Question 1

With a lump-sum tax, the

Accepted Answer

A) marginal tax rate is always less than the average tax rate. 
B) average tax rate is always less than the marginal tax rate. 
C) marginal tax rate falls as income rises. 
D) marginal tax rate rises as income rises. 
A) marginal tax rate is always less than the average tax rate. 
B) average tax rate is always less than the marginal tax rate. 
C) marginal tax rate falls as income rises. 
D) marginal tax rate rises as income rises.

Question 2

Use Table A to complete Table B.
 $$\begin{array}{l}
\text { TABLE}{A }\
\begin{array} { | l | l | } 
\hline \text { On Taxable Income } & \text { The Tax Rate Is } \
\hline \text { Up to } \$ 27,050 & 15.0 \% \
\hline \text { From } \$ 27,051 \text { to } \$ 65,550 & 27.5 \% \
\hline \text { From } \$ 65,551 \text { to } \$ 136,750 & 30.5 \% \
\hline \text { From } \$ 136,751 \text { to } \$ 297,350 & 35.5 \% \
\hline \text { Over } \$ 297,350 & 39.1 \% \
\hline
\end{array}
\end{array}$$ $$\begin{array}{l}
\text { TABLE B }\
\begin{array} { | l | l | l | l | } 
\hline \text { Taxpayer } & \text { Income } & \text { Tax Amount } & \text { Average Tax Rate } \
\hline \text { John } & \$ 52,700 & & \
\hline \text { Todd } & \$ 132,500 & & \
\hline \text { Glen } & \$ 237,000 & & \
\hline \text { Jake } & \$ 315,250 & & \
\hline
\end{array}
\end{array}$$

Accepted Answer

The answer of Use Table A to complete Table B.
...

Question 3

A lump-sum tax would take different amounts from the poor and the rich.

Accepted Answer

A) True 
 B)False

Question 4

Under a regressive tax system, the marginal tax rate for high income taxpayers is

Accepted Answer

A) higher than the marginal tax rate for low income taxpayers. 
B) the same as the marginal tax rate for low income taxpayers. 
C) lower than the marginal tax rate for low income taxpayers. 
D) is unknown relative to the low income tax payer. 
A) higher than the marginal tax rate for low income taxpayers. 
B) the same as the marginal tax rate for low income taxpayers. 
C) lower than the marginal tax rate for low income taxpayers. 
D) is unknown relative to the low income tax payer.

Question 5

Sue earns income of $80,000 per year. Her average tax rate is 50 percent. Sue paid $5,000 in taxes on the first $30,000 she earned. What was the marginal tax rate on the first $30,000 she earned, and what was the marginal tax rate on the remaining $50,000?

Accepted Answer

A) 6.25 percent and 50.00 percent, respectively 
B) 10.00 percent and 70.00 percent, respectively 
C) 16.67 percent and 60.00 percent, respectively 
D) 16.67 percent and 70.00 percent, respectively 
A) 6.25 percent and 50.00 percent, respectively 
B) 10.00 percent and 70.00 percent, respectively 
C) 16.67 percent and 60.00 percent, respectively 
D) 16.67 percent and 70.00 percent, respectively

Question 6

A budget deficit occurs when government receipts fall short of government spending.

Accepted Answer

A) True 
 B)False

Question 7

Table 12-6
The table below provides information on the four households that make up a small economy and how much they would pay in taxes under three types of taxes.
​
​
  
-Refer to Table 12-6. In this economy Tax C exhibits

Accepted Answer

A) horizontal and vertical equity. 
B) horizontal equity but not vertical equity. 
C) vertical equity but not horizontal equity. 
D) neither horizontal nor vertical equity. 
A) horizontal and vertical equity. 
B) horizontal equity but not vertical equity. 
C) vertical equity but not horizontal equity. 
D) neither horizontal nor vertical equity.

Question 8

The amount of income tax owed by a family is

Accepted Answer

A) unaffected by deductions. 
B) total income minus tax credits. 
C) not simply proportional to its total income. 
D) a constant fraction of income. 
A) unaffected by deductions. 
B) total income minus tax credits. 
C) not simply proportional to its total income. 
D) a constant fraction of income.

Question 9

Which of the following are taxed?

Accepted Answer

A) Both corporate profits and dividends shareholders receive 
B) Corporate profits but not dividends shareholders receive 
C) Dividends shareholders receive but not corporate profits 
D) Neither corporate profits nor dividends shareholders receive 
A) Both corporate profits and dividends shareholders receive 
B) Corporate profits but not dividends shareholders receive 
C) Dividends shareholders receive but not corporate profits 
D) Neither corporate profits nor dividends shareholders receive

Question 10

A consumption tax is a tax on

Accepted Answer

A) goods but not on services. 
B) the amount of income that people spend. 
C) the amount of income that people earn. 
D) the amount of income that people save. 
A) goods but not on services. 
B) the amount of income that people spend. 
C) the amount of income that people earn. 
D) the amount of income that people save.

Question 11

Over the past 100 years, as the U.S. economy's income has grown,

Accepted Answer

A) tax rates have decreased, while tax revenues have increased. 
B) tax rates have increased, while tax revenues have decreased. 
C) both tax rates and tax revenues have increased. 
D) both tax rates and tax revenues have decreased. 
A) tax rates have decreased, while tax revenues have increased. 
B) tax rates have increased, while tax revenues have decreased. 
C) both tax rates and tax revenues have increased. 
D) both tax rates and tax revenues have decreased.

Question 12

Which of the following best describes the case when taxes can be justified?

Accepted Answer

A) Used by the government to clean up negative externalities and provide goods with positive externalities. 
B) Used by the government only to clean up negative externalities such as water pollution. 
C) Used by the government only to provide goods with positive externalities such as medical research. 
D) Used by the government to provide public goods such as national defense. 
A) Used by the government to clean up negative externalities and provide goods with positive externalities. 
B) Used by the government only to clean up negative externalities such as water pollution. 
C) Used by the government only to provide goods with positive externalities such as medical research. 
D) Used by the government to provide public goods such as national defense.

Question 13

Table 12-1
​
​
 $$\begin{array} { | c | c | } 
\hline \text { Person } & \begin{array} { c } 
\text { Value of a White Water Rafting } \
\text { Trip } \
\text { (Dollars) }
\end{array} \
\hline \text { Ken } & 150 \
\hline \text { Alex } & 120 \
\hline \text { Brenda } & 90 \
\hline \text { Rob } & 60 \
\hline
\end{array}$$
-Refer to Table 12-1. Assume that the price of a white water rafting trip pass is $55 and that the price reflects the actual unit cost of the trip. Suppose the government imposes a tax of $12 on white water rafting, which raises the price to $67. What is the value of the surplus that accrues to all four participants?

Accepted Answer

A) $200 
B) $83 
C) $159 
D) $53 
A) $200 
B) $83 
C) $159 
D) $53

Question 14

If your income is $40,000 and your income tax liability is $5,000, your

Accepted Answer

A) marginal tax rate is 8 percent. 
B) average tax rate is 8 percent. 
C) marginal tax rate is 12.5 percent. 
D) average tax rate is 12.5 percent. 
A) marginal tax rate is 8 percent. 
B) average tax rate is 8 percent. 
C) marginal tax rate is 12.5 percent. 
D) average tax rate is 12.5 percent.

Question 15

Horizontal and vertical equity are the two primary measures of efficiency of a tax system.

Accepted Answer

A) True 
 B)False

Question 16

Suppose a recent increase in federal gasoline taxes is estimated to cause a $150 million reduction in the total surplus (consumer plus producer surplus) in the gasoline market. If tax revenues increased by $100 million, what is the deadweight loss associated with the tax? As a result of the tax, 10,000 people sold their cars and started riding their bicycles to work. How much of the burden of the deadweight loss is incurred by the bicycle riders?

Accepted Answer

The direct deadweight loss is $50 millio

Question 17

The United States federal government has a large budget deficit. Long-term projections suggest that under current law, taxes, as a percentage of GDP, will __________ and government spending, as a percentage of GDP, will __________.

Accepted Answer

remain con

Question 18

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 19

The U.S. federal government collects about one-half of the taxes in our economy.

Accepted Answer

A) True 
 B)False

Question 20

The U.S. tax burden is high compared to many European countries..

Accepted Answer

A) True 
 B)False

Exam 12: The Design of the Tax System

With a lump-sum tax, the

A lump-sum tax would take different amounts from the poor and the rich.

Under a regressive tax system, the marginal tax rate for high income taxpayers is

Sue earns income of $80,000 per year. Her average tax rate is 50 percent. Sue paid $5,000 in taxes on the first $30,000 she earned. What was the marginal tax rate on the first $30,000 she earned, and what was the marginal tax rate on the remaining $50,000?

A budget deficit occurs when government receipts fall short of government spending.

Table 12-6 The table below provides information on the four households that make up a small economy and how much they would pay in taxes under three types of taxes. ​ ​ -Refer to Table 12-6. In this economy Tax C exhibits

The amount of income tax owed by a family is

Which of the following are taxed?

A consumption tax is a tax on

Over the past 100 years, as the U.S. economy's income has grown,

Which of the following best describes the case when taxes can be justified?

If your income is $40,000 and your income tax liability is $5,000, your

Horizontal and vertical equity are the two primary measures of efficiency of a tax system.

The United States federal government has a large budget deficit. Long-term projections suggest that under current law, taxes, as a percentage of GDP, will __________ and government spending, as a percentage of GDP, will __________.

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

The U.S. federal government collects about one-half of the taxes in our economy.

The U.S. tax burden is high compared to many European countries..

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 Nations 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

Table 12-6 The table below provides information on the four households that make up a small economy and how much they would pay in taxes under three types of taxes. -Refer to Table 12-6. In this economy Tax C exhibits

The United States federal government has a large budget deficit. Long-term projections suggest that under current law, taxes, as a percentage of GDP, will and government spending, as a percentage of GDP, will .