Question 1

Assume that the government one day decides to tax greens fees at all state golf courses. To the government's dismay, not only was the amount of tax collected small, but there was a 90 percent decline in golfing. What type of tax analysis did the government apparently rely upon when it imposed this tax?

Accepted Answer

A)   static tax analysis
B)   dynamic tax analysis
C)   transaction cost analysis
D)   ad hoc tax analysis

Question 2

Dynamic tax analysis is an economic evaluation of tax rate changes

Accepted Answer

A)   by the National Tax Institute in Burlington, Massachusetts.
B)   by various state governments.
C)   by the tax institutes established by a consortium of business schools.
D)   based on the assumption that tax base declines if tax rates continuously increase.

Question 3

A government wishing to maximize its tax revenues should

Accepted Answer

A)   always assess the highest possible tax rate.
B)   always assess the lowest possible tax rate.
C)   determine the highest possible tax rate and then back it down by exactly 4 percentage points.
D)   push tax rates up to the point where revenues peak, but raise the tax rate no farther.

Question 4

Assume a family that earns $20,000 pays $1,500 in income taxes, while a family that earns $40,000 pays $3,200 in income taxes. In this situation, the income tax system is

Accepted Answer

A)   progressive.
B)   regressive.
C)   proportional.
D)   one of the above but we cannot tell which one without more information.

Question 5

-Refer to the above figure. A unit tax of $.30 has been placed on the good. Which of the following statements is true about the vertical distance between  and  ?

Accepted Answer

A)   The distance is less than $0.30.
B)   The distance is $0.30.
C)   The distance is more than $0.30.
D)   The distance cannot be determined with the information given.

Question 6

Should the government wish to lower the price of gasoline to the consumer, one approach might be

Accepted Answer

A)   to raise the gasoline excise tax.
B)   to reduce the gasoline excise tax.
C)   to take action to shift the supply curve of gasoline to the left.
D)   to lower taxes on automobiles.

Question 7

Suppose the tax rate on the first $10,000 income is 0 percent; 10 percent on the next $20,000; 20 percent on the next $20,000; 30 percent on the next $30,000; and 40 percent on any income over $80,000. Family A has income of $40,000 and Family B has income of $100,000. What is the marginal and average tax rate for each family?

Accepted Answer

A)   Family A: marginal-10 percent; average-10 percent; Family B: marginal-30 percent; average-30 percent.
B)   Family A: marginal-20 percent; average-10 percent; Family B: marginal-40 percent; average-23 percent.
C)   Family A: marginal-20 percent; average-20 percent; Family B: marginal-40 percent; average-40 percent.
D)   Family A: marginal-20 percent; average-15 percent; Family B: marginal-40 percent; average-20 percent.

Question 8

Sales taxes are

Accepted Answer

A)   assessed on the prices paid on a large set of goods and services.
B)   levied on purchases of a particular good or service.
C)   based on each individual taxpayer's income level.
D)   collected only by the U.S. government.

Question 9

Ultimately, the real burden of paying for Social Security benefits will be paid for by

Accepted Answer

A)   taxes levied on workers.
B)   Social Security trust fund bonds.
C)   new federally issued Treasury bills.
D)   a new tax levied on businesses.

Question 10

What are the three sources of funding for the public sector? Can the government rely on all of these sources in the long run? Explain.

Accepted Answer

The three sources are (1) explicit user ...

Question 11

Dynamic tax analysis assumes

Accepted Answer

A)   all of the present tax rates will be in place for a minimum of twenty years.
B)   changes in the tax rates have no effect on the tax base.
C)   changes in the tax rates have no effect on tax revenue.
D)   changes in the tax rates will change the tax base.

Question 12

The imposition of a new excise tax will

Accepted Answer

A)   increase equilibrium price and increase equilibrium quantity.
B)   increase equilibrium price and decrease equilibrium quantity.
C)   decrease equilibrium price and increase equilibrium quantity.
D)   decrease equilibrium price and decrease equilibrium quantity.

Question 13

Ad valorem taxes

Accepted Answer

A)   are not used in the United States.
B)   are assessed as a percentage of a good's price.
C)   are based on income levels.
D)   are applied only to imports.

Question 14

According to dynamic tax analysis, continually increasing the tax rate will eventually

Accepted Answer

A)   cause an increase in the tax base.
B)   have no impact on the tax base.
C)   cause a decrease in the tax base.
D)   result in an initial decrease in the tax base followed ultimately by a rise in the tax base.

Question 15

An excise tax is a tax that is levied on

Accepted Answer

A)   the value of a piece of property.
B)   the purchase of a given good or service.
C)   the value of an estate.
D)   that part of a person's income coming from interest payments.

Question 16

-Using the above figure, which of the lines in the above diagram represents a progressive tax?

Accepted Answer

A)   A
B)   B
C)   C
D)   none of them

Question 17

Over the long run, a government's fundamental source of revenues is

Accepted Answer

A)   printing money.
B)   user fees and taxes.
C)   exports.
D)   gold sales.

Question 18

Corporate profits are

Accepted Answer

A)   taxed at too low a rate.
B)   taxed only when a stockholder sells his or her shares of stock.
C)   taxed twice-once by the corporate tax system, and again by personal tax system when they are paid to stockholders as dividends.
D)   taxed three times-once by the corporate tax system, again by the personal tax system, and again as capital gains.

Question 19

In what type of analysis will an increase in the tax rate always lead to an increase in tax revenues?

Accepted Answer

A)   Ad valorem taxation
B)   Excise taxation
C)   Dynamic tax analysis
D)   Static tax analysis

Question 20

Suppose you are making $50,000 per year and paying $5,000 per year in income taxes. You get a $10,000 per year raise and your income taxes are now $6,500 per year. Based on this information, the income tax system is

Accepted Answer

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

Exam 6: Funding the Public Sector

Correct Answer
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-Using the above figure, which of the lines in the above diagram represents a progressive tax?

Correct Answer
verified

According to dynamic tax analysis, continually increasing the tax rate will eventually

Correct Answer
verified

The imposition of a new excise tax will

Correct Answer
verified

Should the government wish to lower the price of gasoline to the consumer, one approach might be

Correct Answer
verified

Dynamic tax analysis assumes

Correct Answer
verified

-Refer to the above figure. A unit tax of $.30 has been placed on the good. Which of the following statements is true about the vertical distance between and ?

Correct Answer
verified

In what type of analysis will an increase in the tax rate always lead to an increase in tax revenues?

Correct Answer
verified

A government wishing to maximize its tax revenues should

Correct Answer
verified

What are the three sources of funding for the public sector? Can the government rely on all of these sources in the long run? Explain.

Correct Answer
verified
The three sources are (1) explicit user ...
View Answer

Correct Answer
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Ad valorem taxes

Correct Answer
verified

An excise tax is a tax that is levied on

Correct Answer
verified

Ultimately, the real burden of paying for Social Security benefits will be paid for by

Correct Answer
verified

Assume a family that earns $20,000 pays $1,500 in income taxes, while a family that earns $40,000 pays $3,200 in income taxes. In this situation, the income tax system is

Correct Answer
verified

Corporate profits are

Correct Answer
verified

Suppose you are making $50,000 per year and paying $5,000 per year in income taxes. You get a $10,000 per year raise and your income taxes are now $6,500 per year. Based on this information, the income tax system is

Correct Answer
verified

Sales taxes are

Correct Answer
verified

Dynamic tax analysis is an economic evaluation of tax rate changes

Correct Answer
verified

Over the long run, a government's fundamental source of revenues is

Correct Answer
verified

Exam 6: Funding the Public Sector

Correct AnswerverifiedShow Answer

-Using the above figure, which of the lines in the above diagram represents a progressive tax?

Correct AnswerverifiedShow Answer

According to dynamic tax analysis, continually increasing the tax rate will eventually

Correct AnswerverifiedShow Answer

The imposition of a new excise tax will

Correct AnswerverifiedShow Answer

Should the government wish to lower the price of gasoline to the consumer, one approach might be

Correct AnswerverifiedShow Answer

Dynamic tax analysis assumes

Correct AnswerverifiedShow Answer

-Refer to the above figure. A unit tax of $.30 has been placed on the good. Which of the following statements is true about the vertical distance between and ?

Correct AnswerverifiedShow Answer

In what type of analysis will an increase in the tax rate always lead to an increase in tax revenues?

Correct AnswerverifiedShow Answer

A government wishing to maximize its tax revenues should

Correct AnswerverifiedShow Answer

What are the three sources of funding for the public sector? Can the government rely on all of these sources in the long run? Explain.

Correct AnswerverifiedThe three sources are (1) explicit user ...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Ad valorem taxes

Correct AnswerverifiedShow Answer

An excise tax is a tax that is levied on

Correct AnswerverifiedShow Answer

Ultimately, the real burden of paying for Social Security benefits will be paid for by

Correct AnswerverifiedShow Answer

Assume a family that earns $20,000 pays $1,500 in income taxes, while a family that earns $40,000 pays $3,200 in income taxes. In this situation, the income tax system is

Correct AnswerverifiedShow Answer

Corporate profits are

Correct AnswerverifiedShow Answer

Suppose you are making $50,000 per year and paying $5,000 per year in income taxes. You get a $10,000 per year raise and your income taxes are now $6,500 per year. Based on this information, the income tax system is

Correct AnswerverifiedShow Answer

Sales taxes are

Correct AnswerverifiedShow Answer

Dynamic tax analysis is an economic evaluation of tax rate changes

Correct AnswerverifiedShow Answer

Over the long run, a government's fundamental source of revenues is

Correct AnswerverifiedShow Answer

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The three sources are (1) explicit user ...
View Answer

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