Question 1

The largest category of expenditures for state and local governments is __________.

Accepted Answer

The answer of The largest category of expenditures for state...

Question 2

One reason for the projected increase, over the next several decades, in government spending as a percentage of GDP is the projected increase in the size of the elderly population.

Accepted Answer

A) True 
 B)False

Question 3

The government raises revenue through taxation to pay for the services it provides.

Accepted Answer

A) True 
 B)False

Question 4

A tax system exhibits vertical equity when taxpayers with similar abilities to pay contribute the same amount.

Accepted Answer

A) True 
 B)False

Question 5

Why do some policymakers support a consumption tax rather than an income tax?

Accepted Answer

A) The average tax rate would be lower under a consumption tax. 
B) A consumption tax would encourage people to save earned income. 
C) A consumption tax would raise more revenues than an income tax. 
D) The marginal tax rate would be higher under an income tax. 
A) The average tax rate would be lower under a consumption tax. 
B) A consumption tax would encourage people to save earned income. 
C) A consumption tax would raise more revenues than an income tax. 
D) The marginal tax rate would be higher under an income tax.

Question 6

​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 7

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

Accepted Answer

A) True 
 B)False

Question 8

Individual income taxes and social insurance taxes generate the highest tax revenue for the federal government.

Accepted Answer

A) True 
 B)False

Question 9

An efficient tax system is one that imposes small deadweight losses and small administrative burdens.

Accepted Answer

A) True 
 B)False

Question 10

One reason that deadweight losses are so difficult to avoid is that

Accepted Answer

A) taxes affect the decisions that people make. 
B) income taxes are not paid by everyone. 
C) consumption taxes must be universally applied to all commodities. 
D) the administrative burden is hard to calculate. 
A) taxes affect the decisions that people make. 
B) income taxes are not paid by everyone. 
C) consumption taxes must be universally applied to all commodities. 
D) the administrative burden is hard to calculate.

Question 11

If your income is $50,000, your income tax liability is $10,000, and you paid $0.25 in taxes on the last dollar you earned, your

Accepted Answer

A) marginal tax rate is 20 percent. 
B) average tax rate is 5 percent. 
C) marginal tax rate is 25 percent. 
D) average tax rate is 25 percent. 
A) marginal tax rate is 20 percent. 
B) average tax rate is 5 percent. 
C) marginal tax rate is 25 percent. 
D) average tax rate is 25 percent.

Question 12

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 A 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 13

A tax system with little deadweight loss and a small administrative burden would be described as

Accepted Answer

A) efficient. 
B) equitable. 
C) communistic. 
D) capitalistic. 
A) efficient. 
B) equitable. 
C) communistic. 
D) capitalistic.

Question 14

Which of the following is an example of a payroll tax?

Accepted Answer

A) A tax on the wages that a firm pays its workers 
B) An excise tax on distilled alcohol 
C) A tax on corporate profits 
D) The portion of federal income taxes earmarked to pay for national defense 
A) A tax on the wages that a firm pays its workers 
B) An excise tax on distilled alcohol 
C) A tax on corporate profits 
D) The portion of federal income taxes earmarked to pay for national defense

Question 15

Athos, Porthos, and Aramis each like to take fencing lessons. The price of a fencing lesson is $10. Athos values a lesson at $17, Porthos at $15, and Aramis at $12. Suppose that if the government taxes fencing lessons at $3 each, the price will rise to $13. A consequence of the tax is that consumer surplus shrinks by

Accepted Answer

A) $3 and tax revenues increase by $9, so there is a deadweight loss of $3. 
B) $6 and tax revenues increase by $9, so there is no deadweight loss. 
C) $9 and tax revenues increase by $6, so there is no deadweight loss. 
D) $9 and tax revenues increase by $6, so there is a deadweight loss of $3. 
A) $3 and tax revenues increase by $9, so there is a deadweight loss of $3. 
B) $6 and tax revenues increase by $9, so there is no deadweight loss. 
C) $9 and tax revenues increase by $6, so there is no deadweight loss. 
D) $9 and tax revenues increase by $6, so there is a deadweight loss of $3.

Question 16

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 weekend ski 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. How much tax revenue is collected from these four participants?

Accepted Answer

A) $200 
B) $159 
C) $36 
D) $83 
A) $200 
B) $159 
C) $36 
D) $83

Question 17

The revenue that the federal government collects from payroll taxes is mostly earmarked to pay for

Accepted Answer

A) national defense and income security (welfare) programs 
B) national defense and Medicare 
C) Social Security and public schools 
D) Social Security and Medicare 
A) national defense and income security (welfare) programs 
B) national defense and Medicare 
C) Social Security and public schools 
D) Social Security and Medicare

Question 18

Scenario 12-2
Suppose Regina and Ben receive great satisfaction from their consumption of cheesecake. Regina would be willing to purchase only one slice and would pay up to $13 for it. Ben would be willing to pay $17 for his first slice, $14 for his second slice, and $10 for his third slice. The current market price is $10 per slice.
-Refer to Scenario 12-2. How much consumer surplus does Regina receive from consuming her slice of cheesecake?

Accepted Answer

A) $3 
B) $7 
C) $4 
D) $0 
A) $3 
B) $7 
C) $4 
D) $0

Question 19

Government spending is projected to rise over the next few decades. Three of the most important reasons are spending on Social Security, Medicare, and healthcare.

Accepted Answer

A) True 
 B)False

Question 20

If James earns $80,000 in taxable income and pays $20,000 in taxes, his average tax rate is 25 percent.

Accepted Answer

A) True 
 B)False

Exam 12: The Design of the Tax System

The largest category of expenditures for state and local governments is __________.

One reason for the projected increase, over the next several decades, in government spending as a percentage of GDP is the projected increase in the size of the elderly population.

The government raises revenue through taxation to pay for the services it provides.

A tax system exhibits vertical equity when taxpayers with similar abilities to pay contribute the same amount.

Why do some policymakers support a consumption tax rather than an income tax?

​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%.

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

Individual income taxes and social insurance taxes generate the highest tax revenue for the federal government.

An efficient tax system is one that imposes small deadweight losses and small administrative burdens.

One reason that deadweight losses are so difficult to avoid is that

If your income is $50,000, your income tax liability is $10,000, and you paid $0.25 in taxes on the last dollar you earned, your

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 A exhibits

A tax system with little deadweight loss and a small administrative burden would be described as

Which of the following is an example of a payroll tax?

The revenue that the federal government collects from payroll taxes is mostly earmarked to pay for

Government spending is projected to rise over the next few decades. Three of the most important reasons are spending on Social Security, Medicare, and healthcare.

If James earns $80,000 in taxable income and pays $20,000 in taxes, his average tax rate is 25 percent.

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

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 12-6 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 A exhibits