Question 1

State and local governments

Accepted Answer

A) use a mix of taxes and fees to generate revenue. 
B) are required by federal mandate to levy income taxes. 
C) are required to tax property at a standard rate set by the federal government. 
D) cannot impose state excise taxes on products that are taxed by the federal government. 
A) use a mix of taxes and fees to generate revenue. 
B) are required by federal mandate to levy income taxes. 
C) are required to tax property at a standard rate set by the federal government. 
D) cannot impose state excise taxes on products that are taxed by the federal government.

Question 2

Which of the following is a characteristic of a more efficient tax system?

Accepted Answer

A) The system minimizes deadweight loss. 
B) The system raises the same amount of revenue at a lower cost. 
C) The system minimizes administrative burdens. 
D) All of the above are correct. 
A) The system minimizes deadweight loss. 
B) The system raises the same amount of revenue at a lower cost. 
C) The system minimizes administrative burdens. 
D) All of the above are correct.

Question 3

Which of the following statements about state income taxes is correct?

Accepted Answer

A) Some states do not tax income at all. 
B) If states tax income, they must follow federal guidelines for designing the tax structure. 
C) States are not allowed to have a higher marginal tax rate than the federal marginal tax rate. 
D) All of the above are correct. 
A) Some states do not tax income at all. 
B) If states tax income, they must follow federal guidelines for designing the tax structure. 
C) States are not allowed to have a higher marginal tax rate than the federal marginal tax rate. 
D) All of the above are correct.

Question 4

Table 12-3
  
-Refer to Table 12-3.Assume that the price of a weekend ski pass is $38 and that the price reflects the actual unit cost of providing a weekend of skiing.Suppose the government imposes a tax of $15 on skiing,which raises the price of a weekend ski pass to $53.The deadweight loss associated with the tax is

Accepted Answer

A) $2. 
B) $37. 
C) $52. 
D) $97. 
A) $2. 
B) $37. 
C) $52. 
D) $97.

Question 5

One characteristic of an efficient tax system is that it minimizes the costs associated with revenue collection.

Accepted Answer

A) True 
 B)False

Question 6

Many people consider lump-sum taxes to be unfair to low-income taxpayers.

Accepted Answer

A) True 
 B)False

Question 7

Table 12-7
  
-Refer to Table 12-7.What is the marginal tax rate for a person who makes $60,000?

Accepted Answer

A) 20% 
B) 23% 
C) 40% 
D) 45% 
A) 20% 
B) 23% 
C) 40% 
D) 45%

Question 8

If Mary earns $80,000 in taxable income and pays $40,000 in taxes,her marginal tax rate is 50 percent.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements is correct?

Accepted Answer

A) National defense and Medicare are the two largest spending categories for the federal government. 
B) Welfare programs and highways are the two largest spending categories for state and local governments. 
C) Sales taxes and property taxes are the two most important revenue sources for state and local governments. 
D) Corporate income taxes are the largest source of revenue for the federal government. 
A) National defense and Medicare are the two largest spending categories for the federal government. 
B) Welfare programs and highways are the two largest spending categories for state and local governments. 
C) Sales taxes and property taxes are the two most important revenue sources for state and local governments. 
D) Corporate income taxes are the largest source of revenue for the federal government.

Question 10

Table 12-6
  
-Refer to Table 12-6.What is the average tax rate for a person who makes $130,000?

Accepted Answer

A) 30% 
B) 40% 
C) 50% 
D) 60% 
A) 30% 
B) 40% 
C) 50% 
D) 60%

Question 11

Table 12-2
United States Income Tax Rates for a Single Individual, 2002 and 2003.
  
-Refer to Table 12-2.Costa is a single person whose taxable income is $50,000 a year.What is his average tax rate in 2002?

Accepted Answer

A) 19.6% 
B) 20.5% 
C) 21% 
D) 28% 
A) 19.6% 
B) 20.5% 
C) 21% 
D) 28%

Question 12

If a poor family has three children in public school and a rich family has two children in private school,the benefits principle would suggest that

Accepted Answer

A) the poor family should pay more in taxes to pay for public education than the rich family. 
B) the rich family should pay more in taxes to pay for public education than the poor family. 
C) the benefits of private school exceed those of public school. 
D) public schools should be financed by property taxes. 
A) the poor family should pay more in taxes to pay for public education than the rich family. 
B) the rich family should pay more in taxes to pay for public education than the poor family. 
C) the benefits of private school exceed those of public school. 
D) public schools should be financed by property taxes.

Question 13

Part of the deadweight loss from taxing labor earnings is that people

Accepted Answer

A) will work more. 
B) will be reluctant to hire accountants to file their tax returns. 
C) with low tax liabilities will universally be worse off than under some other tax policy. 
D) will work less. 
A) will work more. 
B) will be reluctant to hire accountants to file their tax returns. 
C) with low tax liabilities will universally be worse off than under some other tax policy. 
D) will work less.

Question 14

Taxes create deadweight loss when they

Accepted Answer

A) distort behavior. 
B) cause the price of the product to increase. 
C) don't raise sufficient government revenue. 
D) cannot be computed easily. 
A) distort behavior. 
B) cause the price of the product to increase. 
C) don't raise sufficient government revenue. 
D) cannot be computed easily.

Question 15

Which type of tax is used to finance the Social Security program in the United States?

Accepted Answer

A) consumption tax 
B) income tax 
C) payroll tax 
D) property tax 
A) consumption tax 
B) income tax 
C) payroll tax 
D) property tax

Question 16

If transfer payments are included when evaluating tax burdens,then the average tax rate of the poorest quintile of taxpayers would be approximately

Accepted Answer

A) negative 30 percent. 
B) negative 10 percent. 
C) positive 1 percent. 
D) positive 8 percent. 
A) negative 30 percent. 
B) negative 10 percent. 
C) positive 1 percent. 
D) positive 8 percent.

Question 17

In 2004,total spending per person by the federal government amounted to

Accepted Answer

A) $4,750. 
B) $5,000. 
C) $6,400. 
D) $7,800. 
A) $4,750. 
B) $5,000. 
C) $6,400. 
D) $7,800.

Question 18

State and local governments

Accepted Answer

A) are funded entirely by their own tax base. 
B) receive the majority of their tax revenues from corporate income tax. 
C) are generally not responsible for collecting sales taxes. 
D) receive some of their funds from the federal government. 
A) are funded entirely by their own tax base. 
B) receive the majority of their tax revenues from corporate income tax. 
C) are generally not responsible for collecting sales taxes. 
D) receive some of their funds from the federal government.

Question 19

If a tax system is designed so that individuals with similar incomes pay similar taxes,the system achieves horizontal equity.

Accepted Answer

A) True 
 B)False

Question 20

Table 12-2
United States Income Tax Rates for a Single Individual, 2002 and 2003.
  
-Refer to Table 12-2.Surbhi is a single person whose taxable income is $150,000 a year.What is her total tax due in 2002?

Accepted Answer

A) $22,072 
B) $41,679.50 
C) $43,789.75 
D) $54,000 
A) $22,072 
B) $41,679.50 
C) $43,789.75 
D) $54,000

Exam 12: The Design of the Tax System

State and local governments

Which of the following is a characteristic of a more efficient tax system?

Which of the following statements about state income taxes is correct?

One characteristic of an efficient tax system is that it minimizes the costs associated with revenue collection.

Many people consider lump-sum taxes to be unfair to low-income taxpayers.

Table 12-7 -Refer to Table 12-7.What is the marginal tax rate for a person who makes $60,000?

If Mary earns $80,000 in taxable income and pays $40,000 in taxes,her marginal tax rate is 50 percent.

Which of the following statements is correct?

Table 12-6 -Refer to Table 12-6.What is the average tax rate for a person who makes $130,000?

Table 12-2 United States Income Tax Rates for a Single Individual, 2002 and 2003. -Refer to Table 12-2.Costa is a single person whose taxable income is $50,000 a year.What is his average tax rate in 2002?

If a poor family has three children in public school and a rich family has two children in private school,the benefits principle would suggest that

Part of the deadweight loss from taxing labor earnings is that people

Taxes create deadweight loss when they

Which type of tax is used to finance the Social Security program in the United States?

If transfer payments are included when evaluating tax burdens,then the average tax rate of the poorest quintile of taxpayers would be approximately

In 2004,total spending per person by the federal government amounted to

State and local governments

If a tax system is designed so that individuals with similar incomes pay similar taxes,the system achieves horizontal equity.

Table 12-2 United States Income Tax Rates for a Single Individual, 2002 and 2003. -Refer to Table 12-2.Surbhi is a single person whose taxable income is $150,000 a year.What is her total tax due in 2002?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Applications

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

Oligopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

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 Trade Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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