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Chapter 6: Funding the Public Sector

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Quiz 4

Quiz 4


This activity contains 10 questions.

	An excise tax of 40 cents is levied on a product. As a result of the tax, the market price of the product goes from $2 to $2.30. How much of the tax does the consumer pay and how much does the producer pay?   The consumer pays nothing and the producer pays 40 cents. The consumer pays 40 cents and the producer pays nothing. The consumer pays 10 cents and the producer pays 30 cents. The consumer pays 30 cents and the producer pays 10 cents. The consumer pays 20 cents and the producer pays 20 cents. The tax is not paid by either the producer or the consumer.

	Which of the following statements is correct about the graphs?   Graph A is consistent with dynamic tax analysis while Graph B is consistent with static tax analysis. Both graphs are consistent with static tax analysis. These graphs demonstrate that neither static or dynamic tax analysis explain tax revenues. Neither graph is consistent with dynamic tax analysis. Graph A is consistent with static tax analysis while Graph B is consistent with dynamic tax analysis.

	Which of the following is not a reason for the increase in Medicare expenditures?   An increase in the number of private for-profit hospitals. Consumers paying an increasingly larger share of medical expenditures. The Medicare subsidy has increased the quantity demanded of health care services. An increase in the number of medical tests ordered.

	There is a dire need for reforming the Social Security funding system because   Congressional meddling has depleted the Social Security Trust Fund. inflation has eroded the real value of the Social Security Trust Fund. people want to receive the benefits without paying any taxes whatsoever. in the future there will be more beneficiaries than contributors.

	How are the economic issues facing Medicare similar to the economic issues facing public education?   Both of these programs raise money through federally mandated payroll taxes through the Social Security system. The government is not spending enough money on the programs. Both provide services by using a government-subsidized program where the cost of the services provided is higher than the value consumers place on these services. The majority of the financing comes from the state and local governments for both of these programs.

	A tax system in which the tax rate increases as one's income increases is known as   excise taxation. proportional taxation. progressive taxation. regressive taxation.

	If the government wants to obtain the maximum tax revenue it should:   assess the highest possible tax rate. assess the tax rate determined by dynamic tax analysis. assess the tax rate determined by static tax analysis. use an ad valorem system for collecting taxes.

	Investing Social Security contributions in the stock market   would be beneficial to the economy since stock prices could now be influenced by the government and this would reallocate resources more efficiently. would receive greater rates of return than on other possible investments. would not guarantee recipients a known rate of return. would be beneficial since the government knows which stocks to invest in.

	In 2006 a local government collected $30 million in sales tax revenue with a tax rate of 5%. In 2007 the tax rate was increased to 6% and $25 million was collected in sales tax revenue. What is a possible explanation for the decrease in revenue?   The tax base remained unchanged but a higher tax rate will reduce the amount of revenue. The increase in the tax rate led to a decrease in the tax base. The increase in the tax rate led to an increase in the tax base. The government reduced spending and did not need the extra revenue.

	When the government provides a good to people at a subsidized rate:   the value that people place on the last units consumed will be less than the cost of providing those units. there will be no economic waste. there will be a surplus of the good in the market place. not enough of the good will be produced.

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