Question 1

Individual income taxes generate roughly 25% of the tax revenue for the federal government.

Accepted Answer

A) True 
 B)False

Question 2

When the marginal tax rate exceeds the average tax rate,the tax is

Accepted Answer

A)  proportional. 
B)  regressive. 
C)  non-egalitarian. 
D)  progressive. 
A)  proportional. 
B)  regressive. 
C)  non-egalitarian. 
D)  progressive.

Question 3

Which of the following statements is not correct?

Accepted Answer

A)  A gasoline tax can be an example of a tax that uses the benefits principle. 
B)  A progressive tax attempts to achieve vertical equity. 
C)  A progressive tax can be an example of the ability-to-pay principle. 
D)  A regressive tax attempts to achieve vertical equity. 
A)  A gasoline tax can be an example of a tax that uses the benefits principle. 
B)  A progressive tax attempts to achieve vertical equity. 
C)  A progressive tax can be an example of the ability-to-pay principle. 
D)  A regressive tax attempts to achieve vertical equity.

Question 4

Table 12-2
Consider the tax rates shown in the table below.
  
-Refer to Table 12-2.If Mateo 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 5

Nancy paid a tax of $0.50 on the last dollar she earned in 1999.Nancy's marginal tax rate in 1999 was

Accepted Answer

A)  more than 50 percent. 
B)  exactly 50 percent. 
C)  higher than her average tax rate. 
D)  lower than her average tax rate. 
A)  more than 50 percent. 
B)  exactly 50 percent. 
C)  higher than her average tax rate. 
D)  lower than her average tax rate.

Question 6

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 7

The largest category of federal government spending is growing because

Accepted Answer

A)  the U.S. must spend more on national defense due to the war against terror. 
B)  the elderly population is increasing due to rising life expectancies. 
C)  expenditures on space exploration have increased dramatically. 
D)  health care costs are rising faster than any other service in the U.S. 
A)  the U.S. must spend more on national defense due to the war against terror. 
B)  the elderly population is increasing due to rising life expectancies. 
C)  expenditures on space exploration have increased dramatically. 
D)  health care costs are rising faster than any other service in the U.S.

Question 8

If a government sells debt to help meet its expenditures,then the government has a

Accepted Answer

A)  budget surplus. Other things the same, the surplus rises if government expenditures rise. 
B)  budget surplus. Other things the same, the surplus rises if government expenditures fall. 
C)  budget deficit. Other things the same, the deficit rises if government expenditures rise. 
D)  budget deficit. Other things the same the deficit rises if government expenditures fall 
A)  budget surplus. Other things the same, the surplus rises if government expenditures rise. 
B)  budget surplus. Other things the same, the surplus rises if government expenditures fall. 
C)  budget deficit. Other things the same, the deficit rises if government expenditures rise. 
D)  budget deficit. Other things the same the deficit rises if government expenditures fall

Question 9

Less economically developed countries such as India and Pakistan usually have low tax burdens.

Accepted Answer

A) True 
 B)False

Question 10

Table 12-2
Consider the tax rates shown in the table below.
  
-Refer to Table 12-2.If Mateo has taxable income of $165,000,his average tax rate is

Accepted Answer

A)  26.6%. 
B)  26.9%. 
C)  27.3%. 
D)  28.5%. 
A)  26.6%. 
B)  26.9%. 
C)  27.3%. 
D)  28.5%.

Question 11

Table 12-3
  
-Refer to Table 12-3.Assume that the price of a weekend ski pass is $45 and that the price reflects the actual unit cost of providing a weekend of skiing.Suppose the government imposes a tax of $12 on skiing,which raises the price of a weekend ski pass to $57.What is the value of the surplus that accrues to all four skiers from their weekend trip?

Accepted Answer

A)  $41. 
B)  $95. 
C)  $144. 
D)  $185. 
A)  $41. 
B)  $95. 
C)  $144. 
D)  $185.

Question 12

A value-added tax or VAT is a tax on

Accepted Answer

A)  retail purchases only. 
B)  wholesale purchases only. 
C)  pollution. 
D)  all stages of production of a good. 
A)  retail purchases only. 
B)  wholesale purchases only. 
C)  pollution. 
D)  all stages of production of a good.

Question 13

Country A's tax system is more efficient than Country B's tax system if

Accepted Answer

A)  Country A collects less tax revenue than Country B, and the cost to taxpayers is the same in both countries. 
B)  Country A collects more tax revenue than Country B, even though the cost to taxpayers is greater in Country A than in Country B. 
C)  the same amount of revenue is raised in both countries, but the cost to taxpayers is smaller in Country A than in Country B. 
D)  the same amount of revenue is raised in both countries, but the taxes are collected in a shorter amount of time in Country A than in Country B. 
A)  Country A collects less tax revenue than Country B, and the cost to taxpayers is the same in both countries. 
B)  Country A collects more tax revenue than Country B, even though the cost to taxpayers is greater in Country A than in Country B. 
C)  the same amount of revenue is raised in both countries, but the cost to taxpayers is smaller in Country A than in Country B. 
D)  the same amount of revenue is raised in both countries, but the taxes are collected in a shorter amount of time in Country A than in Country B.

Question 14

Economics alone cannot determine the best way to balance the goals of efficiency and equity.

Accepted Answer

A) True 
 B)False

Question 15

The administrative burden of complying with tax laws is a cost to the government but not to taxpayers.

Accepted Answer

A) True 
 B)False

Question 16

In 2007,state and local government education spending was more than five times highway spending.

Accepted Answer

A) True 
 B)False

Question 17

Table 12-2
Consider the tax rates shown in the table below.
  
-Refer to Table 12-2.If Livi has taxable income of $78,000,her average tax rate is

Accepted Answer

A)  18.7%. 
B)  19.3%. 
C)  20.1%. 
D)  34.0%. 
A)  18.7%. 
B)  19.3%. 
C)  20.1%. 
D)  34.0%.

Question 18

Suppose a country imposes a lump-sum income tax of $5,000 on each individual in the country.What is the marginal income tax rate for an individual who earns $40,000 during the year?

Accepted Answer

A)  0% 
B)  10% 
C)  More than 10% 
D)  The marginal tax rate cannot be determined without knowing the entire tax schedule. 
A)  0% 
B)  10% 
C)  More than 10% 
D)  The marginal tax rate cannot be determined without knowing the entire tax schedule.

Question 19

Public schools,which educate most students through high school,are paid for primarily by

Accepted Answer

A)  state governments. 
B)  local governments. 
C)  the federal government. 
D)  taxpayers directly. 
A)  state governments. 
B)  local governments. 
C)  the federal government. 
D)  taxpayers directly.

Question 20

Suppose an excise tax is imposed on luxury boats and yachts.Economists argue that such a tax

Accepted Answer

A)  is sure to be vertically equitable, since buyers of luxury boats and yachts are wealthy. 
B)  entails no deadweight loss as long as buyers of boats and yachts can easily substitute one luxury good for another. 
C)  violates the benefits principle of taxation. 
D)  may burden workers in the luxury-boat-and-yacht industry more than it burdens the buyers of luxury boats and yachts. 
A)  is sure to be vertically equitable, since buyers of luxury boats and yachts are wealthy. 
B)  entails no deadweight loss as long as buyers of boats and yachts can easily substitute one luxury good for another. 
C)  violates the benefits principle of taxation. 
D)  may burden workers in the luxury-boat-and-yacht industry more than it burdens the buyers of luxury boats and yachts.

Exam 12: The Design of the Tax System.

Individual income taxes generate roughly 25% of the tax revenue for the federal government.

When the marginal tax rate exceeds the average tax rate,the tax is

Which of the following statements is not correct?

Table 12-2 Consider the tax rates shown in the table below. -Refer to Table 12-2.If Mateo has taxable income of $165,000,his marginal tax rate is

Nancy paid a tax of $0.50 on the last dollar she earned in 1999.Nancy's marginal tax rate in 1999 was

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?

The largest category of federal government spending is growing because

If a government sells debt to help meet its expenditures,then the government has a

Less economically developed countries such as India and Pakistan usually have low tax burdens.

Table 12-2 Consider the tax rates shown in the table below. -Refer to Table 12-2.If Mateo has taxable income of $165,000,his average tax rate is

A value-added tax or VAT is a tax on

Country A's tax system is more efficient than Country B's tax system if

Economics alone cannot determine the best way to balance the goals of efficiency and equity.

The administrative burden of complying with tax laws is a cost to the government but not to taxpayers.

In 2007,state and local government education spending was more than five times highway spending.

Table 12-2 Consider the tax rates shown in the table below. -Refer to Table 12-2.If Livi has taxable income of $78,000,her average tax rate is

Suppose a country imposes a lump-sum income tax of $5,000 on each individual in the country.What is the marginal income tax rate for an individual who earns $40,000 during the year?

Public schools,which educate most students through high school,are paid for primarily by

Suppose an excise tax is imposed on luxury boats and yachts.Economists argue that such a tax

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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