In a progressive income tax system,
A) the marginal tax rate exceeds the average tax rate.
B) the average tax rate exceeds the marginal tax rate.
C) high income earners pay a lower percentage of their income in taxes than do low income earners.
D) the tax rate depends solely on how long an individual has been in the labor force.
Ques. 2The assumption that individuals will not intentionally make decisions that will leave them worse off is known as
A) microeconomic analysis.
B) macroeconomic analysis.
C) a model or theory.
D) the rationality assumption.
Ques. 3Mr. Smith earns 100,000 per year. Each year he spends 50,000 and saves 50,000. He pays a 5 percent sales tax on all of his spending. Assuming the sales tax is the only tax he pays, his average tax rate out of his income is
A) 0 percent.
B) 2.5 percent.
C) 3.5 percent.
D) 5.0 percent.
Ques. 4The population of individuals at least 16 years of age can be broken into 3 groups. They are
A) the unemployed, discouraged workers, and retirees.
B) those employed full-time, those employed only part-time, and the unemployed.
C) those working in the for-profit sector, those working in the nonprofit sector, and individuals who are unemployed.
D) none of the above.
Ques. 5Say's law argues that I. overproduction is typical in a market economy. II. supply creates its own demand.
A) I only
B) II only
C) Both I and II
D) Neither I nor II
Ques. 6Goods X and Y are complementary goods. A decrease in price of good X has occurred. In the market for good Y, this will lead to
A) an increase in price and a decrease in quantity.
B) an increase in price and an increase in quantity.
C) a decrease in price and a decrease in quantity.
D) a decrease in price and an increase in quantity.
Ques. 7An externality exists when
A) goods are sold in specific geographic locations.
B) some of the benefits or costs associated with a good are borne by third parties.
C) the government taxes a good.
D) the government subsidizes a good.
Ques. 8Steve and Karen decide to attend the same concert when they are each given free tickets to it. We know that
A) both bear the same opportunity cost because they are seeing the same thing.
B) both bear the same opportunity cost because the tickets have the same face value.
C) both bear an opportunity cost that depends on what each person is giving up to attend the concert.
D) neither bears an opportunity cost since the tickets were given free to them.
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