Public Finance Multiple Choice Pt 2
Suppose the pre-tax price of cigarettes is $3.00 per pack and the post-tax price is $4.00 per pack. The tax is $1.50 per pack and is paid by the retailers of cigarettes to the government. Six hundred packs were sold prior to the tax increase; 500 packs were sold after the tax. What is the statutory incidence of the tax on consumers?
$0
Suppose the pretax price of gasoline is $1 per gallon. A tax of $1.50 is imposed and is paid by producers to the government. What must the post-tax price of gasoline in order for the consumer tax burden to be equal to one-half of the tax wedge?
$1.75
Suppose there is a 20% tax on the first $15,000 of taxable income, a 30% tax on taxable income above $15,000 until $30,000, and a 40% tax on all taxable income above $30,000. There is a $3,000 exemption per person. What is the marginal tax rate for a single mother making $35,000 who has one child?
30%
Which of the following is TRUE of the prospective payment system?
All diagnoses for hospital admissions were grouped into one of several hundred groups on which reimbursement was based.
Which statement best describes the current Earned Income Tax Credit (EITC) program?
As earnings increase from zero, the EITC increases and then decreases until it is zero.
According to analysis by the Congressional Budget Office and Urban Institute's Tax Policy Center, which statement related to the effective tax rates by income group for the last half century is NOT true?
Average excise tax has fallen for the bottom of the income distribution while rising for the top.
Which statement is TRUE?
Effective excise tax rates have risen for low-income groups over the last 20 years.
Which statement about the subsidy for home ownership is TRUE?
Empirical research suggests that the tax subsidy does not change homeownership rates but rather induces homeowners to spend more on houses.
What does the Congressional Budget Office assume with respect to the tax incidence of corporate taxes?
Employees at the corporation bear one-fifth of the tax burden and the owners of the capital bear the rest.
In general, which of the following is TRUE of Social Security?
Females have higher Social Security Wealth than do males.
Which fixed amount can a taxpayer subtract from adjusted gross income for each dependent member of the household, as well as for the taxpayer and his or her spouse?
an exemption
If a person responds to a tax on wages by working more, then the:
income effect exceeds the substitution effect
The effect of nonlabor income on labor supply has ________; the effect of after-tax wages on labor supply has ________.
income effects; substitution and income effects
All other things equal, consumers bear more of a tax as demand becomes more _____ and supply becomes more _____.
inelastic; elastic
The Earned Income Tax Credit subsidizes the wages of:
low-income earners.
If corporations bear at least some of the tax burden when profits are taxed, this means that workers are likely to bear some of the burden through:
lower wages if labor supply is not perfectly elastic.
If a politician suggested that Social Security benefits be means-tested, which of the following approaches is that politician suggesting?
lowering benefits for higher-income groups
If you do not qualify for a federal insurance program because your income or wealth is too high, that program is characterized by:
means testing.
Limited liability:
means that the owners of a firm cannot personally be held responsible for the obligations of the firm.
If government subsidizes the health insurance costs of individuals because individuals do not sufficiently realize the importance of having health insurance, which justification for government intervention is being used?
paternalism
Under current tax law, U.S. corporations are:
permitted to claim tax payments to foreign governments as a credit against U.S. taxes.
Which of the following is NOT a reason for government intervention in insurance markets?
positive externalities
Which of the following has been found to be the primary cause of the rise in health care costs in the U.S.?
prices of medical care services
Which of the following is an in-kind program pair?
public housing and Special Supplemental Nutrition Program for Women, Infants, and Children (WIC)
A return that exceeds a firm's payouts to its factors of production is a(n):
pure profit
If a politician proposed that Social Security be made more solvent by increasing the amount employers pay into the Social Security program, which approach is that politician advocating for the reform of Social Security?
raising taxes further
If the government pays part of the health care costs of citizens determined by the government to be unlucky, which of the following justifications for government intervention is being used?
redistribution
Which of the following is NOT primarily intended to address the problem of insuring people who don't have health insurance?
reducing deductibles and copays for all insurance policies
A tax system in which average tax rates fall as income rises is a ________ tax system; the way in which the average tax rate changes as income rises is a measure of ________ equity.
regressive; vertical
Which tax is paid on the value of assets (e.g., stocks) held by a person or family?
wealth tax
Which of the following provides insurance against on-the-job accidents?
workers' compensation
The separation of the ownership of the firm from the control of the firm leads to:
an agency problem.
Which statement is TRUE in the standard model of labor supply?
If the income effect dominates the substitution effect, higher wages lead to a reduction in the quantity of labor supplied.
Which statement is TRUE?
In labor markets, workers bear more of the burden of a payroll tax if labor supply is highly inelastic.
Suppose the government were to impose a $3 tax on high-speed Internet connections. The law states that $2/connection is to be paid to the government by the producer, and the remaining $1 to be paid by the consumer. Which statement regarding the tax is TRUE?
It shifts the supply curve of high-speed Internet connections to the left.
There is no perfect way to rank states in terms of taxation. The US Census Bureau and Colorado legislative analyst uses a particular method for comparison: the taxes paid per $1,000 of income. Which of the following is NOT one of the reasons as to why this method is used?
It takes into account poverty.
Which of the following provides coverage for prescription drug expenditure for the elderly?
Medicare Part D
If a firm finances investment by selling equity, which statement is TRUE?
The firm has a choice of paying dividends or retaining earnings for reinvestment.
Which of the following best explains the structure of the recently passed prescription drug benefit?
The government chose to deliver benefits to as many seniors as possible.
How much the poor have relative to some measure of a reasonable "minimally acceptable" income level can be best described as:
absolute deprivation
Asymmetric information between buyers and sellers results in:
adverse selection.
The percentage of Colorado's General Fund that is made up of sales taxes has been declining. Which one of the following is one of the reasons for this trend?
all of the above
Which one of the following is correct about Colorado's Marijuana Tax?
Retail marijuana revenue that exceeds $40 million goes to Public School Fund Treasury.
Which of the following is a tax-preferred retirement savings vehicle primarily for low- and middle-income taxpayers in which the taxpayers make after-tax contributions but then make tax-free withdrawals later in life?
Roth IRA
Suppose you are thinking about the implications of delaying retirement by one year. Which of the following provides you with an incentive to do so?
Since earnings generally rise with age, you get to replace a low-wage earnings year with a high-earnings year in the 35-year benefits average.
Which is an example of an unfunded retirement plan?
Social Security
Which of the following provides insurance against earnings loss due to retirement?
Social Security
Which statement about taxation in the United States is TRUE?
Subnational governments rely more on consumption taxes than does the federal government.
Corporate taxes can be calculated based on:
Taxes = ([Revenues - Expenses] × tax rate) - Tax Credits
For persons who earn an amount of income such that the Earned Income Tax Credit (EITC) benefit is neither increased nor reduced as they work more, which statement is TRUE?
The EITC does not have a substitution effect.
Which statement about the Earned Income Tax Credit (EITC) is NOT true?
The EITC reduces tax liabilities only for families paying high taxes.
Suppose someone criticizes the federal measure of the poverty line by saying that the typical family spends less of its budget on food than families used to spend. This is an example of which of the following criticisms of the federal poverty line?
The bundle has changed
Suppose someone criticizes the federal measure of the poverty line by saying that it does not account for Medicaid receipts, but that it should account for them. This is an example of which of the following criticisms of the federal poverty line?
The definition of income is incomplete
Which one of the following statements are TRUE about Colorado's income taxes?
The lower the income, the higher the percentage taxes one pays
Which statement is TRUE?
The nominal rate of interest is approximately equal to the real rate of interest plus the rate of inflation.
Which statement is TRUE with respect to Medicare?
The part of Medicare that covers inpatient hospital costs and some costs of long-term care is financed largely through a payroll tax.
For someone who is not working at all without the Earned Income Tax Credit (EITC), which statement is true when the person is subject to the EITC, once he starts working?
The substitution effect of the EITC induces the person to work more
Suppose the government was to eliminate taxes on interest from savings. Which of the following statements is NOT consistent with economic theory?
The substitution effect of the policy induces people to save less.
Which of the following is a reason behind the fiscal imbalance of Social Security?
Wage growth has slowed dramatically.
Which is a fixed amount that a taxpayer can deduct from taxable income?
a standard deduction
The Patient Protection and Affordable Care Act:
bans insurers from denying coverage for pre-existing conditions.
The cash welfare benefit for individuals with no other income that may be reduced as income increases is referred to as the ________; the schedule that shows how welfare benefits will be reduced as other income increases is the _______.
benefit guarantee; benefit reduction rate
Which of the following phrases refers to the taxation of the return from savings?
capital income taxation
Suppose that a monthly check is given to people with HIV or AIDS who earn less than $400 per week. This is an example of:
categorical and means-tested welfare
Suppose that welfare is restricted to unmarried mothers who have at least one child. This type of welfare could be best characterized as:
categorical welfare
Which of the following provides insurance against injuries and problems that end a worker's career?
disability insurance
Which tax is paid by sellers (producers or merchants) on the sales of particular goods, such as cigarettes or gasoline?
excise tax
Which of the following techniques is NOT used to control cost?
exclusion of certain elderly individuals, especially those who are in the last six months of their life
A profit-maximizing corporation would generally prefer _____ to _____.
expensing investments; accelerated depreciation
Which term refers to charging a price for insurance that is a function of realized outcomes?
experience rating
Suppose that someone wishes to address the problems with Social Security by allowing increased immigration. That approach is equivalent to:
extending the base of taxable wages
Medicare is administered by ___________ and is financed by ____________.
federal government; a payroll tax
In the United States from 1980 to the present, the share of income accruing to the bottom income quintile _____ and the share accruing to the top income quintile _____.
fell; grew
The Personal Responsibility and Work Opportunity Reconciliation Act of 1996: You Answered
gave more flexibility to the states in choosing the structure of cash welfare payments.
If the payroll tax were increased, the empirical evidence suggests that:
secondary earners would change their hours worked more than would primary earners
If a person has imperfect or partial self-insurance against job loss, they are likely to:
smooth consumption to some extent, but not fully
A public national health insurance system would:
solve the problem of the uninsured.
Medicaid is administered by the ___________ and is financed by ____________.
states; general state and federal revenues
By which item can taxpayers reduce the taxes they owe to the government through spending, for example, on child care?
tax credit
Which of the following is equal to government revenue losses attributable to tax law provisions that allow special exclusions, exemptions, or deductions from gross income or that provide a special credit, preferential tax rate, or deferral of liability?
tax expenditures
The difference between what consumers pay and what producers receive (net of tax) from a transaction is called the:
tax wedge
In order to maintain a solvent pay-as-you-go Social Security system in the future:
the government may have to raise the payroll tax rate or the maximum amount of taxable earnings.
Which refers to the federal government's measure of "minimally acceptable" income?
the poverty line
Which one of the following is correct about Colorado's corporate income tax?
the third-lowest in the nation
If government intervenes in the market for health insurance in order to address the adverse selection problem and improve efficiency:
there will likely be some redistribution from low-risk individuals to high-risk individuals.
