1.Taxes can be justified if the government uses the
revenue to
| (i) |
provide public goods such as national
defense. |
| (ii) |
clean up negative externalities such as
water pollution. |
| (iii) |
regulate a common resource such as fish in
a public lake. |
| (iv) |
provide goods with positive externalities
such as medical research. |
| C) |
(i), (ii), and (iii) only |
| D) |
(i), (ii), (iii), and (iv) |
2.A person's tax liability refers to
| A) |
the percentage of income that a person must pay in taxes. |
| B) |
the amount of tax a person owes to the government. |
| C) |
the amount of tax the government is required to refund to each
person. |
| D) |
deductions that can be legally subtracted from a person's
income each yea |
3. Which of the following is an example of a payroll
tax?
| A) |
a tax on the wages that a firm pays its workers |
| B) |
a “sin” tax on distilled alcohol |
| C) |
a tax on corporate profits |
| D) |
the portion of federal income taxes earmarked to pay for
national defense |
4. A transfer payment is a government
payment
| A) |
to companies that provide goods or services to government
agencies. |
| B |
designed to transfer funds from one government agency to
another. |
| C) |
which transfers revenue from the federal government to state
government. |
| D) |
not made in exchange for a good or service. |
5. Like spending on Social Security, the share of
federal government spending on Medicare has risen substantially
over time. This is most likely a result of
|
A)a rising population of poor in the economy. |
| B) |
a rising population of the elderly in the economy. |
| C) |
an immigration policy that promotes an influx of migrant farm
workers. |
| D) |
All of the above are important factors. |
6. Medicaid is
|
A)the government's health plan for the elderly. |
| B) |
the government's health plan for the poor. |
| C) |
another name for Social Security. |
| D) |
Both a and c are correct. |
7. A budget deficit
| A) |
occurs when government receipts are less than spending. |
| B) |
occurs when government spending is less than receipts. |
| C) |
occurs when government receipts are equal to spending. |
| D) |
is the accumulation of years of government overspending. |
8. State and local governments
| A) |
use a mix of taxes and fees to generate revenue. |
| B) |
are required by federal mandate to levy income taxes. |
| C) |
are required to tax property at a standard rate set by the
federal government. |
| D) |
must tax wages more heavily than interest and dividend
income. |
9. One tax system is less efficient than another if
it
| A) |
places a lower tax burden on lower-income families than on
higher-income families. |
| B) |
places a higher tax burden on lower-income families than on
higher-income families. |
| C) |
raises the same amount of revenue at a higher cost to
taxpayers. |
| D) |
raises less revenue at a lower cost to taxpayers. |
10. The deadweight loss of a tax is:
| A) |
the reduction in economic welfare of taxpayers that exceeds the
revenue raised by the government. |
| B) |
the improved efficiency created as people reallocate resources
according to the tax incentive rather than the true costs and
benefits. |
| C) |
the loss in tax revenues. |
| D) |
Both a and b are correct. |
11. A value-added tax or VAT is a tax on
| A) |
retail purchases only. |
| B) |
wholesale purchases only. |
| D) |
all stages of production of a good. |
12. A person's marginal tax rate equals
| A) |
her tax obligation divided by her average tax rate. |
| B) |
the increase in taxes she would pay as a percentage of the rise
in her income. |
| C) |
her tax obligation divided by her income. |
| D) |
the increase in taxes if her average tax rate were to rise by
1percent |