Question 1

In order to determine tax incidence,one must

Accepted Answer

A)  consider issues of equity. 
B)  also determine the legal liability of the tax. 
C)  evaluate where the tax burden eventually falls. 
D)  use the "flypaper theory" of taxation. 
A)  consider issues of equity. 
B)  also determine the legal liability of the tax. 
C)  evaluate where the tax burden eventually falls. 
D)  use the "flypaper theory" of taxation.

Question 2

Many health economists believe that President Obama's 2010 healthcare reform bill and other measures proposed by policymakers to reduce the growth of healthcare costs will have only a limited impact because

Accepted Answer

A)  providing universal coverage is very expensive. 
B)  the main source of higher costs is medical advances which extend and improve lives. 
C)  lawsuits do not create a costly burden on the healthcare system. 
D)  encouraging competition does not usually result in lower costs. 
A)  providing universal coverage is very expensive. 
B)  the main source of higher costs is medical advances which extend and improve lives. 
C)  lawsuits do not create a costly burden on the healthcare system. 
D)  encouraging competition does not usually result in lower costs.

Question 3

A person's tax obligation divided by her income is called her

Accepted Answer

A)  marginal social tax rate. 
B)  marginal private tax rate. 
C)  marginal tax rate. 
D)  average tax rate. 
A)  marginal social tax rate. 
B)  marginal private tax rate. 
C)  marginal tax rate. 
D)  average tax rate.

Question 4

Under a progressive tax system,the marginal tax rate could be equal to the average tax rate only when a taxpayer

Accepted Answer

A)  has a very high income. 
B)  has a very low income. 
C)  is self-employed. 
D)  invests in a retirement plan. 
A)  has a very high income. 
B)  has a very low income. 
C)  is self-employed. 
D)  invests in a retirement plan.

Question 5

Which of the following statements is correct?

Accepted Answer

A)  Both tax avoidance and tax evasion are legal. 
B)  Both tax avoidance and tax evasion are illegal. 
C)  Tax avoidance is legal, whereas tax evasion is illegal. 
D)  Tax avoidance is illegal, whereas tax evasion is legal. 
A)  Both tax avoidance and tax evasion are legal. 
B)  Both tax avoidance and tax evasion are illegal. 
C)  Tax avoidance is legal, whereas tax evasion is illegal. 
D)  Tax avoidance is illegal, whereas tax evasion is legal.

Question 6

The top 1% of income earners

Accepted Answer

A)  makes 18.8 percent of all income and pays 28.3 percent of all taxes 
B)  makes 27.6 percent of all income and pays 18.1 percent of all taxes. 
C)  makes 55.1 percent of all income and pays 68.7 percent of all taxes. 
D)  makes 68.7 percent of all income and pays 55.1 percent of all taxes. 
A)  makes 18.8 percent of all income and pays 28.3 percent of all taxes 
B)  makes 27.6 percent of all income and pays 18.1 percent of all taxes. 
C)  makes 55.1 percent of all income and pays 68.7 percent of all taxes. 
D)  makes 68.7 percent of all income and pays 55.1 percent of all taxes.

Question 7

Taxes can create deadweight losses because they

Accepted Answer

A)  allow the government to fund private goods. 
B)  create administrative burdens as people comply with tax laws. 
C)  allow the government to fund public goods. 
D)  Both b and c are correct. 
A)  allow the government to fund private goods. 
B)  create administrative burdens as people comply with tax laws. 
C)  allow the government to fund public goods. 
D)  Both b and c are correct.

Question 8

Table 12-1
  
-Refer to Table 12-1.If Agatha has $80,000 in taxable income,her marginal tax rate is

Accepted Answer

A)  15%. 
B)  25%. 
C)  28%. 
D)  33%. 
A)  15%. 
B)  25%. 
C)  28%. 
D)  33%.

Question 9

As a share of total spending,state and local government expenditure on education in 2007 was

Accepted Answer

A)  6 percent. 
B)  18 percent. 
C)  34 percent. 
D)  42 percent. 
A)  6 percent. 
B)  18 percent. 
C)  34 percent. 
D)  42 percent.

Question 10

Special tax treatment given to specific types of behavior are called

Accepted Answer

A)  tax avoidance. 
B)  tax evasion. 
C)  tax loopholes. 
D)  tax burden. 
A)  tax avoidance. 
B)  tax evasion. 
C)  tax loopholes. 
D)  tax burden.

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.How much tax revenue is collected from these four skiers?

Accepted Answer

A)  $0. 
B)  $12. 
C)  $36. 
D)  $48. 
A)  $0. 
B)  $12. 
C)  $36. 
D)  $48.

Question 12

Vertical equity is not consistent with a regressive tax structure.

Accepted Answer

A) True 
 B)False

Question 13

The notion that similar taxpayers should pay similar amounts of taxes is known as

Accepted Answer

A)  vertical equity. 
B)  the benefits principle. 
C)  horizontal equity. 
D)  taxpayer efficiency. 
A)  vertical equity. 
B)  the benefits principle. 
C)  horizontal equity. 
D)  taxpayer efficiency.

Question 14

Deadweight losses occur in markets in which

Accepted Answer

A)  firms decide to downsize. 
B)  the government imposes a tax. 
C)  profits fall because of low consumer demand. 
D)  equilibrium prices fall. 
A)  firms decide to downsize. 
B)  the government imposes a tax. 
C)  profits fall because of low consumer demand. 
D)  equilibrium prices fall.

Question 15

The largest category of federal spending is national defense.

Accepted Answer

A) True 
 B)False

Question 16

A lump-sum tax minimizes deadweight loss.

Accepted Answer

A) True 
 B)False

Question 17

Table 12-16
The table below provides information on the 4 households that make up a small economy and how much they would pay in taxes under 3 types of taxes.
  
-Refer to Table 12-16.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 18

In 1950 there were approximately 7 working age people for every elderly person; however,in 2050 there will be

Accepted Answer

A)  only 2.5 working people for every elderly person. 
B)  only 5 working age people for every elderly person. 
C)  10 working age people for every elderly person. 
D)  14 working age people for every elderly person. 
A)  only 2.5 working people for every elderly person. 
B)  only 5 working age people for every elderly person. 
C)  10 working age people for every elderly person. 
D)  14 working age people for every elderly person.

Question 19

Because taxes distort incentives,they typically result in

Accepted Answer

A)  deadweight losses. 
B)  reductions in consumer surplus. 
C)  reductions in producer surplus. 
D)  All of the above are correct. 
A)  deadweight losses. 
B)  reductions in consumer surplus. 
C)  reductions in producer surplus. 
D)  All of the above are correct.

Question 20

A country is using a proportional tax when

Accepted Answer

A)  its marginal tax rate equals its average tax rate. 
B)  its marginal tax rate is less than its average tax rate. 
C)  its marginal tax rate is greater than its average tax rate. 
D)  it uses a lump-sum tax. 
A)  its marginal tax rate equals its average tax rate. 
B)  its marginal tax rate is less than its average tax rate. 
C)  its marginal tax rate is greater than its average tax rate. 
D)  it uses a lump-sum tax.

Exam 12: The Design of the Tax System.

In order to determine tax incidence,one must

Many health economists believe that President Obama's 2010 healthcare reform bill and other measures proposed by policymakers to reduce the growth of healthcare costs will have only a limited impact because

A person's tax obligation divided by her income is called her

Under a progressive tax system,the marginal tax rate could be equal to the average tax rate only when a taxpayer

Which of the following statements is correct?

The top 1% of income earners

Taxes can create deadweight losses because they

Table 12-1 -Refer to Table 12-1.If Agatha has $80,000 in taxable income,her marginal tax rate is

As a share of total spending,state and local government expenditure on education in 2007 was

Special tax treatment given to specific types of behavior are called

Vertical equity is not consistent with a regressive tax structure.

The notion that similar taxpayers should pay similar amounts of taxes is known as

Deadweight losses occur in markets in which

The largest category of federal spending is national defense.

A lump-sum tax minimizes deadweight loss.

Table 12-16 The table below provides information on the 4 households that make up a small economy and how much they would pay in taxes under 3 types of taxes. -Refer to Table 12-16.In this economy Tax B exhibits

In 1950 there were approximately 7 working age people for every elderly person; however,in 2050 there will be

Because taxes distort incentives,they typically result in

A country is using a proportional tax when

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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