Question 1

If a tax system is designed so that individuals with higher incomes pay more in taxes than individuals with lower incomes,the system achieves horizontal equity.

Accepted Answer

A) True 
 B)False

Question 2

The benefits principle of taxation can be used to argue that wealthy citizens should pay higher taxes than poorer ones on the basis that

Accepted Answer

A) police services are more frequently used in poor neighborhoods. 
B) the wealthy benefit more from services provided by government than the poor. 
C) the poor are more active in political processes. 
D) the poor receive welfare payments. 
A) police services are more frequently used in poor neighborhoods. 
B) the wealthy benefit more from services provided by government than the poor. 
C) the poor are more active in political processes. 
D) the poor receive welfare payments.

Question 3

Specific spending programs that are included under the general category of income security include

Accepted Answer

A) health programs. 
B) Medicare. 
C) Social Security. 
D) Food Stamps. 
A) health programs. 
B) Medicare. 
C) Social Security. 
D) Food Stamps.

Question 4

The marginal tax rate for a lump-sum tax

Accepted Answer

A) is always positive. 
B) is always negative. 
C) is zero. 
D) can take on any value but must be greater than the average tax rate. 
A) is always positive. 
B) is always negative. 
C) is zero. 
D) can take on any value but must be greater than the average tax rate.

Question 5

Tax incidence refers to

Accepted Answer

A) what product or service the tax is levied on. 
B) who bears the tax burden. 
C) what sector of the economy is most affected by the tax. 
D) the dollar value of the tax revenues. 
A) what product or service the tax is levied on. 
B) who bears the tax burden. 
C) what sector of the economy is most affected by the tax. 
D) the dollar value of the tax revenues.

Question 6

Table 12-2
United States Income Tax Rates for a Single Individual, 2002 and 2003.
  
-Refer to Table 12-2.What type of tax structure does the United States have in 2003 for single individuals?

Accepted Answer

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

Question 7

Kyle places a $10 value on a glass of red wine,and Keith places an $8 value on it.If there is no tax on glasses of red wine,the price of a glass of red wine reflects the cost of making it.The equilibrium price for a glass of red wine is $6.Suppose the government levies a tax of $3 on each glass of red wine,and the equilibrium price of a glass of red wine increases to $9.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 8

According to the ability-to-pay principle,it is fair for people to pay taxes based on their ability to handle the financial burden.

Accepted Answer

A) True 
 B)False

Question 9

Table 12-1
  
-Refer to Table 12-1.If Morgan has $29,050 in taxable income,her tax liability will be

Accepted Answer

A) $2,905. 
B) $3,285. 
C) $4,000. 
D) $4,357.50. 
A) $2,905. 
B) $3,285. 
C) $4,000. 
D) $4,357.50.

Question 10

In 2004,the average American paid approximately how much to the federal government in taxes?

Accepted Answer

A) $1,900 
B) $4,500 
C) $6,400 
D) $9,000 
A) $1,900 
B) $4,500 
C) $6,400 
D) $9,000

Question 11

A person's marginal tax rate equals

Accepted Answer

A) her tax obligation divided by her average tax rate. 
B) the increase in taxes she would pay as a percentage of the rise in her income. 
C) her tax obligation divided by her income. 
D) the increase in taxes if her average tax rate were to rise by 1%. 
A) her tax obligation divided by her average tax rate. 
B) the increase in taxes she would pay as a percentage of the rise in her income. 
C) her tax obligation divided by her income. 
D) the increase in taxes if her average tax rate were to rise by 1%.

Question 12

A payroll tax is a tax on

Accepted Answer

A) the wages that a firm pays its workers. 
B) earned and unearned income. 
C) specific goods like gasoline and cigarettes. 
D) corporate profits. 
A) the wages that a firm pays its workers. 
B) earned and unearned income. 
C) specific goods like gasoline and cigarettes. 
D) corporate profits.

Question 13

The average tax rate measures the

Accepted Answer

A) fraction of spending paid in taxes. 
B) fraction of income paid in taxes. 
C) incremental rate of tax on income. 
D) average deadweight loss from all taxes. 
A) fraction of spending paid in taxes. 
B) fraction of income paid in taxes. 
C) incremental rate of tax on income. 
D) average deadweight loss from all taxes.

Question 14

Table 12-9
  
-Refer to Table 12-9.A proportional tax is illustrated by tax

Accepted Answer

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

Question 15

Table 12-7
  
-Refer to Table 12-7.What is the average tax rate for a person who makes $120,000?

Accepted Answer

A) 25% 
B) 35% 
C) 45% 
D) 60% 
A) 25% 
B) 35% 
C) 45% 
D) 60%

Question 16

As government debt increases,

Accepted Answer

A) Congress will reduce spending by an equal proportion. 
B) the government must spend more revenue on interest payments. 
C) a trade-off with government deficits is inevitable. 
D) taxes must rise to cover the deficit. 
A) Congress will reduce spending by an equal proportion. 
B) the government must spend more revenue on interest payments. 
C) a trade-off with government deficits is inevitable. 
D) taxes must rise to cover the deficit.

Question 17

The government taxes corporate income on the basis of

Accepted Answer

A) profit. 
B) the amount the firm receives for the goods or services it sells. 
C) the number of employees. 
D) All of the above are correct. 
A) profit. 
B) the amount the firm receives for the goods or services it sells. 
C) the number of employees. 
D) All of the above are correct.

Question 18

Over the past 100 years,as the U.S.economy's income has grown,

Accepted Answer

A) tax rates have decreased, while tax revenues have increased. 
B) tax rates have increased, while tax revenues have decreased. 
C) U.S.tax rates have surpassed those of all other countries except Mexico and India. 
D) the government has grown even more. 
A) tax rates have decreased, while tax revenues have increased. 
B) tax rates have increased, while tax revenues have decreased. 
C) U.S.tax rates have surpassed those of all other countries except Mexico and India. 
D) the government has grown even more.

Question 19

John and Rachelle face a progressive tax structure that has the following marginal tax rates: 0 percent on the first $10,000,10 percent on the next $10,000,15 percent on the next $10,000,25 percent on the next $10,000 and 50 percent on all additional income.John earns $50,000 per year,and Rachelle earns $50,000 per year.If John and Rachelle get married,the "marriage tax" will be

Accepted Answer

A) $10,000 
B) $15,000 
C) $20,000 
D) $35,000 
A) $10,000 
B) $15,000 
C) $20,000 
D) $35,000

Question 20

Which of the following is not an administrative burden of our tax system?

Accepted Answer

A) government resources used to enforce tax laws 
B) keeping tax records throughout the year 
C) paying the taxes owed 
D) time spent in April filling out forms 
A) government resources used to enforce tax laws 
B) keeping tax records throughout the year 
C) paying the taxes owed 
D) time spent in April filling out forms

Exam 12: The Design of the Tax System

If a tax system is designed so that individuals with higher incomes pay more in taxes than individuals with lower incomes,the system achieves horizontal equity.

The benefits principle of taxation can be used to argue that wealthy citizens should pay higher taxes than poorer ones on the basis that

Specific spending programs that are included under the general category of income security include

The marginal tax rate for a lump-sum tax

Tax incidence refers to

Table 12-2 United States Income Tax Rates for a Single Individual, 2002 and 2003. -Refer to Table 12-2.What type of tax structure does the United States have in 2003 for single individuals?

According to the ability-to-pay principle,it is fair for people to pay taxes based on their ability to handle the financial burden.

Table 12-1 -Refer to Table 12-1.If Morgan has $29,050 in taxable income,her tax liability will be

In 2004,the average American paid approximately how much to the federal government in taxes?

A person's marginal tax rate equals

A payroll tax is a tax on

The average tax rate measures the

Table 12-9 -Refer to Table 12-9.A proportional tax is illustrated by tax

Table 12-7 -Refer to Table 12-7.What is the average tax rate for a person who makes $120,000?

As government debt increases,

The government taxes corporate income on the basis of

Over the past 100 years,as the U.S.economy's income has grown,

Which of the following is not an administrative burden of our tax system?

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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