Question 1

Vertical equity states that taxpayers with a greater ability to pay taxes should

Accepted Answer

A)  contribute a decreasing proportion of each increment in income to taxes. 
B)  contribute a larger amount than those with a lesser ability to pay. 
C)  be less subject to administrative burdens of a tax. 
D)  be less subject to tax distortions that lead to deadweight losses. 
A)  contribute a decreasing proportion of each increment in income to taxes. 
B)  contribute a larger amount than those with a lesser ability to pay. 
C)  be less subject to administrative burdens of a tax. 
D)  be less subject to tax distortions that lead to deadweight losses.

Question 2

Table 12-1
  
-Refer to Table 12-1.If Betina has $170,000 in taxable income,her average tax rate is

Accepted Answer

A)  23.8%. 
B)  24.3%. 
C)  25.9%. 
D)  28.0%. 
A)  23.8%. 
B)  24.3%. 
C)  25.9%. 
D)  28.0%.

Question 3

Table 12-13
The dollar amounts in the last three columns are the taxes owed under the three different tax systems.
  
-Refer to Table 12-13.Which of the three tax systems is progressive?

Accepted Answer

A)  Tax System A 
B)  Tax System B 
C)  Tax System C 
D)  All of the tax systems are progressive. 
A)  Tax System A 
B)  Tax System B 
C)  Tax System C 
D)  All of the tax systems are progressive.

Question 4

The most common explanation for Social Security payments accounting for a larger share of federal government expenditures is

Accepted Answer

A)  increases in life expectancy. 
B)  people becoming eligible for Social Security benefits at an earlier age. 
C)  increases in birth rates among teenagers and the poor. 
D)  falling payroll tax receipts. 
A)  increases in life expectancy. 
B)  people becoming eligible for Social Security benefits at an earlier age. 
C)  increases in birth rates among teenagers and the poor. 
D)  falling payroll tax receipts.

Question 5

Scenario 12-1
Skip places a $20 value on a bottle of wine, and Walt places a $17 value on it. The equilibrium price for a bottle of wine is $15.
-Refer to Scenario 12-1.Suppose the government levies a tax of $3 on each bottle of wine,and the equilibrium price of a bottle of wine increases to $18.How much tax revenue is collected?

Accepted Answer

A)  $0 
B)  $2 
C)  $3 
D)  $6 
A)  $0 
B)  $2 
C)  $3 
D)  $6

Question 6

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 7

Scenario 12-4. A taxpayer faces the following tax rates on her income:
  
-Refer to Scenario 12-4.At what level of income would the taxpayer's marginal tax rate be 30 percent and her average tax rate be 25 percent?

Accepted Answer

A)  $42,000 
B)  $57,000 
C)  $60,000 
D)  $80,000 
A)  $42,000 
B)  $57,000 
C)  $60,000 
D)  $80,000

Question 8

Table 12-11
The following table presents the total tax liability for an unmarried taxpayer under four different tax schedules for the income levels shown.
  
-Refer to Table 12-11.For an individual with $200,000 in taxable income,which tax schedule has the lowest average marginal tax rate?

Accepted Answer

A)  Tax Schedule A 
B)  Tax Schedule B 
C)  Tax Schedule C 
D)  Tax Schedule D 
A)  Tax Schedule A 
B)  Tax Schedule B 
C)  Tax Schedule C 
D)  Tax Schedule D

Question 9

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 10

Temporary Assistance for Needy Families (TANF)falls into which spending category?

Accepted Answer

A)  Medicare 
B)  income security 
C)  guaranteed social eligibility 
D)  Social Security 
A)  Medicare 
B)  income security 
C)  guaranteed social eligibility 
D)  Social Security

Question 11

Suppose that in 2020 the average citizen's federal tax bill is $12,466,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 12

Table 12-17
The dollar amounts in the last three columns are the taxes owed under the three different tax systems.
  
-Refer to Table 12-17.Which of the three tax systems is regressive?

Accepted Answer

A)  Tax System A 
B)  Tax System B 
C)  Tax System C 
D)  None of the systems are regressive. 
A)  Tax System A 
B)  Tax System B 
C)  Tax System C 
D)  None of the systems are regressive.

Question 13

The income tax requires that taxpayers pay 10% 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 14

In the 1980s,President Ronald Reagan argued that high tax rates distorted economic incentives to work and save.In the 1990s,President Bill Clinton argued that the rich were not paying their fair share of taxes.Which of the following statements best summarizes the economic theories behind the differing philosophies?

Accepted Answer

A)  President Reagan was concerned about vertical equity, whereas President Clinton was concerned about horizontal equity. 
B)  President Reagan was concerned about average tax rates, whereas President Clinton was concerned about horizontal equity. 
C)  President Reagan was concerned about marginal tax rates, whereas President Clinton was concerned about vertical equity. 
D)  None of the above is correct. 
A)  President Reagan was concerned about vertical equity, whereas President Clinton was concerned about horizontal equity. 
B)  President Reagan was concerned about average tax rates, whereas President Clinton was concerned about horizontal equity. 
C)  President Reagan was concerned about marginal tax rates, whereas President Clinton was concerned about vertical equity. 
D)  None of the above is correct.

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Which tax system requires higher-income taxpayers to pay a higher percentage of their income in taxes?

Accepted Answer

A)  a progressive tax 
B)  a proportional tax 
C)  a regressive tax 
D)  a lump-sum tax 
A)  a progressive tax 
B)  a proportional tax 
C)  a regressive tax 
D)  a lump-sum tax

Question 17

Table 12-12
United States Income Tax Rates for a Single Individual, 2009 and 2010.
  
-Refer to Table 12-12.Kurt is a single person whose taxable income is $35,000 a year.What is his average tax rate in 2009?

Accepted Answer

A)  17.6% 
B)  20.5% 
C)  21.3% 
D)  26.2% 
A)  17.6% 
B)  20.5% 
C)  21.3% 
D)  26.2%

Question 18

Suppose that in 2012 the average citizen's federal tax bill is $11,888 per person,and total federal spending is $13,997 per person.In 2012,the federal government will have

Accepted Answer

A)  a per person budget surplus of $2,109. 
B)  a per person budget deficit of $2,109. 
C)  horizontal equity. 
D)  vertical equity. 
A)  a per person budget surplus of $2,109. 
B)  a per person budget deficit of $2,109. 
C)  horizontal equity. 
D)  vertical equity.

Question 19

Scenario 12-1
Skip places a $20 value on a bottle of wine, and Walt places a $17 value on it. The equilibrium price for a bottle of wine is $15.
-Refer to Scenario 12-1.Suppose the government levies a tax of $3 on each bottle of wine,and the equilibrium price of a bottle of wine increases to $18.Because total consumer surplus has

Accepted Answer

A)  fallen by more than the tax revenue, the tax has a deadweight loss 
B)  fallen by less than the tax revenue, the tax has no dead weight loss. 
C)  fallen by exactly the amount of the tax revenue, the tax has no deadweight loss. 
D)  increased by less than the tax revenue, the tax has a deadweight loss. 
A)  fallen by more than the tax revenue, the tax has a deadweight loss 
B)  fallen by less than the tax revenue, the tax has no dead weight loss. 
C)  fallen by exactly the amount of the tax revenue, the tax has no deadweight loss. 
D)  increased by less than the tax revenue, the tax has a deadweight loss.

Question 20

Zoe,Chloe,and Brody each like to read novels.The current bestseller costs $11.Zoe values it at $16,Chloe at $14,and Brody at $12.Suppose that if the government taxes books at $2 each,the selling price will rise to $13.A consequence of the tax is that

Accepted Answer

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

Vertical equity states that taxpayers with a greater ability to pay taxes should

Table 12-1 -Refer to Table 12-1.If Betina has $170,000 in taxable income,her average tax rate is

Table 12-13 The dollar amounts in the last three columns are the taxes owed under the three different tax systems. -Refer to Table 12-13.Which of the three tax systems is progressive?

The most common explanation for Social Security payments accounting for a larger share of federal government expenditures is

When the government taxes labor earnings we can expect people to

Scenario 12-4. A taxpayer faces the following tax rates on her income: -Refer to Scenario 12-4.At what level of income would the taxpayer's marginal tax rate be 30 percent and her average tax rate be 25 percent?

Table 12-11 The following table presents the total tax liability for an unmarried taxpayer under four different tax schedules for the income levels shown. -Refer to Table 12-11.For an individual with $200,000 in taxable income,which tax schedule has the lowest average marginal tax rate?

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

Temporary Assistance for Needy Families (TANF)falls into which spending category?

Suppose that in 2020 the average citizen's federal tax bill is $12,466,and total federal spending is $10,824 per person.In 2020,the federal government will have

Table 12-17 The dollar amounts in the last three columns are the taxes owed under the three different tax systems. -Refer to Table 12-17.Which of the three tax systems is regressive?

The income tax requires that taxpayers pay 10% 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?

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

Which tax system requires higher-income taxpayers to pay a higher percentage of their income in taxes?

Table 12-12 United States Income Tax Rates for a Single Individual, 2009 and 2010. -Refer to Table 12-12.Kurt is a single person whose taxable income is $35,000 a year.What is his average tax rate in 2009?

Suppose that in 2012 the average citizen's federal tax bill is $11,888 per person,and total federal spending is $13,997 per person.In 2012,the federal government will have

Zoe,Chloe,and Brody each like to read novels.The current bestseller costs $11.Zoe values it at $16,Chloe at $14,and Brody at $12.Suppose that if the government taxes books at $2 each,the selling price will rise to $13.A consequence of the tax is that

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.

Application: 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 Market For the Factors of Production.

Earnings and Discrimination.

Income Inequality and Poverty.

The Theory of Consumer Choice.

Frontiers in Microeconomics.

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Exam 12: The Design of the Tax System.

Vertical equity states that taxpayers with a greater ability to pay taxes should

Table 12-1 -Refer to Table 12-1.If Betina has $170,000 in taxable income,her average tax rate is

Table 12-13 The dollar amounts in the last three columns are the taxes owed under the three different tax systems. -Refer to Table 12-13.Which of the three tax systems is progressive?

The most common explanation for Social Security payments accounting for a larger share of federal government expenditures is

When the government taxes labor earnings we can expect people to

Scenario 12-4. A taxpayer faces the following tax rates on her income: -Refer to Scenario 12-4.At what level of income would the taxpayer's marginal tax rate be 30 percent and her average tax rate be 25 percent?

Table 12-11 The following table presents the total tax liability for an unmarried taxpayer under four different tax schedules for the income levels shown. -Refer to Table 12-11.For an individual with $200,000 in taxable income,which tax schedule has the lowest average marginal tax rate?

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

Temporary Assistance for Needy Families (TANF)falls into which spending category?

Suppose that in 2020 the average citizen's federal tax bill is $12,466,and total federal spending is $10,824 per person.In 2020,the federal government will have

Table 12-17 The dollar amounts in the last three columns are the taxes owed under the three different tax systems. -Refer to Table 12-17.Which of the three tax systems is regressive?

The income tax requires that taxpayers pay 10% 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?

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

Which tax system requires higher-income taxpayers to pay a higher percentage of their income in taxes?

Table 12-12 United States Income Tax Rates for a Single Individual, 2009 and 2010. -Refer to Table 12-12.Kurt is a single person whose taxable income is $35,000 a year.What is his average tax rate in 2009?

Suppose that in 2012 the average citizen's federal tax bill is $11,888 per person,and total federal spending is $13,997 per person.In 2012,the federal government will have

Zoe,Chloe,and Brody each like to read novels.The current bestseller costs $11.Zoe values it at $16,Chloe at $14,and Brody at $12.Suppose that if the government taxes books at $2 each,the selling price will rise to $13.A consequence of the tax is that

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.

Application: 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 Market For the Factors of Production.

Earnings and Discrimination.

Income Inequality and Poverty.

The Theory of Consumer Choice.

Frontiers in Microeconomics.

Filters