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| 1 | |
Suppose that product X is taxed at a constant rate of 10%. However, high-income individuals spend a greater proportion of their income on X than low-income individuals. The tax on product X is: |
| | A) | regressive |
| | B) | proportional |
| | C) | progressive |
| | D) | elastic |
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| 2 | |
Sellers will bear the largest burden of an excise tax if: |
| | A) | both demand and supply are elastic |
| | B) | both demand and supply are inelastic |
| | C) | demand is elastic and supply is inelastic |
| | D) | demand is inelastic and supply is elastic |
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| 3 | |
According to public choice theorists, which of the following circumstances will most likely lead to approval of a given public project? |
| | A) | Immediate costs and benefits |
| | B) | Delayed costs and benefits |
| | C) | Immediate benefits and delayed costs |
| | D) | Delayed benefits and immediate costs |
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| 4 | |
As the election nears, the positions of the major presidential candidates tend to converge. This is an implication of: |
| | A) | the Coase Theorem |
| | B) | the median voter model |
| | C) | political logrolling |
| | D) | government failure |
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| 5 | |
Which of the following federal taxes is most progressive? |
| | A) | Corporate income tax |
| | B) | Personal income tax |
| | C) | Social security tax |
| | D) | Medicare tax |
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| 6 | |
The alleged inefficiency of public bureaucracies arises primarily because: |
| | A) | the voting paradox leads to too little public output |
| | B) | special interests work to assure the passage of projects whose costs exceed their benefits |
| | C) | public sector workers have less training than their private sector counterparts |
| | D) | competitive pressures of the market are largely absent |
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| 7 | |
If someone earning $50,000 pays $10,000 in taxes and someone earning $80,000 pays $20,000 in taxes, then over this range the tax is: |
| | A) | proportional |
| | B) | progressive |
| | C) | regressive |
| | D) | retrograde |
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| 8 | |
The demand for gasoline is more elastic in the long run than the short run. All else equal, this implies that over time, an excise tax on gasoline will: |
| | A) | increasingly be passed onto consumers |
| | B) | increasingly be passed back onto sellers |
| | C) | have a shrinking efficiency loss |
| | D) | generate increasing tax revenues |
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| 9 | |
By law, the payroll tax is levied equally on workers and their employees, each paying 7.65%. In the aggregate, the supply of labor is essentially perfectly inelastic. Combining these two observations, we can conclude that the true burden of the tax: |
| | A) | is equally shared by employers and workers |
| | B) | falls mostly on employers |
| | C) | falls fully on employers |
| | D) | falls fully on workers |
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| 10 | |
Suppose the only three members of society will receive marginal benefits from a proposed public project equal to $300, $500, and $800, respectively. However, each must pay taxes of $400 to pay for the total cost. In the absence of vote trading, a majority rule vote will: |
| | A) | pass this project and resources will be allocated efficiently |
| | B) | pass this project and resources will be overallocated to the project |
| | C) | defeat this project and resources will be allocated efficiently |
| | D) | defeat this project and resources will be underallocated to the project |
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