Question 1

The idea that when citizens vote for an elected official they vote for a bundle of inseparable political programs is known as

Accepted Answer

A)   the benefit principle.
B)   bureaucratic inefficiency.
C)   the equity principle.
D)   nonselectivity.
E)   patronage.F) B) and C)
G) None of the above

Question 2

The marginal tax rate for the federal personal income tax

Accepted Answer

A)   increases as income rises.
B)   is 90 percent for income over $10 million per year.
C)   is equal to the average tax rate for all income brackets.
D)   is constant for all income levels.
E)   is structured to increase after-tax income.F) A) and E)
G) All of the above

Question 3

Tax incidence refers to

Accepted Answer

A)   whether the sales tax is collected by sellers or buyers.
B)   who bears the ultimate burden of the tax.
C)   the principle of taxation used, either benefit or ability-to-pay.
D)   the classification of a particular act as tax evasion or tax avoidance.
E)   the separation of taxation from expenditure as in revenue sharing.F) A) and C)
G) C) and D)

Question 4

An example of an ability-to-pay principle tax is the

Accepted Answer

A)   gasoline tax.
B)   real estate tax.
C)   sales tax.
D)   license fee for vehicles and drivers.
E)   personal income tax.F) A) and C)
G) A) and B)

Question 5

The fact that all citizens,whether they pay taxes or not,benefit from expenditures on national defense is an example of a(n)

Accepted Answer

A)   unfair distribution of income.
B)   external economy.
C)   external diseconomy.
D)   public good.
E)   transfer payment.F) A) and D)
G) C) and E)

Question 6

If a $100,000 household consumes 50 percent of its income whereas a $10,000 household consumes 90 percent of its income,then a 5 percent sales tax

Accepted Answer

A)   affects both households equally.
B)   effectively taxes the income of the low-income household at the rate of 4.5 percent and the income of the high-income household at 2.5 percent.
C)   taxes the incomes of both households at the rate of 5 percent.
D)   costs the low-income household $500 per year and the high-income household $5,000 per year; therefore, a greater burden is placed on the high-income household.
E)   effectively duplicates the impact of a rising marginal tax rate.F) A) and E)
G) A) and D)

Question 7

A major advantage of a sales tax is that it

Accepted Answer

A)   tends to place a relatively greater burden on high-income individuals who have more money to spend.
B)   cannot be shifted.
C)   provides a high yield with relatively low collection costs.
D)   has little or no effect on the final prices consumers pay.
E)   does not affect the overall level of retail sales.F) B) and E)
G) A) and E)

Question 8

Public goods are generally financed by

Accepted Answer

A)   user charges.
B)   voluntary contributions.
C)   the price system.
D)   a tax system.
E)   nothing; a public good is by definition costless.F) A) and B)
G) C) and D)

Question 9

The primary reason for arguing that the sales tax imposes a greater relative burden on the poor is that

Accepted Answer

A)   the incidence of the sales tax falls entirely on the consumer.
B)   sales taxes lower the final prices of the goods taxed.
C)   the poor spend a greater percentage of their incomes than do the rich.
D)   poor people have more trouble evading sales taxes than the rich.
E)   poor people live primarily in rental dwellings, whereas rich people own their own houses.F) A) and B)
G) C) and D)

Question 10

With which of the following statements would John Kenneth Galbraith probably agree?

Accepted Answer

A)   All people should have equal income.
B)   Economic and political freedoms are likely to be lost if we rely too heavily on the government to solve economic problems.
C)   The nation suffers because too little is spent on government services such as transportation, education, and urban renewal.
D)   There is every reason to be skeptical about government's ability to solve our social and economic problems.
E)   Government tends to be slow, inefficient, and cumbersome.F) A) and B)
G) A) and D)

Question 11

When the government establishes programs to aid the poor by taxing the more affluent,it
Engages in

Accepted Answer

A)   income redistribution.
B)   economic stabilization.
C)   providing a competitive framework.
D)   establishing the rules of the game.
E)   free market capitalism.F) B) and E)
G) D) and E)

Question 12

Property taxes are

Accepted Answer

A)   quite flexible, with assessments and rates changing frequently.
B)   generally taxes with rising marginal rates, taxing the wealthy more heavily.
C)   the major source of revenue for the federal government.
D)   frequently calculated on assessed values, which are much lower than actual market values.
E)   levied only on real estate.F) D) and E)
G) A) and B)

Question 13

The sales tax

Accepted Answer

A)   is the major source of revenue for local government.
B)   is never applied to food or medical purchases.
C)   is usually at the rate of 1-2 percent.
D)   is completely shifted to the consumer.
E)   imposes a relatively greater burden on the poor.F) D) and E)
G) A) and E)

Question 14

An individual who smokes in a public place is an example of

Accepted Answer

A)   public choice.
B)   the ability-to-pay principle.
C)   an external diseconomy.
D)   nonselectivity.
E)   a transfer payment.F) C) and D)
G) B) and D)

Question 15

For a society operating at full employment,an increase in the amount of publicly provided goods

Accepted Answer

A)   can be achieved without the sacrifice of privately provided goods.
B)   means a reduction in the scope of government services.
C)   means that the rate of unemployment falls.
D)   means that society must reduce its consumption of privately provided goods.
E)   means that the production possibilities curve has shifted to the left.F) A) and B)
G) A) and C)

Question 16

The following question are based on the following diagram:
 
-Suppose a sales tax on the commodity is imposed where S and D are the market supply and demand curves before the tax was levied.The equilibrium price with the tax is

Accepted Answer

A)   $6.
B)   $6.40.
C)   $7.
D)   $7.40.
E)   somewhere between $6.40 and $7.F) C) and E)
G) B) and E)

Question 17

A basic characteristic of an equitable tax system is that

Accepted Answer

A)   it promotes a perfectly equal distribution of income.
B)   only the highest income families pay taxes.
C)   people in essentially the same circumstances pay the same taxes.
D)   marginal and average tax rates fall as incomes rise.
E)   it places the tax burden primarily on businesses, rather than on households.F) A) and C)
G) None of the above

Question 18

Which of the following best describes the concept of a marginal tax rate?

Accepted Answer

A)   the amount of income divided by the amount of taxes
B)   the tax rate divided by total income
C)   the change in taxes divided by the amount of taxes
D)   the change in taxes divided by the change in income
E)   the amount of before-tax income divided by the amount of after-tax incomeF) C) and E)
G) None of the above

Question 19

If the supply curve is vertical and the demand curve slopes downward,the imposition of a sales tax will

Accepted Answer

A)   shift entirely to the buyer.
B)   fall more heavily on the buyer.
C)   be equally shared by the buyer and seller.
D)   fall more heavily on the seller.
E)   shift entirely to the seller.F) C) and E)
G) B) and E)

Question 20

Two general principles of taxation are the ________ principle and the ________ principle.

Accepted Answer

A)   income; revenue
B)   public; private
C)   Republican; Democratic
D)   demand-side; supply-side
E)   ability-to-pay; benefitF) All of the above
G) A) and B)

Exam 14: Public Goods and the Role of the Government

Two general principles of taxation are the ________ principle and the ________ principle.

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With which of the following statements would John Kenneth Galbraith probably agree?

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Public goods are generally financed by

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An example of an ability-to-pay principle tax is the

Correct AnswerverifiedShow Answer

The marginal tax rate for the federal personal income tax

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The following question are based on the following diagram: -Suppose a sales tax on the commodity is imposed where S and D are the market supply and demand curves before the tax was levied.The equilibrium price with the tax is

Correct AnswerverifiedShow Answer

Property taxes are

Correct AnswerverifiedShow Answer

A basic characteristic of an equitable tax system is that

Correct AnswerverifiedShow Answer

If the supply curve is vertical and the demand curve slopes downward,the imposition of a sales tax will

Correct AnswerverifiedShow Answer

Which of the following best describes the concept of a marginal tax rate?

Correct AnswerverifiedShow Answer

The idea that when citizens vote for an elected official they vote for a bundle of inseparable political programs is known as

Correct AnswerverifiedShow Answer

The fact that all citizens,whether they pay taxes or not,benefit from expenditures on national defense is an example of a(n)

Correct AnswerverifiedShow Answer

A major advantage of a sales tax is that it

Correct AnswerverifiedShow Answer

An individual who smokes in a public place is an example of

Correct AnswerverifiedShow Answer

Tax incidence refers to

Correct AnswerverifiedShow Answer

For a society operating at full employment,an increase in the amount of publicly provided goods

Correct AnswerverifiedShow Answer

The primary reason for arguing that the sales tax imposes a greater relative burden on the poor is that

Correct AnswerverifiedShow Answer

If a $100,000 household consumes 50 percent of its income whereas a $10,000 household consumes 90 percent of its income,then a 5 percent sales tax

Correct AnswerverifiedShow Answer

When the government establishes programs to aid the poor by taxing the more affluent,it Engages in

Correct AnswerverifiedShow Answer

The sales tax

Correct AnswerverifiedShow Answer

Two general principles of taxation are the principle and the principle.

Correct Answer
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