Question 1

According to the benefits principle, it is fair for people to pay taxes based on the benefits they receive from the government.

Accepted Answer

A) True 
 B)False

Question 2

If the rich pay more in taxes than the poor, the tax system must be progressive.

Accepted Answer

A) True 
 B)False

Question 3

If the government imposes a tax of $3,000 on everyone, the tax would be

Accepted Answer

A) an income tax. 
B) a consumption tax. 
C) a lump-sum tax. 
D) a marginal tax. 
A) an income tax. 
B) a consumption tax. 
C) a lump-sum tax. 
D) a marginal tax.

Question 4

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 5

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. The deadweight loss associated with the tax is

Accepted Answer

A) $5. 
B) $41. 
C) $164. 
D) $123. 
A) $5. 
B) $41. 
C) $164. 
D) $123.

Question 6

A budget deficit occurs when government receipts exceed government spending.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

The marginal tax rate would be

Question 8

Define the deadweight loss of a tax.

Accepted Answer

The deadweight loss of a tax i

Question 9

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 10

Suppose that Christine values a baseball hat at $20, and Mark values one at $18. The pretax price of a baseball hat is $14. The government imposes a $5 tax on baseball hats, which raises the price to $19. What is the deadweight loss from the tax?

Accepted Answer

Prior to the tax, consumer surplus was $

Question 11

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 B 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 12

Which of the following statements is correct?

Accepted Answer

A) Equity is more important than efficiency as a goal of the tax system. 
B) Efficiency is more important than equity as a goal of the tax system. 
C) Both equity and efficiency are important goals of the tax system. 
D) Neither equity nor efficiency is an important goal of the tax system. 
A) Equity is more important than efficiency as a goal of the tax system. 
B) Efficiency is more important than equity as a goal of the tax system. 
C) Both equity and efficiency are important goals of the tax system. 
D) Neither equity nor efficiency is an important goal of the tax system.

Question 13

Suppose that the government taxes income in the following fashion: 20 percent of the first $50,000, 40 percent of the next $50,000, and 60 percent of all income over $100,000. Marshall earns $200,000, and Lily earns $600,000. Which of the following statements is correct?

Accepted Answer

A) Marshall's marginal tax rate is higher than Lily's marginal tax rate. 
B) Marshall's average tax rate is higher than his marginal tax rate. 
C) Lily's average tax rate is higher than her marginal tax rate. 
D) Lily's average tax rate is higher than Marshall's average tax rate. 
A) Marshall's marginal tax rate is higher than Lily's marginal tax rate. 
B) Marshall's average tax rate is higher than his marginal tax rate. 
C) Lily's average tax rate is higher than her marginal tax rate. 
D) Lily's average tax rate is higher than Marshall's average tax rate.

Question 14

If we want to gauge how much the income tax system distorts incentives, we should use the

Accepted Answer

A) average tax rate. 
B) ability-to-pay principle. 
C) total tax revenue collected. 
D) marginal tax rate. 
A) average tax rate. 
B) ability-to-pay principle. 
C) total tax revenue collected. 
D) marginal tax rate.

Question 15

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 16

What is the most efficient tax and why?

Accepted Answer

A lump-sum tax is the most eff

Question 17

Scenario 12-3
A taxpayer faces the following tax rates on her income:
​
 20 percent of the first $\$ 40,000$ of her income;
30 percent of all her income above $\$ 40,000$.
-Refer to Scenario 12-3. The taxpayer faces a marginal tax rate of

Accepted Answer

A) 30 percent when her income rises from $20,000 to $20,001. 
B) 20 percent when her income rises from $20,000 to $20,001. 
C) 20 percent when her income rises from $60,000 to $60,001. 
D) 0 percent when her income rises from $20,000 to $20,001. 
A) 30 percent when her income rises from $20,000 to $20,001. 
B) 20 percent when her income rises from $20,000 to $20,001. 
C) 20 percent when her income rises from $60,000 to $60,001. 
D) 0 percent when her income rises from $20,000 to $20,001.

Question 18

An advantage of a consumption tax is that it does not distort the incentive to save.

Accepted Answer

A) True 
 B)False

Question 19

In which of the following tax systems does total tax liability increase as income increases?

Accepted Answer

A) Both proportional and progressive 
B) Proportional but not progressive 
C) Progressive but not proportional 
D) Neither proportional nor progressive 
A) Both proportional and progressive 
B) Proportional but not progressive 
C) Progressive but not proportional 
D) Neither proportional nor progressive

Question 20

If all taxpayers pay the same percentage of income in taxes, the tax system is progressive.

Accepted Answer

A) True 
 B)False

Exam 12: The Design of the Tax System

According to the benefits principle, it is fair for people to pay taxes based on the benefits they receive from the government.

If the rich pay more in taxes than the poor, the tax system must be progressive.

If the government imposes a tax of $3,000 on everyone, the tax would be

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

A budget deficit occurs when government receipts exceed government spending.

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

Define the deadweight loss of a tax.

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

Suppose that Christine values a baseball hat at $20, and Mark values one at $18. The pretax price of a baseball hat is $14. The government imposes a $5 tax on baseball hats, which raises the price to $19. What is the deadweight loss from the tax?

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 B exhibits

Which of the following statements is correct?

Suppose that the government taxes income in the following fashion: 20 percent of the first $50,000, 40 percent of the next $50,000, and 60 percent of all income over $100,000. Marshall earns $200,000, and Lily earns $600,000. Which of the following statements is correct?

If we want to gauge how much the income tax system distorts incentives, we should use the

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

What is the most efficient tax and why?

Scenario 12-3 A taxpayer faces the following tax rates on her income: ​ 20 percent of the first $40,000\$ 40,000$40,000 of her income; 30 percent of all her income above $40,000\$ 40,000$40,000 . -Refer to Scenario 12-3. The taxpayer faces a marginal tax rate of

An advantage of a consumption tax is that it does not distort the incentive to save.

In which of the following tax systems does total tax liability increase as income increases?

If all taxpayers pay the same percentage of income in taxes, the tax system is progressive.

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 B exhibits

Scenario 12-3 A taxpayer faces the following tax rates on her income: 20 percent of the first $\$ 40,000$ of her income; 30 percent of all her income above $\$ 40,000$ . -Refer to Scenario 12-3. The taxpayer faces a marginal tax rate of