D)  quantity of the good that is bought and sold is below the market equilibrium quantity.E) A) and D)
F) B) and D)

Question 20

When policy makers are deciding where to place the statutory incidence of a tax, it is helpful to remember that:

Accepted Answer

A)  this decision will have no effect on the economic incidence of the tax.
B)  the economic incidence will fall to the more elastic party.
C)  this decision will largely determine the economic incidence of the tax.
D)  this decision will have a large impact on the efficiency of the tax.E) None of the above
F) All of the above

Exam 20: Taxation and the Public Budget

We can describe who bears the burden of a tax by using the concept of:

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Deadweight loss as a result of taxation occurs because the:

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The graph shown depicts a tax being imposed, causing demand to shift from D1 to D2. Which area of the graph represents the deadweight loss associated with the tax?

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If the federal government brings in $3 trillion in tax revenues and spends $4 trillion, the government has a budget _______ of _______ trillion.

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A helpful way to put government revenues into context is to think about them:

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The difference between the loss of surplus to taxpayers and the tax revenue collected is called:

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Discretionary spending involves public expenditures that:

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In general, the _______ complicated and _______ efficient the design of a tax system is, the more equitable its incidence.

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A payroll tax is charged on:

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The graph shown depicts a tax being imposed, causing demand to shift from D1 to D2. What change does this tax cause?

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Which of the following is an example of a tax-funded program primarily intended to stimulate economic growth?

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Corporate taxes in the United States are:

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Consider the Laffer curve for a hypothetical good as displayed in the graph shown. If the current tax rate is 90 percent: the quantity effect currently outweighs the price effect.the government could increase revenue by lowering the tax rate.deadweight loss will increase if the tax rate is lowered.

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Suppose Javier earns $50,000 per year and pays $500 in taxes, while Camilla earns $100,000 per year and pays $20,000 in taxes. In this scenario, Javier's effective tax rate is _______ and Camilla's effective tax rate is _______.

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The marginal tax rate is charged on:

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How much deadweight loss a tax causes depends on all of the following except:

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The burden of a tax placed on buyers is:

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When policy makers are deciding where to place the statutory incidence of a tax, it is helpful to remember that:

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To calculate tax revenue, we:

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The _______ tells us that when the government raises taxes, fewer units will be sold.

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If the federal government brings in $3 trillion in tax revenues and spends $4 trillion, the government has a budget _ of _ trillion.

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In general, the _ complicated and _ efficient the design of a tax system is, the more equitable its incidence.

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Suppose Javier earns $50,000 per year and pays $500 in taxes, while Camilla earns $100,000 per year and pays $20,000 in taxes. In this scenario, Javier's effective tax rate is _ and Camilla's effective tax rate is _.

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