2. Who generally bears most of a sales tax when the demand for the good taxed is inelastic?
the retailer
the consumer
the wholesaler
the producer

3. What is an entitlement?
a social welfare program providing benefits to people who meet certain eligibility requirements
a social welfare program paying bills for government spending such as supplies and utilities
a social welfare program spending funds over which legislators have direct control
a social welfare program providing payments that the government receives for certain services

4. What is the major source of tax revenue for local governments?
inheritance taxes
income taxes
property taxes
sales taxes

5. Your department store receipt says that you paid a 5% sales tax on sports equipment. This sales tax is an example of a
proportional tax.
progressive tax.
regressive tax.
income tax.

6. The sales tax on a $20. 00 hammer is 7%, or $1. 40
The sales tax on a $20.00 hammer is 7%, or $1.40. Why is this tax a bigger burden for Josh, who has a $15,000 income, than for Aaron, who has a $150,000 income?
The tax represents a larger proportion of Josh’s income.
The burden is the same for both Josh and Aaron.
The tax rate is higher for Josh than for Aaron.
Josh will have to pay a greater property tax on the hammer than will Aaron.

7. the consumer and producer equally the government
The demand for cable television is relatively elastic, since if the price gets too high, people will rent DVDs or videos instead of watching cable. Who is likely to bear the incidence of a 10 percent tax on cable television?
the consumer
the producer
the consumer and producer equally
the government

8. Your pay stub deducts money for FICA. What does this mean?
Money is being withheld to fund Social Security and Medicare.
Money is being withheld for federal, state, and city taxes.
Money is being withheld for personal exemptions and deductions.
Money is being withheld for excise and estate taxes.

9. When you drive away from the gas pump, you have just paid a(n)
import fee.
excise tax.
corporate income tax.
estate tax.

10. The main source of funding for your school probably comes from
state sales taxes.
local property taxes.
payroll taxes.
federal income taxes.

11. What is a positive externality?
a way to generate trade that will benefit people who are from other countries
an economic side effect that generates unexpected benefits
a cash flow that will benefit both the government and the businesses who interact with it
an extra payment to welfare recipients

12. What best describes the role of government in a free enterprise system?
Control business activities.
Decide what companies will be formed and then allow the managers to run them.
Allow individuals to operate their businesses in ways they think will maximize their profits.
Require companies to disclose information to consumers.

13. Which of the following is a critical rule for determining whether something is a public good?
The benefit to each individual who uses the facility is greater than the cost.
The benefits of the facility are greater for the society than for the individuals using it.
The total benefits to society are greater than the total cost.
The total cost is small for each individual taxpayer.

14. Which of the following is NOT an example of a public good?
shopping malls
national parks
highways
municipal libraries

15. A person who consumes a good or service but does not pay for it is called which of the following?
a free rider
a volunteer user
a private consumer
an entrepreneur

16. An externality is
an economic side effect of a good or service that generates benefits or costs to someone other than the person deciding how much to produce or consume.
the total cost to society of producing an additional unit of a good or service.
the amount a consumer pays to consume an additional amount of any particular good.
a situation in which the market, on its own, does not distribute resources efficiently.

17. Why does the government protect inventors and authors by offering them patents and copyrights?
to encourage free trade
to promote innovation
to regulate the business cycle
to strengthen American culture

18. Which of the following is the best example of a public good?
highway system
shopping mall
country club
movie theater

19. public good problem. public sector problem. externality problem.
You will still be able to get public broadcasting whether or not you contribute to their fundraising campaign. You decide not to contribute. This is an example of the
public good problem.
public sector problem.
externality problem.
free-rider problem.