Chapter Taxation and Resource Allocation
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1. Under a progressive tax, the fraction of income paid in taxes
a. rises as income rises.
b. is unchanged as income changes.
c. falls as income rises.
d. is proportional to the change in income.
2. State governments' main source of revenue is
a. property taxes.
b. income taxes.
c. excise taxes.
d. sales taxes.
3. Which is the correct order of importance in terms of revenue collected among the following federal taxes?
a. (1) corporate income taxes (2) value-added taxes (3) excise taxes
b. (1) personal income taxes (2) corporate income taxes (3) sales taxes
c. (1) payroll taxes (2) personal income taxes (3) federal excise taxes
d. (1) personal income taxes (2) payroll taxes (3) corporate income taxes
4. A University of Wisconsin study of the distributional effects of tax programs used the Lorenz curve to present its results. The Lorenz curve for pre-tax money income was farther from the line of equal distribution than the after-tax Lorenz curve. This indicates the U.S. tax system was
a. regressive
b. progressive
c. proportional
d. degressive
5. The corporate income tax is
a. an indirect tax.
b. a regressive tax.
c. the second largest source of revenue for the federal government.
d. a direct tax.
6. Unofficially, the payroll tax is referred to as
a. the trust fund tax.
b. Social Security tax.
c. contributions for social insurance.
d. investment in Social Security.
7. If two families are equally situated except that one rents and the other owns their home, the existing tax system will lead to
a. vertical inequity.
b. equal treatment of both
c. horizontal inequity.
d. equal burden sharing.
8. According to the graph in Figure 19-1, the tax is which of the following?
a. 400
b. 600
c. 1,000
d. 200
9. Suppose that the government imposes an excise tax on widgets. The portion of the tax borne by the buyer of widgets depends upon
a. elasticity of demand.
b. income of buyers.
c. size of the tax which is imposed.
d. cross elasticity of demand between widgets and floogles.
10. Taxation may improve the social welfare when the taxed good
a. is socially undesirable (like, in some views, liquor and pornography).
b. imposes negative externalities.
c. is overproduced under a free-market system.
d. All of the above are correct.
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