Question 1

Under a regressive tax system,

Accepted Answer

A)   the marginal tax rate for high income taxpayers is higher than the marginal tax rate for low income taxpayers.
B)   the marginal tax rate for high income taxpayers is the same as the marginal tax rate for low income taxpayers.
C)   the marginal tax rate for high income taxpayers is lower than the marginal tax rate for low income taxpayers.
D)   Any of the above could be true under a regressive tax system.E) A) and D)
F) B) and C)

Question 2

The middle quintile of income earners

Accepted Answer

A)   pays 14.2 percent of income as taxes and pays 9.1 percent of all taxes
B)   pays 9.1 percent of income as taxes and pays 14.2 percent of all taxes.
C)   pays 17.6 percent of income as taxes and pays 16.5 percent of all taxes.
D)   pays 16.5 percent of income as taxes and pays 17.6 percent of all taxes.E) C) and D)
F) A) and B)

Question 3

The idea that people in equal conditions should pay equal taxes is referred to as

Accepted Answer

A)   horizontal equity.
B)   vertical equity.
C)   the ability-to-pay principle.
D)   the marriage tax.E) A) and D)
F) A) and B)

Question 4

Table 12-7
 
-Refer to Table 12-7.What is the marginal tax rate for a person who makes $60,000?

Accepted Answer

A)   20%
B)   23%
C)   40%
D)   45%E) A) and B)
F) B) and C)

Question 5

Suppose Jack values an ice cream sundae at $4.Dianne values an ice cream sundae at $6.The pre-tax price of an ice cream sundae is $2.The government imposes a "fat tax" of $3 on each ice cream sundae,and the price rises to $5.The deadweight loss from the tax is

Accepted Answer

A)   $4,and the deadweight loss comes from both Jack and Dianne.
B)   $4,and the deadweight loss comes only from Jack because he does not buy a sundae after the tax.
C)   $2,and the deadweight loss comes from both Jack and Dianne.
D)   $2,and the deadweight loss comes only from Jack because he does not buy a sundae after the tax.E) B) and C)
F) B) and D)

Question 6

One characteristic of an efficient tax system is that it minimizes the costs associated with revenue collection.

Accepted Answer

A) True 
 B)False

Question 7

Table 12-11
The following table presents the total tax liability for an unmarried taxpayer under four different tax schedules for the income levels shown.
 
-Refer to Table 12-11.For an individual with $200,000 in taxable income,which tax schedule has the highest average tax rate?

Accepted Answer

A)   Tax Schedule A
B)   Tax Schedule B
C)   Tax Schedule C
D)   Tax Schedule DE) B) and C)
F) None of the above

Question 8

If we want to gauge the sacrifice made by a taxpayer,we should use the

Accepted Answer

A)   average tax rate.
B)   marginal tax rate.
C)   lump-sum tax rate.
D)   sales tax rate.E) None of the above
F) A) and B)

Question 9

In 1789,the average American paid approximately what percent of income in taxes?

Accepted Answer

A)   5%
B)   15%
C)   33%
D)   50%E) B) and D)
F) B) and C)

Question 10

Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000.What is the average tax rate when income is $50,000?

Accepted Answer

A)   20 percent
B)   15 percent
C)   12 percent
D)   10 percentE) A) and C)
F) B) and C)

Question 11

Which of the following is not an advantage of a lump-sum tax in comparison to other types of taxes?

Accepted Answer

A)   It would not cause deadweight loss.
B)   It imposes a minimal administrative burden on taxpayers.
C)   It is more equitable.
D)   It is more efficient.E) A) and D)
F) None of the above

Question 12

In 2009,which category represented the largest source of receipts for the U.S.federal government?

Accepted Answer

A)   Medicare
B)   Social Security
C)   corporate income taxes
D)   individual income taxesE) A) and B)
F) None of the above

Question 13

In the absence of taxes,Ashley would prefer to purchase a large sport utility vehicle (SUV) .The government has recently decided to place a $10,000 nuisance tax on SUVs.If Ashley decides to purchase a small economy car as a result of the tax,which of the following statements is correct?

Accepted Answer

A)   Other people who choose to purchase SUVs will incur the cost of the deadweight loss of the tax.
B)   There are no deadweight losses as long as some people still choose to purchase SUVs.
C)   In order to determine the magnitude of the deadweight loss,we must add the revenues from the tax to the loss in Ashley's consumer surplus.
D)   Ashley is worse off,and her loss of welfare is part of the deadweight loss of the tax.E) A) and B)
F) All of the above

Question 14

Which of the following in not a reason that a lump-sum tax imposes a minimal administrative burden on taxpayers?

Accepted Answer

A)   Everyone can easily compute the amount of tax owed.
B)   There is no benefit to hiring an accountant to do your taxes.
C)   Everyone owes the same amount of tax,regardless of earnings.
D)   The government can easily forecast tax revenues.E) B) and C)
F) B) and D)

Question 15

Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000.What are the tax liability and the marginal tax rate for a person whose income is $50,000?

Accepted Answer

A)   12 percent and 20 percent,respectively
B)   12 percent and $50,000,respectively
C)   $6,000 and 12 percent,respectively
D)   $6,000 and 20 percent,respectivelyE) A) and B)
F) C) and D)

Question 16

State and local government spending on public welfare includes

Accepted Answer

A)   trash removal.
B)   transfer payments to the poor.
C)   libraries.
D)   road repairs.E) A) and D)
F) All of the above

Question 17

Briefly describe why taxes create deadweight loss.

Accepted Answer

When the government imposes a ...

Question 18

If the government were to impose a tax that assigned everyone the same tax liability,it would be

Accepted Answer

A)   a lump-sum tax.
B)   an equitable tax.
C)   supported by the poor.
D)   a progressive tax.E) B) and C)
F) A) and D)

Question 19

The payroll tax differs from the individual income tax because the payroll tax is primarily earmarked to pay for

Accepted Answer

A)   employer-provided pensions.
B)   Social Security and Medicare.
C)   employer-provided health benefits.
D)   job loss and training programs.E) B) and D)
F) All of the above

Question 20

Table 12-14
 
-Refer to Table 12-14.A lump-sum tax is illustrated by tax

Accepted Answer

A)   A.
B)   B.
C)   C.
D)   D.E) A) and C)
F) A) and B)

Exam 12: The Design of the Tax System

If we want to gauge the sacrifice made by a taxpayer,we should use the

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If the government were to impose a tax that assigned everyone the same tax liability,it would be

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Under a regressive tax system,

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The payroll tax differs from the individual income tax because the payroll tax is primarily earmarked to pay for

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Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000.What are the tax liability and the marginal tax rate for a person whose income is $50,000?

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One characteristic of an efficient tax system is that it minimizes the costs associated with revenue collection.

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Suppose Jack values an ice cream sundae at $4.Dianne values an ice cream sundae at $6.The pre-tax price of an ice cream sundae is $2.The government imposes a "fat tax" of $3 on each ice cream sundae,and the price rises to $5.The deadweight loss from the tax is

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Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000.What is the average tax rate when income is $50,000?

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In 2009,which category represented the largest source of receipts for the U.S.federal government?

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In 1789,the average American paid approximately what percent of income in taxes?

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State and local government spending on public welfare includes

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Table 12-11 The following table presents the total tax liability for an unmarried taxpayer under four different tax schedules for the income levels shown. -Refer to Table 12-11.For an individual with $200,000 in taxable income,which tax schedule has the highest average tax rate?

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Which of the following is not an advantage of a lump-sum tax in comparison to other types of taxes?

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Table 12-7 -Refer to Table 12-7.What is the marginal tax rate for a person who makes $60,000?

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The idea that people in equal conditions should pay equal taxes is referred to as

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Briefly describe why taxes create deadweight loss.

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Table 12-14 -Refer to Table 12-14.A lump-sum tax is illustrated by tax

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In the absence of taxes,Ashley would prefer to purchase a large sport utility vehicle (SUV) .The government has recently decided to place a $10,000 nuisance tax on SUVs.If Ashley decides to purchase a small economy car as a result of the tax,which of the following statements is correct?

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The middle quintile of income earners

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Which of the following in not a reason that a lump-sum tax imposes a minimal administrative burden on taxpayers?

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When the government imposes a ...
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