Question 1

Table 12-4  
-Refer to Table 12-4. What is the marginal tax rate for a person who makes $35,000?

Accepted Answer

A) 25% 
B) 30% 
C) 40% 
D) 60% 
A) 25% 
B) 30% 
C) 40% 
D) 60%

Question 2

Table 12-10  
-Refer to Table 12-10. If Jace has $33,000 in taxable income, his marginal tax rate is

Accepted Answer

A) 10%. 
B) 15%. 
C) 25%. 
D) 28%. 
A) 10%. 
B) 15%. 
C) 25%. 
D) 28%.

Question 3

​Which of the following is an example of horizontal equity?

Accepted Answer

A) ​A wealthy individual should pay more taxes than a lower-income individual​ 
B) A wealthy individual should have a greater average tax rate than a middle-income individual​ 
C) Two persons with identical incomes should pay the same taxes​ 
D) A local government decides to impose taxes based on the benefits principle​ 
A) ​A wealthy individual should pay more taxes than a lower-income individual​ 
B) A wealthy individual should have a greater average tax rate than a middle-income individual​ 
C) Two persons with identical incomes should pay the same taxes​ 
D) A local government decides to impose taxes based on the benefits principle​

Question 4

The income tax requires that taxpayers pay 10percent on the first $40,000 of income and 20 percent on all income over $40,000. Karen paid $6,000 in taxes. What were her marginal and average tax rates?

Accepted Answer

A) 20 percent and 12 percent, respectively 
B) 20 percent and 15 percent, respectively 
C) 10 percent and 12 percent respectively 
D) 10 percent and 15 percent respectively 
A) 20 percent and 12 percent, respectively 
B) 20 percent and 15 percent, respectively 
C) 10 percent and 12 percent respectively 
D) 10 percent and 15 percent respectively

Question 5

An income tax in which the average tax rate is the same for all taxpayers would be considered a

Accepted Answer

A) progressive tax. 
B) regressive tax. 
C) distortion-free tax. 
D) proportional tax. 
A) progressive tax. 
B) regressive tax. 
C) distortion-free tax. 
D) proportional tax.

Question 6

Vertical equity refers to a tax system in which individuals with similar incomes pay similar taxes.

Accepted Answer

A) True 
 B)False

Question 7

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

Question 8

When the government taxes labor earnings we can expect people to

Accepted Answer

A) work more so they can keep the same standard of living. 
B) work less and enjoy more leisure. 
C) quit their present job and find one that pays better. 
D) stop working altogether and go on welfare. 
A) work more so they can keep the same standard of living. 
B) work less and enjoy more leisure. 
C) quit their present job and find one that pays better. 
D) stop working altogether and go on welfare.

Question 9

Suppose that in 2020 the average citizen's federal tax bill is $9,372, and total federal spending is $10,824 per person. In 2020, the federal government will have

Accepted Answer

A) a budget surplus. 
B) a budget deficit. 
C) horizontal equity. 
D) vertical equity. 
A) a budget surplus. 
B) a budget deficit. 
C) horizontal equity. 
D) vertical equity.

Question 10

Corporate profits are

Accepted Answer

A) included in payroll taxes. 
B) exempt from taxes. 
C) taxed twice, once as profit and once as dividends. 
D) taxed to pay for Medicare. 
A) included in payroll taxes. 
B) exempt from taxes. 
C) taxed twice, once as profit and once as dividends. 
D) taxed to pay for Medicare.

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. 
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.

Question 12

Table 12-11  
-Refer to Table 12-11. If Peggy has taxable income of $43,000, her marginal tax rate is

Accepted Answer

A) 8%. 
B) 16%. 
C) 24%. 
D) 34%. 
A) 8%. 
B) 16%. 
C) 24%. 
D) 34%.

Question 13

What is the marginal tax rate of a lump-sum tax of $5,000?

Accepted Answer

The marginal tax rate would be

Question 14

A tax levied on the total amount spent in retail stores is called

Accepted Answer

A) a sales tax. 
B) an excise tax. 
C) a retail tax. 
D) an income tax. 
A) a sales tax. 
B) an excise tax. 
C) a retail tax. 
D) an income tax.

Question 15

Deadweight losses represent the

Accepted Answer

A) inefficiency that taxes create. 
B) shift in benefit from producers to consumers. 
C) part of consumer and producer surplus that is now revenue to the government. 
D) increase in revenue to the government. 
A) inefficiency that taxes create. 
B) shift in benefit from producers to consumers. 
C) part of consumer and producer surplus that is now revenue to the government. 
D) increase in revenue to the government.

Question 16

Table 12-19  
-Refer to Table 12-19. The tax system is

Accepted Answer

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

Question 17

In 2014, the largest source of receipts for state and local governments was individual income taxes.

Accepted Answer

A) True 
 B)False

Question 18

Sales taxes generate nearly 50% of the tax revenue for state and local governments.

Accepted Answer

A) True 
 B)False

Question 19

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 20

Costas faces a progressive federal income tax structure that has the following marginal tax rates: 0 percent on the first $10,000, 10 percent on the next $10,000, 15 percent on the next $10,000, 25 percent on the next $10,000, and 50 percent on all additional income. In addition, he must pay 5 percent of his income in state income tax and 15.3 percent of his labor income in federal payroll taxes. Costas earns $70,000 per year in salary and another $20,000 per year in non-labor income. What is his average tax rate, and what is his marginal tax rate on his salary?

Accepted Answer

A) His average tax rate is 17.19 percent, and the marginal tax rate on his salary is 55 percent. 
B) His average tax rate is 50.23 percent, and the marginal tax rate on his salary is 70.3 percent. 
C) His average tax rate is 53.63 percent, and the marginal tax rate on his salary is 70.3 percent. 
D) His average tax rate is 55.79 percent, and the marginal tax rate on his salary is 70.3 percent. 
A) His average tax rate is 17.19 percent, and the marginal tax rate on his salary is 55 percent. 
B) His average tax rate is 50.23 percent, and the marginal tax rate on his salary is 70.3 percent. 
C) His average tax rate is 53.63 percent, and the marginal tax rate on his salary is 70.3 percent. 
D) His average tax rate is 55.79 percent, and the marginal tax rate on his salary is 70.3 percent.

Exam 12: The Design of the Tax System

Table 12-4 -Refer to Table 12-4. What is the marginal tax rate for a person who makes $35,000?

Table 12-10 -Refer to Table 12-10. If Jace has $33,000 in taxable income, his marginal tax rate is

​Which of the following is an example of horizontal equity?

The income tax requires that taxpayers pay 10percent on the first $40,000 of income and 20 percent on all income over $40,000. Karen paid $6,000 in taxes. What were her marginal and average tax rates?

An income tax in which the average tax rate is the same for all taxpayers would be considered a

Vertical equity refers to a tax system in which individuals with similar incomes pay similar taxes.

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

When the government taxes labor earnings we can expect people to

Suppose that in 2020 the average citizen's federal tax bill is $9,372, and total federal spending is $10,824 per person. In 2020, the federal government will have

Corporate profits are

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

Table 12-11 -Refer to Table 12-11. If Peggy has taxable income of $43,000, her marginal tax rate is

What is the marginal tax rate of a lump-sum tax of $5,000?

A tax levied on the total amount spent in retail stores is called

Deadweight losses represent the

Table 12-19 -Refer to Table 12-19. The tax system is

In 2014, the largest source of receipts for state and local governments was individual income taxes.

Sales taxes generate nearly 50% of the tax revenue for state and local governments.

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

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

Applications: 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

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

Which of the following is an example of horizontal equity?