Question 1

When a government earns more than it spends in revenue,we say that it has a:

Accepted Answer

A)  budget surplus.
B)  budget deficit.
C)  federal debt.
D)  federal deficit.E) All of the above
F) None of the above

Question 2

When a tax is imposed,some of the lost surplus becomes tax revenues and the rest is transferred to:

Accepted Answer

A)  consumers.
B)  producers.
C)  recipients of government services.
D)  No one benefits from that lost surplus.E) A) and B)
F) All of the above

Question 3

When a tax alters consumers' incentives,it is:

Accepted Answer

A)  sometimes a side effect of a tax designed to raise revenue.
B)  always the explicit purpose of the policy.
C)  called a sin tax.
D)  meant to encourage increased consumption.E) A) and B)
F) All of the above

Question 4

When raising taxes,the quantity effect tells us that:

Accepted Answer

A)  the government gets more revenue per units sold.
B)  the higher tax rate causes fewer units to be sold.
C)  the government gets less revenue per unit sold.
D)  the higher tax rate causes more units to be supplied.E) C) and D)
F) All of the above

Question 5

A lump-sum tax is:

Accepted Answer

A)  also called a head tax.
B)  the most efficient form of taxation.
C)  a tax that charges the same amount to each taxpayer.
D)  All of these statements are true.E) A) and B)
F) B) and D)

Question 6

While corporations bear the statutory incidence of corporate income tax,the economic incidence is likely borne by:

Accepted Answer

A)  shareholders.
B)  employees.
C)  customers.
D)  All of these likely bear some of the economic incidence.E) B) and C)
F) C) and D)

Question 7

Considering a given increase in price due to a tax,the less price elastic the demand curve is,the:

Accepted Answer

A)  larger the drop in equilibrium quantity.
B)  smaller the amount of deadweight loss created.
C)  larger the amount of deadweight loss created.
D)  more surplus that is transferred to consumers.E) A) and C)
F) None of the above

Question 8

The question of how people's behavior changes in response to taxes is:

Accepted Answer

A)  has been studied and is well known today.
B)  the subject of much research.
C)  was generally accepted and has recently come under examination again.
D)  None of these statements is true.E) A) and D)
F) None of the above

Question 9

The marginal tax rate refers to the tax rate charged on:

Accepted Answer

A)  the last dollar a taxpayer earns.
B)  income earned from buying investments and selling them at a higher price.
C)  the earnings of individuals.
D)  the value of a good or service being purchased.E) B) and D)
F) A) and D)

Question 10

A proportional tax:

Accepted Answer

A)  takes the same percentage of taxes from income from all taxpayers.
B)  requires those with low incomes to pay a smaller percentage of their income than high-income people.
C)  is levied in such a way that low-income taxpayers pay a greater proportion of their income toward taxes than do high-income taxpayers.
D)  None of these statements is true.E) C) and D)
F) A) and B)

Question 11

When a government spends more than it earns in revenue,we say that it has a:

Accepted Answer

A)  budget deficit.
B)  budget surplus.
C)  budget crisis.
D)  federal debt.E) None of the above
F) A) and C)

Question 12

Many tax-funded programs are intended to:

Accepted Answer

A)  increase surplus.
B)  increase income inequality.
C)  provide basic human needs.
D)  All of these are uses for tax revenue.E) C) and D)
F) B) and D)

Question 13

Governments impose taxes in order to:

Accepted Answer

A)  raise government revenues.
B)  increase consumer spending.
C)  spur economic growth.
D)  encourage more production.E) A) and C)
F) C) and D)

Question 14

How much deadweight loss a tax causes depends on:

Accepted Answer

A)  how responsive buyers and sellers are to a price change.
B)  the price elasticity of supply.
C)  the price elasticity of demand.
D)  All of these statements are true.E) A) and C)
F) C) and D)

Question 15

One of the basic trade-offs inherent in designing a tax system is between:

Accepted Answer

A)  efficiency and equity.
B)  surplus and revenues.
C)  supply and demand.
D)  price and quantity.E) A) and D)
F) B) and C)

Question 16

Raising taxes:

Accepted Answer

A)  always raises tax revenues.
B)  always decreases tax revenues.
C)  can sometimes decrease tax revenues.
D)  None of these statements is true.E) A) and D)
F) A) and B)

Question 17

A payroll tax is a tax on:

Accepted Answer

A)  the earnings of individuals.
B)  income earned by buying investments and selling them at a higher price.
C)  the wages paid to an employee.
D)  the value of a good or service being purchased.E) B) and D)
F) All of the above

Question 18

When a tax is imposed,the surplus that is lost to buyers and sellers but converted into tax revenue is:

Accepted Answer

A)  transferred to others through public programs.
B)  lost and considered a cost of taxation.
C)  part of deadweight loss.
D)  All of these statements are true.E) B) and D)
F) B) and C)

Question 19

In general,raising taxes:

Accepted Answer

A)  has diminishing returns to revenue.
B)  has increasing returns to revenue.
C)  has increasing then decreasing returns to revenue.
D)  has constant returns to revenue.E) A) and B)
F) A) and C)

Question 20

The administrative burden of taxes is:

Accepted Answer

A)  smallest with a lump-sum tax.
B)  the same if the revenue generated is the same for any kind of tax.
C)  smaller the larger the amount of the tax.
D)  None of these statements is true.E) None of the above
F) B) and C)

Exam 20: Taxation and the Public Budget

When raising taxes,the quantity effect tells us that:

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How much deadweight loss a tax causes depends on:

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The marginal tax rate refers to the tax rate charged on:

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The question of how people's behavior changes in response to taxes is:

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A proportional tax:

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Considering a given increase in price due to a tax,the less price elastic the demand curve is,the:

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When a government earns more than it spends in revenue,we say that it has a:

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Governments impose taxes in order to:

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When a government spends more than it earns in revenue,we say that it has a:

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A payroll tax is a tax on:

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When a tax alters consumers' incentives,it is:

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When a tax is imposed,some of the lost surplus becomes tax revenues and the rest is transferred to:

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When a tax is imposed,the surplus that is lost to buyers and sellers but converted into tax revenue is:

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One of the basic trade-offs inherent in designing a tax system is between:

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Many tax-funded programs are intended to:

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While corporations bear the statutory incidence of corporate income tax,the economic incidence is likely borne by:

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The administrative burden of taxes is:

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In general,raising taxes:

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A lump-sum tax is:

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Raising taxes:

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