Question 1

Assume that both the corporate and noncorporate sectors are in long-run equilibrium before the imposition of a corporate profits tax. In the short run, the imposition of a corporate profits tax will

Accepted Answer

A)   decrease profits in both the corporate and noncorporate sectors.
B)   not change profits in either the corporate or the noncorporate sector.
C)   not change profits in the noncorporate sector, but decrease profits in the corporate sector.
D)   not change profits in the corporate sector, but increase profits in the noncorporate sector.

Question 2

________ argued for a tax on consumption instead of on income because the standard of living depends not on income, but on how much is consumed.

Accepted Answer

A)   Thomas Hobbes
B)   John Rawls
C)   Irving Fisher
D)   Ben Bernanke

Question 3

Vertical equity holds that

Accepted Answer

A)   those with equal ability to pay should bear equal tax burdens.
B)   those who benefit the most from governmental services should bear the higher tax burden.
C)   those with greater ability to pay should pay more.
D)   those with equal ability to pay should bear unequal tax burdens.

Question 4

After subtracting all deductions and exemptions from total income, you are left with

Accepted Answer

A)   taxable income.
B)   marginal income.
C)   standardized income.
D)   the tax base.

Question 5

The voting paradox is an example of the

Accepted Answer

A)   impossibility theorem.
B)   the Coase theorem.
C)   Tiebout hypothesis.
D)   free-rider problem.

Question 6

Consumption is a flow measure.

Accepted Answer

A) True 
 B)False

Question 7

A payroll tax is imposed on two types of labor: carpenters and laborers. In the short run, the elasticity of labor supply of carpenters is much less elastic than the elasticity of labor supply of laborers. Which of the following is true?

Accepted Answer

A)   In the short run, carpenters will bear a larger share of the payroll tax than laborers.
B)   In the short run, laborers will bear a larger share of the payroll tax than carpenters.
C)   In the short run, carpenters and laborers will bear the same share of the payroll tax, but in the long run, laborers will bear a larger share of the payroll tax than carpenters.
D)   There is not enough information to determine the relative shares of the payroll tax for carpenters and laborers in either the short run or the long run.

Question 8

In the long run the corporate profits tax may lead to

Accepted Answer

A)   higher prices for the products of corporations as well as higher prices for the products of partnerships and proprietorships.
B)   lower prices for the products of corporations as well as lower prices for the products of partnerships and proprietorships.
C)   higher prices for the products of corporations and lower prices for the products of partnerships and proprietorships.
D)   lower prices for the products of corporations and higher prices for the products of partnerships and proprietorships.

Question 9

________ is caused by the fact that taxes distort economic decisions.

Accepted Answer

A)   Neutrality
B)   Excess burden
C)   Tax shifting
D)   Market failure

Question 10

The excess burden of a tax is $5,000 and the tax revenue from this tax is $20,000. The total burden of this tax is

Accepted Answer

A)   $4,000.
B)   $5,000.
C)   $15,000.
D)   $25,000.

Question 11

Refer to the information provided in Table 19.8 below to answer the question(s)  that follow.
Table 19.8
   Total Income  Total Taxes $20,000$2,00040,0004,80060,0009,00080,00016,000\begin{array} { | c | c | } \hline 	ext { Total Income } & 	ext { Total Taxes } \\hline \$ 20,000 & \$ 2,000 \\hline 40,000 & 4,800 \\hline 60,000 & 9,000 \\hline 80,000 & 16,000 \\hline\end{array} Total Income $20,00040,00060,00080,000​ Total Taxes $2,0004,8009,00016,000​​ 
-Related to the Economics in Practice on page 393: Refer to Table 19.8. If income increases from $20,000 to $40,000, the marginal tax rate is

Accepted Answer

A)   2%.
B)   12%.
C)   14%.
D)   indeterminate from this information.

Question 12

A retail sales tax is a proportional tax with respect to income.

Accepted Answer

A) True 
 B)False

Question 13

You own stock that increases in value by $3,000 but you do not cash in the stock. The $3,000 is

Accepted Answer

A)   counted as part of economic income but not part of taxable income.
B)   counted as both economic and taxable income.
C)   counted as taxable income but not economic income.
D)   counted as neither taxable nor economic income.

Question 14

A family that earns $20,000 a year pays $200 a year in city wage taxes. A family that earns $40,000 a year pays $1,600 a year in city wage taxes. The city wage tax is

Accepted Answer

A)   a progressive tax.
B)   a regressive tax.
C)   a proportional tax.
D)   a benefits-received tax.

Question 15

The ________ principle of taxation is not often used because it is difficult to determine the values individual taxpayers place on goods and services that are produced using tax revenue.

Accepted Answer

A)   vertical equity
B)   ability-to-pay
C)   benefits-received
D)   horizontal equity

Question 16

A theory of taxation that states that ________ is the ability-to-pay principle.

Accepted Answer

A)   citizens should bear tax burdens in line with their ability to pay taxes
B)   taxpayers should contribute to the government in proportion to the benefits they receive from public expenditures
C)   taxpayers should contribute to the government in a greater proportion than the benefits they receive from public expenditures
D)   taxpayers should contribute to the government in a smaller proportion than the benefits they receive from public expenditures

Question 17

If the average tax rate is less than the marginal tax rate, the tax would be

Accepted Answer

A)   proportional.
B)   regressive.
C)   progressive.
D)   uniform.

Question 18

During 2016, Victorʹs consumption equals $30,000 and the change in his net worth is -$5,000. Victorʹs economic income for 2013 is

Accepted Answer

A)   $5,000.
B)   $25,000.
C)   $30,000.
D)   $35,000.

Question 19

During 2016, Tony's assets equal $300,000 and his net worth is $50,000. Tony's liabilities are

Accepted Answer

A)   $50,000.
B)   $150,000.
C)   $200,000.
D)   $250,000.

Question 20

Refer to the information provided in Figure 19.1 below to answer the question(s)  that follow.  Figure 19.1
-Refer to Figure 19.1. After firms can respond to the payroll tax, employment will be

Accepted Answer

A)   500.
B)   650.
C)   700.
D)   800.

Exam 19: Public Finance: the Economics of Taxation

In the long run the corporate profits tax may lead to

Correct Answer
verified

The voting paradox is an example of the

Correct Answer
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Consumption is a flow measure.

Correct Answer
verified

After subtracting all deductions and exemptions from total income, you are left with

Correct Answer
verified

The excess burden of a tax is $5,000 and the tax revenue from this tax is $20,000. The total burden of this tax is

Correct Answer
verified

The ________ principle of taxation is not often used because it is difficult to determine the values individual taxpayers place on goods and services that are produced using tax revenue.

Correct Answer
verified

During 2016, Tony's assets equal $300,000 and his net worth is $50,000. Tony's liabilities are

Correct Answer
verified

A retail sales tax is a proportional tax with respect to income.

Correct Answer
verified

A family that earns $20,000 a year pays $200 a year in city wage taxes. A family that earns $40,000 a year pays $1,600 a year in city wage taxes. The city wage tax is

Correct Answer
verified

During 2016, Victorʹs consumption equals $30,000 and the change in his net worth is -$5,000. Victorʹs economic income for 2013 is

Correct Answer
verified

Refer to the information provided in Figure 19.1 below to answer the question(s) that follow. Figure 19.1 -Refer to Figure 19.1. After firms can respond to the payroll tax, employment will be

Correct Answer
verified

You own stock that increases in value by $3,000 but you do not cash in the stock. The $3,000 is

Correct Answer
verified

A theory of taxation that states that ________ is the ability-to-pay principle.

Correct Answer
verified

________ argued for a tax on consumption instead of on income because the standard of living depends not on income, but on how much is consumed.

Correct Answer
verified

Correct Answer
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________ is caused by the fact that taxes distort economic decisions.

Correct Answer
verified

Assume that both the corporate and noncorporate sectors are in long-run equilibrium before the imposition of a corporate profits tax. In the short run, the imposition of a corporate profits tax will

Correct Answer
verified

A payroll tax is imposed on two types of labor: carpenters and laborers. In the short run, the elasticity of labor supply of carpenters is much less elastic than the elasticity of labor supply of laborers. Which of the following is true?

Correct Answer
verified

Vertical equity holds that

Correct Answer
verified

If the average tax rate is less than the marginal tax rate, the tax would be

Correct Answer
verified

Exam 19: Public Finance: the Economics of Taxation

In the long run the corporate profits tax may lead to

Correct AnswerverifiedShow Answer

The voting paradox is an example of the

Correct AnswerverifiedShow Answer

Consumption is a flow measure.

Correct AnswerverifiedShow Answer

After subtracting all deductions and exemptions from total income, you are left with

Correct AnswerverifiedShow Answer

The excess burden of a tax is $5,000 and the tax revenue from this tax is $20,000. The total burden of this tax is

Correct AnswerverifiedShow Answer

The ________ principle of taxation is not often used because it is difficult to determine the values individual taxpayers place on goods and services that are produced using tax revenue.

Correct AnswerverifiedShow Answer

During 2016, Tony's assets equal $300,000 and his net worth is $50,000. Tony's liabilities are

Correct AnswerverifiedShow Answer

A retail sales tax is a proportional tax with respect to income.

Correct AnswerverifiedShow Answer

A family that earns $20,000 a year pays $200 a year in city wage taxes. A family that earns $40,000 a year pays $1,600 a year in city wage taxes. The city wage tax is

Correct AnswerverifiedShow Answer

During 2016, Victorʹs consumption equals $30,000 and the change in his net worth is -$5,000. Victorʹs economic income for 2013 is

Correct AnswerverifiedShow Answer

Refer to the information provided in Figure 19.1 below to answer the question(s) that follow. Figure 19.1 -Refer to Figure 19.1. After firms can respond to the payroll tax, employment will be

Correct AnswerverifiedShow Answer

You own stock that increases in value by $3,000 but you do not cash in the stock. The $3,000 is

Correct AnswerverifiedShow Answer

A theory of taxation that states that ________ is the ability-to-pay principle.

Correct AnswerverifiedShow Answer

________ argued for a tax on consumption instead of on income because the standard of living depends not on income, but on how much is consumed.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

________ is caused by the fact that taxes distort economic decisions.

Correct AnswerverifiedShow Answer

Assume that both the corporate and noncorporate sectors are in long-run equilibrium before the imposition of a corporate profits tax. In the short run, the imposition of a corporate profits tax will

Correct AnswerverifiedShow Answer

A payroll tax is imposed on two types of labor: carpenters and laborers. In the short run, the elasticity of labor supply of carpenters is much less elastic than the elasticity of labor supply of laborers. Which of the following is true?

Correct AnswerverifiedShow Answer

Vertical equity holds that

Correct AnswerverifiedShow Answer

If the average tax rate is less than the marginal tax rate, the tax would be

Correct AnswerverifiedShow Answer

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