Question 1

A tax on the wages that a firm pays its workers is called

Accepted Answer

A)  an income tax. 
B)  an excise tax. 
C)  a consumption tax. 
D)  a payroll tax. 
A)  an income tax. 
B)  an excise tax. 
C)  a consumption tax. 
D)  a payroll tax.

Question 2

Which of the following is not a way that a corporate tax on the income of U.S.car companies will affect markets?

Accepted Answer

A)  The price of cars will rise. 
B)  The wages of auto workers will fall. 
C)  Owners of car companies (stockholders) will receive less profit. 
D)  Less deadweight loss will occur since corporations are entities and not people who respond to incentives. 
A)  The price of cars will rise. 
B)  The wages of auto workers will fall. 
C)  Owners of car companies (stockholders) will receive less profit. 
D)  Less deadweight loss will occur since corporations are entities and not people who respond to incentives.

Question 3

In the absence of taxes,Ashley would prefer to purchase a large sport utility vehicle (SUV).The government has recently decided to place a $10,000 nuisance tax on SUVs.If Ashley decides to purchase a small economy car as a result of the tax,which of the following statements is correct?

Accepted Answer

A)  Other people who choose to purchase SUVs will incur the cost of the deadweight loss of the tax. 
B)  There are no deadweight losses as long as some people still choose to purchase SUVs. 
C)  In order to determine the magnitude of the deadweight loss, we must add the revenues from the tax to the loss in Ashley's consumer surplus. 
D)  Ashley is worse off, and her loss of welfare is part of the deadweight loss of the tax. 
A)  Other people who choose to purchase SUVs will incur the cost of the deadweight loss of the tax. 
B)  There are no deadweight losses as long as some people still choose to purchase SUVs. 
C)  In order to determine the magnitude of the deadweight loss, we must add the revenues from the tax to the loss in Ashley's consumer surplus. 
D)  Ashley is worse off, and her loss of welfare is part of the deadweight loss of the tax.

Question 4

Vertical equity and horizontal equity are associated with

Accepted Answer

A)  the benefits principle of taxation. 
B)  the ability-to-pay principle of taxation. 
C)  taxes that have no deadweight losses. 
D)  falling marginal tax rates. 
A)  the benefits principle of taxation. 
B)  the ability-to-pay principle of taxation. 
C)  taxes that have no deadweight losses. 
D)  falling marginal tax rates.

Question 5

Table 12-12
United States Income Tax Rates for a Single Individual, 2009 and 2010.
  
-Refer to Table 12-12.Mia is a single person whose taxable income is $100,000 a year.What is her average tax rate in 2010?

Accepted Answer

A)  24.1% 
B)  26.4% 
C)  27.8% 
D)  30.9% 
A)  24.1% 
B)  26.4% 
C)  27.8% 
D)  30.9%

Question 6

In 2009,social insurance taxes represented approximately what percentage of total receipts for the federal government?

Accepted Answer

A)  12% 
B)  22% 
C)  32% 
D)  42% 
A)  12% 
B)  22% 
C)  32% 
D)  42%

Question 7

Scenario 12-3
Suppose that Bob places a value of $10 on a movie ticket and that Lisa places a value of $7 on a movie ticket. In addition, suppose the price of a movie ticket is $5.
-Refer to Scenario 12-3.Suppose the government levies a tax of $3 on a movie ticket and that,as a result,the price of a movie ticket increases to $8.What is the deadweight loss from the tax?

Accepted Answer

A)  $0 
B)  $1 
C)  $2 
D)  $3 
A)  $0 
B)  $1 
C)  $2 
D)  $3

Question 8

Incentives to work and save are reduced when

Accepted Answer

A)  income taxes are higher. 
B)  consumption taxes replace income taxes. 
C)  corrective taxes are implemented. 
D)  All of the above are correct. 
A)  income taxes are higher. 
B)  consumption taxes replace income taxes. 
C)  corrective taxes are implemented. 
D)  All of the above are correct.

Question 9

Deadweight losses arise because a tax causes some individuals to change their behavior.

Accepted Answer

A) True 
 B)False

Question 10

Resources devoted to complying with the tax laws are a type of deadweight loss.

Accepted Answer

A) True 
 B)False

Question 11

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 $1 on each bottle of wine,and the equilibrium price of a bottle of wine increases to $16.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 deadweight 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 deadweight 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 12

Vertical equity in taxation refers to the idea that people

Accepted Answer

A)  in unequal conditions should be treated differently. 
B)  in equal conditions should pay equal taxes. 
C)  should pay taxes based on the benefits they receive from the government. 
D)  should pay a proportional tax rather than a progressive tax. 
A)  in unequal conditions should be treated differently. 
B)  in equal conditions should pay equal taxes. 
C)  should pay taxes based on the benefits they receive from the government. 
D)  should pay a proportional tax rather than a progressive tax.

Question 13

Which of the following tax systems is the most fair?

Accepted Answer

A)  proportional taxes 
B)  regressive taxes 
C)  progressive taxes 
D)  There is no objective way to assess fairness among the three systems. 
A)  proportional taxes 
B)  regressive taxes 
C)  progressive taxes 
D)  There is no objective way to assess fairness among the three systems.

Question 14

Table 12-15
  
-Refer to Table 12-15.The tax system is

Accepted Answer

A)  proportional. 
B)  regressive. 
C)  progressive. 
D)  lump sum. 
A)  proportional. 
B)  regressive. 
C)  progressive. 
D)  lump sum.

Question 15

In 2009,the federal government spent 5 percent of the budget on net interest.Which of the following statements regarding net interest is correct?

Accepted Answer

A)  If the government pays down its debt, the amount of the budget needed for net interest decreases. 
B)  If the government accrues more debt, the amount of the budget needed for net interest increases. 
C)  In 2009, the federal government spent 187 billion dollars to cover interest payments on its loans. 
D)  All of the above are correct. 
A)  If the government pays down its debt, the amount of the budget needed for net interest decreases. 
B)  If the government accrues more debt, the amount of the budget needed for net interest increases. 
C)  In 2009, the federal government spent 187 billion dollars to cover interest payments on its loans. 
D)  All of the above are correct.

Question 16

Which of the following statements is correct?

Accepted Answer

A)  Vertical equity is the idea that taxpayers with similar abilities to pay taxes should pay the same amount. 
B)  Horizontal equity is the idea that taxes should be levied on a person according to how well that person can shoulder the burden. 
C)  A regressive tax would mean that high-income tax payers pay a larger fraction of their income in taxes than would low-income taxpayers. 
D)  A proportional tax would mean that high-income and low-income taxpayers pay the same fraction of income in taxes. 
A)  Vertical equity is the idea that taxpayers with similar abilities to pay taxes should pay the same amount. 
B)  Horizontal equity is the idea that taxes should be levied on a person according to how well that person can shoulder the burden. 
C)  A regressive tax would mean that high-income tax payers pay a larger fraction of their income in taxes than would low-income taxpayers. 
D)  A proportional tax would mean that high-income and low-income taxpayers pay the same fraction of income in taxes.

Question 17

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 18

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 marginal tax rate is

Accepted Answer

A)  19.3%. 
B)  24.0%. 
C)  26.8%. 
D)  34.0%. 
A)  19.3%. 
B)  24.0%. 
C)  26.8%. 
D)  34.0%.

Question 19

Table 12-9
The table below shows the marginal tax rates for an unmarried taxpayer for various levels of taxable income.
  
-Refer to Table 12-9.For this tax schedule,what is the marginal tax rate for an individual with $212,000 in taxable income?

Accepted Answer

A)  0% 
B)  1% 
C)  2% 
D)  45% 
A)  0% 
B)  1% 
C)  2% 
D)  45%

Question 20

Table 12-14
  
-Refer to Table 12-14.A progressive tax is illustrated by tax

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
A)  A. 
B)  B. 
C)  C. 
D)  D.

A tax on the wages that a firm pays its workers is called

Which of the following is not a way that a corporate tax on the income of U.S.car companies will affect markets?

In the absence of taxes,Ashley would prefer to purchase a large sport utility vehicle (SUV).The government has recently decided to place a $10,000 nuisance tax on SUVs.If Ashley decides to purchase a small economy car as a result of the tax,which of the following statements is correct?

Vertical equity and horizontal equity are associated with

Table 12-12 United States Income Tax Rates for a Single Individual, 2009 and 2010. -Refer to Table 12-12.Mia is a single person whose taxable income is $100,000 a year.What is her average tax rate in 2010?

In 2009,social insurance taxes represented approximately what percentage of total receipts for the federal government?

Incentives to work and save are reduced when

Deadweight losses arise because a tax causes some individuals to change their behavior.

Resources devoted to complying with the tax laws are a type of deadweight loss.

Vertical equity in taxation refers to the idea that people

Which of the following tax systems is the most fair?

Table 12-15 -Refer to Table 12-15.The tax system is

In 2009,the federal government spent 5 percent of the budget on net interest.Which of the following statements regarding net interest is correct?

Which of the following statements is correct?

A consumption tax is a tax on

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 marginal tax rate is

Table 12-9 The table below shows the marginal tax rates for an unmarried taxpayer for various levels of taxable income. -Refer to Table 12-9.For this tax schedule,what is the marginal tax rate for an individual with $212,000 in taxable income?

Table 12-14 -Refer to Table 12-14.A progressive tax is illustrated by 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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Exam 12: The Design of the Tax System.

A tax on the wages that a firm pays its workers is called

Which of the following is not a way that a corporate tax on the income of U.S.car companies will affect markets?

In the absence of taxes,Ashley would prefer to purchase a large sport utility vehicle (SUV).The government has recently decided to place a $10,000 nuisance tax on SUVs.If Ashley decides to purchase a small economy car as a result of the tax,which of the following statements is correct?

Vertical equity and horizontal equity are associated with

Table 12-12 United States Income Tax Rates for a Single Individual, 2009 and 2010. -Refer to Table 12-12.Mia is a single person whose taxable income is $100,000 a year.What is her average tax rate in 2010?

In 2009,social insurance taxes represented approximately what percentage of total receipts for the federal government?

Incentives to work and save are reduced when

Deadweight losses arise because a tax causes some individuals to change their behavior.

Resources devoted to complying with the tax laws are a type of deadweight loss.

Vertical equity in taxation refers to the idea that people

Which of the following tax systems is the most fair?

Table 12-15 -Refer to Table 12-15.The tax system is

In 2009,the federal government spent 5 percent of the budget on net interest.Which of the following statements regarding net interest is correct?

Which of the following statements is correct?

A consumption tax is a tax on

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 marginal tax rate is

Table 12-9 The table below shows the marginal tax rates for an unmarried taxpayer for various levels of taxable income. -Refer to Table 12-9.For this tax schedule,what is the marginal tax rate for an individual with $212,000 in taxable income?

Table 12-14 -Refer to Table 12-14.A progressive tax is illustrated by 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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