Question 1

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 producers of X pay $1.9 of the tax and the consumers pay $0.1, we can conclude that the

Accepted Answer

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

Question 2

Which of the following taxes is most likely to be regressive?

Accepted Answer

A)  personal income taxes
B)  corporate income taxes
C)  estate taxes
D)  general sales taxesE) A) and C)
F) All of the above

Question 3

In 2016, U.S. governments (local, state, and federal) employed approximately how many million workers?

Accepted Answer

A)  14.0
B)  19.4
C)  22.4
D)  11.9E) B) and C)
F) None of the above

Question 4

List the four major sources of federal tax revenues.

Accepted Answer

The four main sources of tax revenue for...

Question 5

If an income tax is progressive, the average tax rate will increase as incomes increase.

Accepted Answer

A) True 
 B)False

Question 6

The more inelastic are demand and supply, the

Accepted Answer

A)  larger is the efficiency loss of an excise tax.
B)  smaller is the efficiency loss of an excise tax.
C)  higher is the proportion of an excise tax paid by consumers.
D)  smaller is the proportion of an excise tax paid by producers.E) C) and D)
F) A) and C)

Question 7

Which of the following statements about taxes and government spending is correct?

Accepted Answer

A)  Despite the overall progressive tax system, government expenditures disproportionately favor the rich and result in a system that is slightly regressive.
B)  The progressive tax system is almost perfectly offset by regressive expenditures, making the overall system proportional.
C)  The regressive tax system is offset by expenditures directed toward lower-income households, making the overall system proportional.
D)  The overall system of taxes and spending is progressive, as over $1 trillion per year gets transferred from upper-income households to lower- and middle-income households.E) A) and B)
F) C) and D)

Question 8

The graph illustrates the market for a product on which an excise tax has been imposed by government. How much of the excise tax per unit is shouldered by the buyers?

Accepted Answer

A)  $3
B)  $5
C)  $6
D)  $8E) None of the above
F) All of the above

Question 9

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) A) and C)
F) None of the above

Question 10

Which generalization is incorrect?

Accepted Answer

A)  Given supply, the more elastic the demand for a product, the larger is the portion of an excise tax that is shifted forward to consumers.
B)  Given demand, the more elastic the supply of a product, the larger is the portion of an excise tax that is borne by producers.
C)  Given supply, the more elastic the demand for a product, the larger is the portion of an excise tax that is borne by the sellers.
D)  Given demand, the less elastic the supply of a product, the larger is the portion of an excise tax that is shifted forward to consumers.E) C) and D)
F) B) and C)

Question 11

The fact that high-income earners tend to earn a higher percentage of their incomes from rent and dividends, in contrast to low-income earners, makes the payroll taxes

Accepted Answer

A)  more progressive.
B)  proportional.
C)  more regressive.
D)  a flat tax.E) A) and B)
F) A) and C)

Question 12

List the four main categories of federal spending.

Accepted Answer

Four areas of federal spending...

Question 13

In the U.S., the progressive income-tax system substantially redistributes income.

Accepted Answer

A) True 
 B)False

Question 14

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) None of the above
F) All of the above

Question 15

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

Accepted Answer

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

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

In which of the given market situations will the efficiency loss of an excise tax be the greatest?

Accepted Answer

A)  4
B)  3
C)  1
D)  2E) B) and C)
F) B) and D)

Question 18

In the diagram, if box E represents government, box D the resource market, and box B the product market, then flows (5) and (7) represent

Accepted Answer

A)  goods and services.
B)  government expenditures.
C)  resources.
D)  net taxes.E) All of the above
F) A) and B)

Question 19

Assume the demand for automobile tires is highly inelastic and that the supply is highly elastic. The burden of a $2 excise tax on each tire will be

Accepted Answer

A)  borne by resource suppliers that provide the inputs for manufacturing tires.
B)  shared about equally by buyers and sellers of tires.
C)  borne primarily by buyers of tires.
D)  borne primarily by sellers of tires.E) B) and C)
F) A) and B)

Question 20

Approximately what percentage of the U.S. labor force works for U.S. governments at the federal, state, and local levels (as of 2016) ?

Accepted Answer

A)  8
B)  11
C)  14
D)  22E) B) and D)
F) A) and C)

Exam 20: Public Finance: Expenditures and Taxes

Which of the following taxes is most likely to be regressive?

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The fact that high-income earners tend to earn a higher percentage of their incomes from rent and dividends, in contrast to low-income earners, makes the payroll taxes

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If an income tax is progressive, the average tax rate will increase as incomes increase.

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In the U.S., the progressive income-tax system substantially redistributes income.

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List the four main categories of federal spending.

Correct AnswerverifiedFour areas of federal spending...View AnswerShow Answer

The more inelastic are demand and supply, the

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List the four major sources of federal tax revenues.

Correct AnswerverifiedThe four main sources of tax revenue for...View AnswerShow Answer

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

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In which of the given market situations will the efficiency loss of an excise tax be the greatest?

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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 producers of X pay $1.9 of the tax and the consumers pay $0.1, we can conclude that the

Correct AnswerverifiedShow Answer

In 2016, U.S. governments (local, state, and federal) employed approximately how many million workers?

Correct AnswerverifiedShow Answer

Which of the following statements about taxes and government spending is correct?

Correct AnswerverifiedShow Answer

The graph illustrates the market for a product on which an excise tax has been imposed by government. How much of the excise tax per unit is shouldered by the buyers?

Correct AnswerverifiedShow Answer

Which generalization is incorrect?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the diagram, if box E represents government, box D the resource market, and box B the product market, then flows (5) and (7) represent

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

Approximately what percentage of the U.S. labor force works for U.S. governments at the federal, state, and local levels (as of 2016) ?

Correct AnswerverifiedShow Answer

Assume the demand for automobile tires is highly inelastic and that the supply is highly elastic. The burden of a $2 excise tax on each tire will be

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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Four areas of federal spending...
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The four main sources of tax revenue for...
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