Question 1

Table 12-11  
-Refer to Table 12-11. If Al has taxable income of $165,000, his marginal tax rate is

Accepted Answer

A) 16%. 
B) 24%. 
C) 34%. 
D) 36%. 
A) 16%. 
B) 24%. 
C) 34%. 
D) 36%.

Question 2

The theory that the wealthy should contribute more to police protection than the poor because they have more to protect is based on

Accepted Answer

A) the ability-to-pay principle. 
B) a consumption tax plan. 
C) the benefits principle. 
D) property tax assessments. 
A) the ability-to-pay principle. 
B) a consumption tax plan. 
C) the benefits principle. 
D) property tax assessments.

Question 3

One of the most difficult issues associated with trying to structure a tax policy to satisfy horizontal equity is determining

Accepted Answer

A) whether or not a taxpayer falls within the highest income quintile. 
B) the level of transfer payments made to low-income groups. 
C) the source of income for taxpayers. 
D) what differences are relevant to a family's ability to pay. 
A) whether or not a taxpayer falls within the highest income quintile. 
B) the level of transfer payments made to low-income groups. 
C) the source of income for taxpayers. 
D) what differences are relevant to a family's ability to pay.

Question 4

​Rob's income rises from $50,000 to $60,000 and his income tax increases from $6,000 to $7,500.His marginal tax rate is 12.5%.

Accepted Answer

A) True 
 B)False

Question 5

Table 12-22  
-Refer to Table 12-22. A progressive tax is illustrated by tax

Accepted Answer

A) A. 
B) B. 
C) C. 
D) D. 
A) A. 
B) B. 
C) C. 
D) D.

Question 6

'The U.S. tax code gives preferential treatment to investors in municipal bonds. This is an example of

Accepted Answer

A) a tax loophole. 
B) tax evasion. 
C) an administrative burden. 
D) tax enforcement. 
A) a tax loophole. 
B) tax evasion. 
C) an administrative burden. 
D) tax enforcement.

Question 7

The largest category of federal spending is national defense.

Accepted Answer

A) True 
 B)False

Question 8

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, respectively 
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, respectively

Question 9

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. 
A) average tax rate. 
B) marginal tax rate. 
C) lump-sum tax rate. 
D) sales tax rate.

Question 10

Table 12-22  
-Refer to Table 12-22. A regressive tax is illustrated by tax

Accepted Answer

A) A only. 
B) B or D. 
C) C only. 
D) A or D. 
A) A only. 
B) B or D. 
C) C only. 
D) A or D.

Question 11

​Suppose Ron is willing to pay $200 to see a professional basketball game and Felix is willing to pay $150.Assume the normal price of a ticket is $125.The local government decides to impose a $35/ticket surcharge to raise revenue, causing the ticket price to rise to $160.The resulting deadweight loss is:

Accepted Answer

A) ​$75 
B) ​$25 
C) ​$35 
D) ​$150 
A) ​$75 
B) ​$25 
C) ​$35 
D) ​$150

Question 12

Athos, Porthos,and Aramis each like to take fencing lessons. The price of a fencing lesson is $11. Athos values a lesson at $16, Porthos at $14, and Aramis at $12. Suppose that if the government taxes fencing lessons at $2 each, the price will rise to $13. A consequence of the tax is that consumer surplus shrinks by

Accepted Answer

A) $4 and tax revenues increase by $6, so there is a deadweight loss of $2. 
B) $6 and tax revenues increase by $6, so there is no deadweight loss. 
C) $5 and tax revenues increase by $6, so there is no deadweight loss. 
D) $5 and tax revenues increase by $4, so there is a deadweight loss of $1. 
A) $4 and tax revenues increase by $6, so there is a deadweight loss of $2. 
B) $6 and tax revenues increase by $6, so there is no deadweight loss. 
C) $5 and tax revenues increase by $6, so there is no deadweight loss. 
D) $5 and tax revenues increase by $4, so there is a deadweight loss of $1.

Question 13

A tax on all forms of income will

Accepted Answer

A) lower the effective rate of interest on savings. 
B) have no effect on savings. 
C) enhance social welfare because the benefits will outweigh the costs. 
D) enhance the incentives to save. 
A) lower the effective rate of interest on savings. 
B) have no effect on savings. 
C) enhance social welfare because the benefits will outweigh the costs. 
D) enhance the incentives to save.

Question 14

What are the two types of costs that a well-designed tax policy tries to avoid or minimize?

Accepted Answer

1. the deadweight loss that oc

Question 15

In 2011, approximately how much of federal government spending went to income security?

Accepted Answer

A) 10% 
B) 25% 
C) 33% 
D) 50% 
A) 10% 
B) 25% 
C) 33% 
D) 50%

Question 16

Scenario 12-2
Suppose that Bob places a value of $10 on a movie ticket and that Lisa places a value of $7 on a movie ticket. In addition, suppose the price of a movie ticket is $5.
-Refer to Scenario 12-2. What is total consumer surplus for Bob and Lisa?

Accepted Answer

A) $0 
B) $2 
C) $5 
D) $7 
A) $0 
B) $2 
C) $5 
D) $7

Question 17

As tax laws become more complex,

Accepted Answer

A) the administrative burden of taxes will increase. 
B) compliance costs are likely to decrease. 
C) the government will collect more in tax revenue. 
D) the amount of tax revenue lost to tax evasion will decrease. 
A) the administrative burden of taxes will increase. 
B) compliance costs are likely to decrease. 
C) the government will collect more in tax revenue. 
D) the amount of tax revenue lost to tax evasion will decrease.

Question 18

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. Assume that the government places a $4 tax on each slice of cheesecake and that the new equilibrium price is $9. What is the deadweight loss of the tax?

Accepted Answer

A) $3 
B) $6 
C) $8 
D) $9 
A) $3 
B) $6 
C) $8 
D) $9

Question 19

Vertical and horizontal equity are widely accepted and applying them to evaluate a tax system is always straightforward.

Accepted Answer

A) True 
 B)False

Question 20

If transfer payments are included when evaluating tax burdens, then the average tax rate of the poorest quintile of taxpayers would be approximately

Accepted Answer

A) negative 30 percent. 
B) negative 10 percent. 
C) positive 1 percent. 
D) positive 8 percent. 
A) negative 30 percent. 
B) negative 10 percent. 
C) positive 1 percent. 
D) positive 8 percent.

Exam 12: The Design of the Tax System

Table 12-11 -Refer to Table 12-11. If Al has taxable income of $165,000, his marginal tax rate is

The theory that the wealthy should contribute more to police protection than the poor because they have more to protect is based on

One of the most difficult issues associated with trying to structure a tax policy to satisfy horizontal equity is determining

​Rob's income rises from $50,000 to $60,000 and his income tax increases from $6,000 to $7,500.His marginal tax rate is 12.5%.

Table 12-22 -Refer to Table 12-22. A progressive tax is illustrated by tax

'The U.S. tax code gives preferential treatment to investors in municipal bonds. This is an example of

The largest category of federal spending is national defense.

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?

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

Table 12-22 -Refer to Table 12-22. A regressive tax is illustrated by tax

A tax on all forms of income will

What are the two types of costs that a well-designed tax policy tries to avoid or minimize?

In 2011, approximately how much of federal government spending went to income security?

Scenario 12-2 Suppose that Bob places a value of $10 on a movie ticket and that Lisa places a value of $7 on a movie ticket. In addition, suppose the price of a movie ticket is $5. -Refer to Scenario 12-2. What is total consumer surplus for Bob and Lisa?

As tax laws become more complex,

Vertical and horizontal equity are widely accepted and applying them to evaluate a tax system is always straightforward.

If transfer payments are included when evaluating tax burdens, then the average tax rate of the poorest quintile of taxpayers would be approximately

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

Rob's income rises from $50,000 to $60,000 and his income tax increases from $6,000 to $7,500.His marginal tax rate is 12.5%.