Question 1

The concept of equity pertains to the fairness of a tax.

Accepted Answer

A) True 
 B)False

Question 2

Figure 18-3 
-In which panel of Figure 18-3 would an excise tax be borne entirely by the consumer?

Accepted Answer

A)  1
B)  2
C)  3
D)  4E) All of the above
F) None of the above

Question 3

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

Accepted Answer

A)  An excise tax on coffee
B)  An excise tax on gasoline
C)  A progressive income tax
D)  A tax on residential propertyE) None of the above
F) All of the above

Question 4

If Linda' annual income is $160,000 and she pays $35,000 in taxes, and Paul's annual income is $100,000 and he pays $25,000 in taxes, the tax system is

Accepted Answer

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

Question 5

The payroll tax represents

Accepted Answer

A)  the largest source of revenue in the federal budget.
B)  the second largest source of revenue in the federal budget.
C)  the third largest source of revenue in the federal budget.
D)  the largest source of revenue in state government budgets.E) B) and C)
F) A) and B)

Question 6

If a tax is regressive, the average tax rate

Accepted Answer

A)  remains the same as income rises.
B)  rises as income rises.
C)  falls as income rises.
D)  falls as income falls.E) A) and D)
F) A) and C)

Question 7

State governments' main source of revenue is

Accepted Answer

A)  property taxes.
B)  income taxes.
C)  excise taxes.
D)  sales taxes.E) C) and D)
F) B) and C)

Question 8

The exemption of municipal bond interest income from federal personal income taxes

Accepted Answer

A)  generally benefits the wealthy most.
B)  does not help municipal governments lower financing costs because it is offset by shifting increasing municipal bond rates.
C)  does not help municipal governments lower financing costs because it is offset by shifting falling municipal bond rates.
D)  is an indirect tax on the underlying municipal bonds that generate the interest income.E) A) and C)
F) A) and D)

Question 9

Fiscal federalism

Accepted Answer

A)  is uncommon in the United States.
B)  involves grants between levels of government.
C)  relies on balanced budgets.
D)  is administered by the Federal Reserve.E) All of the above
F) A) and D)

Question 10

Which of the following is an example of a direct tax?

Accepted Answer

A)  Sales tax
B)  Property tax
C)  Gasoline tax
D)  Income taxE) B) and C)
F) None of the above

Question 11

Payments to Social Security recipients would decline if the retirement age were lowered.

Accepted Answer

A) True 
 B)False

Question 12

When the average tax rate rises as income rises, this is known as progressive taxation.

Accepted Answer

A) True 
 B)False

Question 13

A tax has an excess burden whenever

Accepted Answer

A)  people are unable to alter their behavior to avoid paying it.
B)  government seeks to raise it.
C)  it raises a great deal of revenue.
D)  it induces people to change their behavior.E) B) and C)
F) A) and D)

Question 14

The ability of homeowners to deduct mortgage interest costs from their taxes makes the income tax more progressive.

Accepted Answer

A) True 
 B)False

Question 15

Some enterprising individuals produce and sell alcoholic beverages without collecting or paying legally required taxes.These "moonshiners" often have to hide their production facilities and hire fast driving delivery personnel to avoid various authorities.These moonshiners

Accepted Answer

A)  are taking advantage of obvious loopholes in the tax rules.
B)  are making the alcohol taxes more regressive by altering who pays the taxes.
C)  are indicative of the tax's excess burden even if their actions may reduce excess burden relative to no moonshining.
D)  are able to avoid the tax burdens on the moonshined alcohol assuming they are not caught and fined by the authorities.E) C) and D)
F) None of the above

Question 16

Why do many economists rate the income tax high in efficiency and equity terms?

Accepted Answer

The income tax could potentially reduce ...

Question 17

If Harun's taxes are $20,000 when he earns $100,000 and $15,000 when he earns $80,000, then

Accepted Answer

A)  Harun faces a progressive tax.
B)  Harun faces a regressive tax.
C)  Harun faces a proportional tax.
D)  Harun faces a falling marginal tax rates.E) All of the above
F) A) and B)

Question 18

When we say most Americans are in the 15-percent tax bracket, we mean federal taxes are about 15 percent of the income of most Americans.

Accepted Answer

A) True 
 B)False

Question 19

Tax loopholes reduce the excess tax burden on individuals.

Accepted Answer

A) True 
 B)False

Question 20

The system of grants from one level of government to another is an example of fiscal federalism.

Accepted Answer

A) True 
 B)False

Exam 17: Taxation and Resource Allocation

Payments to Social Security recipients would decline if the retirement age were lowered.

Correct AnswerverifiedShow Answer

The payroll tax represents

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When the average tax rate rises as income rises, this is known as progressive taxation.

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The ability of homeowners to deduct mortgage interest costs from their taxes makes the income tax more progressive.

Correct AnswerverifiedShow Answer

If Harun's taxes are $20,000 when he earns $100,000 and $15,000 when he earns $80,000, then

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The exemption of municipal bond interest income from federal personal income taxes

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The concept of equity pertains to the fairness of a tax.

Correct AnswerverifiedShow Answer

Figure 18-3 -In which panel of Figure 18-3 would an excise tax be borne entirely by the consumer?

Correct AnswerverifiedShow Answer

If Linda' annual income is $160,000 and she pays $35,000 in taxes, and Paul's annual income is $100,000 and he pays $25,000 in taxes, the tax system is

Correct AnswerverifiedShow Answer

Some enterprising individuals produce and sell alcoholic beverages without collecting or paying legally required taxes.These "moonshiners" often have to hide their production facilities and hire fast driving delivery personnel to avoid various authorities.These moonshiners

Correct AnswerverifiedShow Answer

State governments' main source of revenue is

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Fiscal federalism

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A tax has an excess burden whenever

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Which of the following is an example of a direct tax?

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The system of grants from one level of government to another is an example of fiscal federalism.

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

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Why do many economists rate the income tax high in efficiency and equity terms?

Correct AnswerverifiedThe income tax could potentially reduce ...View AnswerShow Answer

When we say most Americans are in the 15-percent tax bracket, we mean federal taxes are about 15 percent of the income of most Americans.

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If a tax is regressive, the average tax rate

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Tax loopholes reduce the excess tax burden on individuals.

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The income tax could potentially reduce ...
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