Question 1

Which of the following statements is correct?

Accepted Answer

A) Vertical equity is the idea that taxpayers with similar abilities to pay taxes should pay the same amount. 
B) Horizontal equity is the idea that taxes should be levied on a person according to how well that person can shoulder the burden. 
C) A regressive tax would mean that high-income tax payers pay a larger fraction of their income in taxes than would low-income taxpayers. 
D) A proportional tax would mean that high-income and low-income taxpayers pay the same fraction of income in taxes. 
A) Vertical equity is the idea that taxpayers with similar abilities to pay taxes should pay the same amount. 
B) Horizontal equity is the idea that taxes should be levied on a person according to how well that person can shoulder the burden. 
C) A regressive tax would mean that high-income tax payers pay a larger fraction of their income in taxes than would low-income taxpayers. 
D) A proportional tax would mean that high-income and low-income taxpayers pay the same fraction of income in taxes.

Question 2

Taxes can be justified if the government uses the revenue to (i)
Provide public goods such as national defense.(ii)
Clean up negative externalities such as water pollution.
(iii)
Regulate a common resource such as fish in a public lake.(iv)
Provide goods with positive externalities such as medical research.

Accepted Answer

A) (ii) only 
B) (ii) and (iii) only 
C) (i), (ii), and (iii) only 
D) (i), (ii), (iii), and (iv) 
A) (ii) only 
B) (ii) and (iii) only 
C) (i), (ii), and (iii) only 
D) (i), (ii), (iii), and (iv)

Question 3

Of all the taxes collected in the U.S. economy, what percentage is collected by the federal government?

Accepted Answer

The answer of Of all the taxes collected in the...

Question 4

Vertical equity refers to a tax system in which individuals with higher incomes pay more in taxes than individuals with lower incomes.

Accepted Answer

A) True 
 B)False

Question 5

If Mary earns $80,000 in taxable income and pays $40,000 in taxes, her marginal tax rate must be 50 percent.

Accepted Answer

A) True 
 B)False

Question 6

Table 12-20
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 12-20. Which tax schedules are progressive?

Accepted Answer

A) Tax Schedule A only 
B) Tax Schedule A and Tax Schedule B 
C) Tax Schedule A, Tax Schedule B, and Tax Schedule C 
D) All four Tax Schedules are progressive. 
A) Tax Schedule A only 
B) Tax Schedule A and Tax Schedule B 
C) Tax Schedule A, Tax Schedule B, and Tax Schedule C 
D) All four Tax Schedules are progressive.

Question 7

If Christopher earns $80,000 in taxable income and pays $20,000 in taxes, his average tax rate is 20 percent.

Accepted Answer

A) True 
 B)False

Question 8

Table 12-23
The dollar amounts in the last three columns are the taxes owed under the three different tax systems.  
-Refer to Table 12-23. Which of the three tax systems is proportional?

Accepted Answer

A) Tax System A 
B) Tax System B 
C) Tax System C 
D) None of the systems are proportional. 
A) Tax System A 
B) Tax System B 
C) Tax System C 
D) None of the systems are proportional.

Question 9

When interest income from savings is taxed, people will save

Accepted Answer

A) more to make up for what is lost in taxes. 
B) the same amount as they would have without the tax. 
C) less than they would without the tax. 
D) None of the above is correct since the government would not tax interest on savings. 
A) more to make up for what is lost in taxes. 
B) the same amount as they would have without the tax. 
C) less than they would without the tax. 
D) None of the above is correct since the government would not tax interest on savings.

Question 10

Table 12-24  
-Refer to Table 12-24. Does the tax system achieve vertical equity?

Accepted Answer

Yes. People with hig

Question 11

The flypaper theory of tax incidence

Accepted Answer

A) ignores the indirect effects of taxes. 
B) assumes that most taxes should be "stuck on " the rich. 
C) says that once a tax has been imposed, there is little chance of it changing, so in essence people are stuck with it. 
D) suggests that taxes are like flies because they are everywhere and will never go away. 
A) ignores the indirect effects of taxes. 
B) assumes that most taxes should be "stuck on " the rich. 
C) says that once a tax has been imposed, there is little chance of it changing, so in essence people are stuck with it. 
D) suggests that taxes are like flies because they are everywhere and will never go away.

Question 12

Suppose a country imposes a lump-sum income tax of $5,000 on each individual in the country. What is the average income tax rate for an individual who earns $40,000 during the year?

Accepted Answer

A) 0% 
B) 10% 
C) More than 10% 
D) The average tax rate cannot be determined without knowing the entire tax schedule. 
A) 0% 
B) 10% 
C) More than 10% 
D) The average tax rate cannot be determined without knowing the entire tax schedule.

Question 13

The income tax requires that taxpayers pay 10 percent on the first $50,000 of income and 20 percent on all income over $50,000. Andy paid $9,000 in taxes. What were his marginal and average tax rates?

Accepted Answer

A) 20 percent and 13 percent, respectively 
B) 20 percent and 15 percent, respectively 
C) 10 percent and 13 percent respectively 
D) 10 percent and 15 percent respectively 
A) 20 percent and 13 percent, respectively 
B) 20 percent and 15 percent, respectively 
C) 10 percent and 13 percent respectively 
D) 10 percent and 15 percent respectively

Question 14

Scenario 12-3
Suppose Roger and Regina receive great satisfaction from their consumption of cheesecake. Regina would be willing to purchase only one slice and would pay up to $8 for it. Roger would be willing to pay $11 for his first slice, $9 for his second slice, and $5 for his third slice. The current market price is $5 per slice.
-Refer to Scenario 12-3. How much consumer surplus does Regina receive from consuming her slice of cheesecake?

Accepted Answer

A) $3 
B) $5 
C) $9 
D) $12 
A) $3 
B) $5 
C) $9 
D) $12

Question 15

Tax incidence refers to

Accepted Answer

A) what product or service the tax is levied on. 
B) who bears the tax burden. 
C) what sector of the economy is most affected by the tax. 
D) the dollar value of the tax revenues. 
A) what product or service the tax is levied on. 
B) who bears the tax burden. 
C) what sector of the economy is most affected by the tax. 
D) the dollar value of the tax revenues.

Question 16

The state government requires all persons to pay 5% of their incomes in income tax.This is an example of:

Accepted Answer

A) ​The benefits principle 
B) ​a proportional tax 
C) ​a regressive tax 
D) ​a progressive tax 
A) ​The benefits principle 
B) ​a proportional tax 
C) ​a regressive tax 
D) ​a progressive tax

Question 17

If tax revenues from a tax on fried foods are used to pay for healthcare expenses related to cardio-vascular diseases, the fried foods tax could be justified using the __________.

Accepted Answer

The answer of If tax revenues from a tax on...

Question 18

Part of the administrative burden of a tax is

Accepted Answer

A) the money people pay to the government in taxes. 
B) reducing the size of the market because of the tax. 
C) the hassle of filling out tax forms that is imposed on taxpayers who comply with the tax. 
D) the cost of administering programs that use tax revenue. 
A) the money people pay to the government in taxes. 
B) reducing the size of the market because of the tax. 
C) the hassle of filling out tax forms that is imposed on taxpayers who comply with the tax. 
D) the cost of administering programs that use tax revenue.

Question 19

Table 12-16  
-Refer to Table 12-16. The tax system is

Accepted Answer

A) proportional. 
B) regressive. 
C) progressive. 
D) lump sum. 
A) proportional. 
B) regressive. 
C) progressive. 
D) lump sum.

Question 20

Define the deadweight loss of a tax.

Accepted Answer

The deadweight loss of a tax i

Which of the following statements is correct?

Of all the taxes collected in the U.S. economy, what percentage is collected by the federal government?

Vertical equity refers to a tax system in which individuals with higher incomes pay more in taxes than individuals with lower incomes.

If Mary earns $80,000 in taxable income and pays $40,000 in taxes, her marginal tax rate must be 50 percent.

Table 12-20 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 12-20. Which tax schedules are progressive?

If Christopher earns $80,000 in taxable income and pays $20,000 in taxes, his average tax rate is 20 percent.

Table 12-23 The dollar amounts in the last three columns are the taxes owed under the three different tax systems. -Refer to Table 12-23. Which of the three tax systems is proportional?

When interest income from savings is taxed, people will save

Table 12-24 -Refer to Table 12-24. Does the tax system achieve vertical equity?

The flypaper theory of tax incidence

Suppose a country imposes a lump-sum income tax of $5,000 on each individual in the country. What is the average income tax rate for an individual who earns $40,000 during the year?

The income tax requires that taxpayers pay 10 percent on the first $50,000 of income and 20 percent on all income over $50,000. Andy paid $9,000 in taxes. What were his marginal and average tax rates?

Tax incidence refers to

The state government requires all persons to pay 5% of their incomes in income tax.This is an example of:

If tax revenues from a tax on fried foods are used to pay for healthcare expenses related to cardio-vascular diseases, the fried foods tax could be justified using the __________.

Part of the administrative burden of a tax is

Table 12-16 -Refer to Table 12-16. The tax system is

Define the deadweight loss of a tax.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

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Exam 12: The Design of the Tax System

Which of the following statements is correct?

Of all the taxes collected in the U.S. economy, what percentage is collected by the federal government?

Vertical equity refers to a tax system in which individuals with higher incomes pay more in taxes than individuals with lower incomes.

If Mary earns $80,000 in taxable income and pays $40,000 in taxes, her marginal tax rate must be 50 percent.

Table 12-20 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 12-20. Which tax schedules are progressive?

If Christopher earns $80,000 in taxable income and pays $20,000 in taxes, his average tax rate is 20 percent.

Table 12-23 The dollar amounts in the last three columns are the taxes owed under the three different tax systems. -Refer to Table 12-23. Which of the three tax systems is proportional?

When interest income from savings is taxed, people will save

Table 12-24 -Refer to Table 12-24. Does the tax system achieve vertical equity?

The flypaper theory of tax incidence

Suppose a country imposes a lump-sum income tax of $5,000 on each individual in the country. What is the average income tax rate for an individual who earns $40,000 during the year?

The income tax requires that taxpayers pay 10 percent on the first $50,000 of income and 20 percent on all income over $50,000. Andy paid $9,000 in taxes. What were his marginal and average tax rates?

Tax incidence refers to

The state government requires all persons to pay 5% of their incomes in income tax.This is an example of:

If tax revenues from a tax on fried foods are used to pay for healthcare expenses related to cardio-vascular diseases, the fried foods tax could be justified using the __________.

Part of the administrative burden of a tax is

Table 12-16 -Refer to Table 12-16. The tax system is

Define the deadweight loss of a tax.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Filters