Question 1

For about the last 45 years, state and local taxes have remained relatively constant as a percentage of GDP.

Accepted Answer

A) True 
 B)False

Question 2

Regarding taxation and efficiency, which of the following statements is not true?

Accepted Answer

A)  ​Many inefficiencies arise from taxation.
B)  ​Many burdens arise from taxation. 
C)  ​Some taxes lead to greater efficiency.
D)  ​All of the above statements are true.

Question 3

The ____ is the fraction of each additional dollar of income that is paid in taxes.

Accepted Answer

A)  deferred tax rate 
B)  cumulative tax rate 
C)  average tax rate 
D)  marginal tax rate

Question 4

Taxation may improve the social welfare when the taxed good

Accepted Answer

A)  is socially undesirable (like, in some views, liquor and pornography) .
B)  imposes negative externalities.
C)  is overproduced under a free-market system.
D)  All of the above are correct.

Question 5

The shares of GDP taken in taxes by federal, state & local governments

Accepted Answer

A)  have risen steadily in the past 40 years to about 22 percent.
B)  have dropped steadily in the past 40 years to about 6 or 7 percent.
C)  grew substantially until the early 1970s and have leveled off at about 10 to 11 percent.
D)  fell steadily until the early 1970s and has risen steadily since then.

Question 6

Direct taxes are levied directly on people or corporations.

Accepted Answer

A) True 
 B)False

Question 7

State governments' main source of revenue is

Accepted Answer

A)  property taxes.
B)  income taxes.
C)  excise taxes.
D)  sales taxes.

Question 8

Which of the following situations is a clear application of the benefits principle of taxation?

Accepted Answer

A)  wealthier people are taxed more heavily 
B)  heavier vehicles are charged higher tolls on turnpikes 
C)  state government providing a free education to any child in the state 
D)  sales of measles vaccine exempt from sales tax

Question 9

Discuss the three principles of equity applied to taxation in the text.

Accepted Answer

1.The principle of horizontal equity hol...

Question 10

The head tax is regressive.

Accepted Answer

A) True 
 B)False

Question 11

What is personal income tax?
 On which principle does the federal government levy this tax?

Accepted Answer

The personal income tax is a tax levied ...

Question 12

Which of the following is an example of an indirect tax?

Accepted Answer

A)  value-added tax 
B)  income tax 
C)  inheritance tax 
D)  head tax

Question 13

Most state governments finance their budgets through ____, and most local governments finance their budgets through ____.

Accepted Answer

A)  income taxes; property taxes 
B)  property taxes; sales taxes 
C)  sales taxes; property taxes 
D)  income taxes; sales taxes

Question 14

In which of the following examples is excess burden not present?

Accepted Answer

A)  Harriet decides to give up her Saturday hours at her law office after income tax rates rise.
B)  Rudolf still smokes three packs a day even after the excise tax on cigarettes rose 10 cents a pack.
C)  Wilma reduced the automatic payroll deduction to her savings account after the tax on interest was imposed.
D)  Harper decided to take a vacation in Bermuda rather than invest in stocks after the tax rate on capital gains was increased.

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

If demand is more elastic, the portion of an excise tax borne by a buyer will

Accepted Answer

A)  increase.
B)  decrease.
C)  be unchanged.
D)  increase for normal goods, decrease for inferior goods.

Question 17

Vertical equity refers to the notion that equally situated individuals should be taxed equally.

Accepted Answer

A) True 
 B)False

Question 18

Taxation alters the behavior patterns of individuals.

Accepted Answer

A) True 
 B)False

Question 19

The economic burden of an excise tax

Accepted Answer

A)  can usually be partially shifted from buyers onto sellers.
B)  equals the revenue from the tax.
C)  is less than the burden of an income tax that would raise the same revenue.
D)  is shared equally by buyers and sellers.

Question 20

The share of GDP going to federal taxes

Accepted Answer

A)  has been about 16 to 20 percent for the past 40 years.
B)  has been about 35 percent for the past 40 years.
C)  was about 40 percent until the early 1980s and has dropped greatly since then.
D)  has risen steadily in the past 40 years to about 35 percent.

Exam 17: Taxation and Resource Allocation

Discuss the three principles of equity applied to taxation in the text.

Correct Answerverified1.The principle of horizontal equity hol...View AnswerShow Answer

Taxation may improve the social welfare when the taxed good

Correct AnswerverifiedShow Answer

Which of the following is an example of an indirect tax?

Correct AnswerverifiedShow Answer

What is personal income tax? On which principle does the federal government levy this tax?

Correct AnswerverifiedThe personal income tax is a tax levied ...View AnswerShow Answer

The share of GDP going to federal taxes

Correct AnswerverifiedShow Answer

Vertical equity refers to the notion that equally situated individuals should be taxed equally.

Correct AnswerverifiedShow Answer

The shares of GDP taken in taxes by federal, state & local governments

Correct AnswerverifiedShow Answer

Most state governments finance their budgets through ____, and most local governments finance their budgets through ____.

Correct AnswerverifiedShow Answer

In which of the following examples is excess burden not present?

Correct AnswerverifiedShow Answer

The ____ is the fraction of each additional dollar of income that is paid in taxes.

Correct AnswerverifiedShow Answer

Which of the following situations is a clear application of the benefits principle of taxation?

Correct AnswerverifiedShow Answer

The economic burden of an excise tax

Correct AnswerverifiedShow Answer

Direct taxes are levied directly on people or corporations.

Correct AnswerverifiedShow Answer

If demand is more elastic, the portion of an excise tax borne by a buyer will

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Taxation alters the behavior patterns of individuals.

Correct AnswerverifiedShow Answer

For about the last 45 years, state and local taxes have remained relatively constant as a percentage of GDP.

Correct AnswerverifiedShow Answer

State governments' main source of revenue is

Correct AnswerverifiedShow Answer

Regarding taxation and efficiency, which of the following statements is not true?

Correct AnswerverifiedShow Answer

The head tax is regressive.

Correct AnswerverifiedShow Answer

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1.The principle of horizontal equity hol...
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The personal income tax is a tax levied ...
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Most state governments finance their budgets through , and most local governments finance their budgets through .

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