Question 1

To determine horizontal equity,two taxpayers with

Accepted Answer

A) The same taxable incomes should be compared for their effective tax rates. 
B) The same gross incomes should be compared for their effective tax rates. 
C) Different gross incomes should be compared for their effective tax rates. 
D) Different taxable incomes should be compared for their nominal tax rates. 
A) The same taxable incomes should be compared for their effective tax rates. 
B) The same gross incomes should be compared for their effective tax rates. 
C) Different gross incomes should be compared for their effective tax rates. 
D) Different taxable incomes should be compared for their nominal tax rates.

Question 2

Greater equality in income is supported by the argument that it

Accepted Answer

A) Increases horizontal equity. 
B) Stimulates consumption. 
C) Increases incentives to work for low-income earners. 
D) Strengthens the link between effort and reward. 
A) Increases horizontal equity. 
B) Stimulates consumption. 
C) Increases incentives to work for low-income earners. 
D) Strengthens the link between effort and reward.

Question 3

A sales tax is a proportional tax.

Accepted Answer

A) True 
 B)False

Question 4

Suppose Mr.Lee has total income of $120,000,has taxable income of $90,000,and pays $30,000 in taxes.Considering the information,what is Mr.Lee's nominal tax rate?

Accepted Answer

A) 25 percent. 
B) 75 percent. 
C) 33.33 percent. 
D) 10 percent. 
A) 25 percent. 
B) 75 percent. 
C) 33.33 percent. 
D) 10 percent.

Question 5

The U.S.tax system as a whole is basically

Accepted Answer

A) Progressive. 
B) Regressive. 
C) Proportional. 
D) Variable in its impact because it changes from one year to the next. 
A) Progressive. 
B) Regressive. 
C) Proportional. 
D) Variable in its impact because it changes from one year to the next.

Question 6

Market failure exists whenever

Accepted Answer

A) Income distribution is unequal. 
B) The market generates a suboptimal outcome of income distribution. 
C) The government intervenes in the market. 
D) Government intervention makes the income distribution worse. 
A) Income distribution is unequal. 
B) The market generates a suboptimal outcome of income distribution. 
C) The government intervenes in the market. 
D) Government intervention makes the income distribution worse.

Question 7

When the Census Bureau counts the number of poor Americans,it counts

Accepted Answer

A) Only in-kind income. 
B) Both in-kind and money income. 
C) Only money income. 
D) Personal income plus transfer payments. 
A) Only in-kind income. 
B) Both in-kind and money income. 
C) Only money income. 
D) Personal income plus transfer payments.

Question 8

The argument against greater equality in the distribution of income in the United States hinges predominantly on

Accepted Answer

A) Loss of incentives. 
B) Greater productivity. 
C) The loss of horizontal equity. 
D) A higher marginal revenue product. 
A) Loss of incentives. 
B) Greater productivity. 
C) The loss of horizontal equity. 
D) A higher marginal revenue product.

Question 9

The benefits of a flat tax include all of the following except

Accepted Answer

A) Elimination of exemptions for children. 
B) Simplicity. 
C) Only one tax bracket. 
D) No deductions or exemptions. 
A) Elimination of exemptions for children. 
B) Simplicity. 
C) Only one tax bracket. 
D) No deductions or exemptions.

Question 10

As exemptions are raised and allowable deductions are increased,there is

Accepted Answer

A) A smaller gap between effective and nominal tax rates. 
B) Greater vertical inequity. 
C) A smaller gap between gross income and taxable income. 
D) Greater horizontal equity. 
A) A smaller gap between effective and nominal tax rates. 
B) Greater vertical inequity. 
C) A smaller gap between gross income and taxable income. 
D) Greater horizontal equity.

Question 11

Loopholes,exemptions,and deductions cause an erosion of the tax base.

Accepted Answer

A) True 
 B)False

Question 12

Compute the tax rates for the three taxpayers shown in Table 33.1.Then use the table to answer the indicated question. $\begin{array}{|c|r|r|r|r|r|}
\hline \text { Taxpayer } & \begin{array}{c}
\text { Income } \
\text { (Dollars) }
\end{array} & \begin{array}{c}
\text { Taxable } \
\text { Income } \
\text { (Dollars) }
\end{array} & \begin{array}{c}
\text { Taxes Paid } \
\text { (Dollars) }
\end{array} & \begin{array}{c}
\text { Effective Tax } \
\text { Rate(Percent) }
\end{array} & \begin{array}{r}
\text { Nominal Tax } \
\text { Rate(Percent) }
\end{array} \
\hline 1 & \$ 200,000 & \$ 100,000 & \$ 6,000 & \% & \% \
\hline 2 & 100,000 & 80,000 & 8,000 & \% & \% \
\hline 3 & 60,000 & 48,000 & 12,000 & \% & \% \
\hline
\end{array}$ In Table 33.1,the nominal tax rate for taxpayer 2 is

Accepted Answer

A) 12.5 percent. 
B) 8.0 percent. 
C) 10.0 percent. 
D) 25.0 percent. 
A) 12.5 percent. 
B) 8.0 percent. 
C) 10.0 percent. 
D) 25.0 percent.

Question 13

According to the Census Bureau,in 2016 nearly ________ Americans were counted as poor.

Accepted Answer

A) 1 million 
B) 9 million 
C) 20 million 
D) 40 million 
A) 1 million 
B) 9 million 
C) 20 million 
D) 40 million

Question 14

Personal income is

Accepted Answer

A) The sum of wealth and in-kind income. 
B) The sum of taxes,in-kind income,and personal consumption. 
C) A good measure of the distribution of output. 
D) The income received by households before payment of personal taxes. 
A) The sum of wealth and in-kind income. 
B) The sum of taxes,in-kind income,and personal consumption. 
C) A good measure of the distribution of output. 
D) The income received by households before payment of personal taxes.

Question 15

The marginal revenue product (MRP)establishes

Accepted Answer

A) An upper limit to the productivity of a worker. 
B) An upper limit to the wage rate an employer is willing to pay. 
C) A lower limit to the wage rate demands of laborers. 
D) A lower limit to profit on the sale of a unit of output. 
A) An upper limit to the productivity of a worker. 
B) An upper limit to the wage rate an employer is willing to pay. 
C) A lower limit to the wage rate demands of laborers. 
D) A lower limit to profit on the sale of a unit of output.

Question 16

The nominal tax rate is

Accepted Answer

A) Lower than the effective tax rate. 
B) Taxes paid divided by total economic income. 
C) Taxes paid divided by taxable income. 
D) Equal to the marginal tax rate. 
A) Lower than the effective tax rate. 
B) Taxes paid divided by total economic income. 
C) Taxes paid divided by taxable income. 
D) Equal to the marginal tax rate.

Question 17

A mathematical summary of inequality based on the Lorenz curve is known as the

Accepted Answer

A) Okun coefficient. 
B) Income distribution share. 
C) Gini coefficient. 
D) Lorenz coefficient. 
A) Okun coefficient. 
B) Income distribution share. 
C) Gini coefficient. 
D) Lorenz coefficient.

Question 18

A cartoon in the text says that while the economy has been expanding,the share of income to blacks and poor whites has decreased.This implies that the

Accepted Answer

A) Area between the Lorenz curve and the absolute equality line has increased. 
B) Level of income inequality has decreased. 
C) Gini coefficient is smaller. 
D) Tax elasticity of supply is greater. 
A) Area between the Lorenz curve and the absolute equality line has increased. 
B) Level of income inequality has decreased. 
C) Gini coefficient is smaller. 
D) Tax elasticity of supply is greater.

Question 19

The nominal tax rate refers to the actual taxes paid as a percentage of taxable income.

Accepted Answer

A) True 
 B)False

Question 20

The bottom 80 percent of families in Alpha receive approximately what percentage of total income? (See Figure 33.1. )

Accepted Answer

A) 80 percent. 
B) 60 percent. 
C) 50 percent. 
D) 40 percent. 
A) 80 percent. 
B) 60 percent. 
C) 50 percent. 
D) 40 percent.

Exam 33: Taxes: Equity Versus Efficiency

To determine horizontal equity,two taxpayers with

Greater equality in income is supported by the argument that it

A sales tax is a proportional tax.

Suppose Mr.Lee has total income of $120,000,has taxable income of $90,000,and pays $30,000 in taxes.Considering the information,what is Mr.Lee's nominal tax rate?

The U.S.tax system as a whole is basically

Market failure exists whenever

When the Census Bureau counts the number of poor Americans,it counts

The argument against greater equality in the distribution of income in the United States hinges predominantly on

The benefits of a flat tax include all of the following except

As exemptions are raised and allowable deductions are increased,there is

Loopholes,exemptions,and deductions cause an erosion of the tax base.

According to the Census Bureau,in 2016 nearly ________ Americans were counted as poor.

Personal income is

The marginal revenue product (MRP)establishes

The nominal tax rate is

A mathematical summary of inequality based on the Lorenz curve is known as the

A cartoon in the text says that while the economy has been expanding,the share of income to blacks and poor whites has decreased.This implies that the

The nominal tax rate refers to the actual taxes paid as a percentage of taxable income.

The bottom 80 percent of families in Alpha receive approximately what percentage of total income? (See Figure 33.1. )

Economics: the Core Issues

The Useconomy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Aggregate Demand

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

Elasticity

The Costs of Production

The Competitive Firm

Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

Financial Markets

Transfer Payments: Welfare and Social Security

International Trade

International Finance

Global Poverty

Filters