Question 1

According to the ability-to-pay principle,it is fair for people to pay taxes based on the amount of government services that they receive.

Accepted Answer

A) True 
 B)False

Question 2

One tax system is less efficient than another if it

Accepted Answer

A) places a lower tax burden on lower-income families than on higher-income families. 
B) places a higher tax burden on lower-income families than on higher-income families. 
C) raises the same amount of revenue at a higher cost to taxpayers. 
D) raises less revenue at a lower cost to taxpayers. 
A) places a lower tax burden on lower-income families than on higher-income families. 
B) places a higher tax burden on lower-income families than on higher-income families. 
C) raises the same amount of revenue at a higher cost to taxpayers. 
D) raises less revenue at a lower cost to taxpayers.

Question 3

Marcus faces a progressive federal income 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.In addition,he must pay 5 percent of his income in state income tax and 15.3 percent of his labor income in federal payroll taxes.Marcus earns $60,000 per year in salary and another $10,000 per year in non-labor income.What is his average tax rate?

Accepted Answer

A) 17.19 percent 
B) 46.69 percent 
C) 48.87 percent 
D) 56.01 percent 
A) 17.19 percent 
B) 46.69 percent 
C) 48.87 percent 
D) 56.01 percent

Question 4

Medicare has been the focus of many proposed reforms over the last several years because

Accepted Answer

A) health care costs have risen more rapidly than the cost of other goods and services produced in the economy. 
B) nationalized health care systems are more efficient than private health care systems. 
C) cures for many major diseases are likely to be found in the next few years. 
D) government health care research has found that limiting access to doctors will increase the general health of the population. 
A) health care costs have risen more rapidly than the cost of other goods and services produced in the economy. 
B) nationalized health care systems are more efficient than private health care systems. 
C) cures for many major diseases are likely to be found in the next few years. 
D) government health care research has found that limiting access to doctors will increase the general health of the population.

Question 5

High marginal income tax rates

Accepted Answer

A) distort incentives to work. 
B) are used to encourage saving behavior. 
C) will invariably lead to lower average tax rates. 
D) are not associated with deadweight losses. 
A) distort incentives to work. 
B) are used to encourage saving behavior. 
C) will invariably lead to lower average tax rates. 
D) are not associated with deadweight losses.

Question 6

Tax systems that impose record keeping requirements on taxpayers are said to have

Accepted Answer

A) an auditing burden. 
B) a lower incidence of compliance. 
C) an administrative burden. 
D) a certification requirement. 
A) an auditing burden. 
B) a lower incidence of compliance. 
C) an administrative burden. 
D) a certification requirement.

Question 7

The public welfare spending category for state and local governments includes

Accepted Answer

A) many programs that are initiated by private foundations. 
B) contributions in support of public universities. 
C) some federal programs that are administered by state and local governments. 
D) All of the above are correct. 
A) many programs that are initiated by private foundations. 
B) contributions in support of public universities. 
C) some federal programs that are administered by state and local governments. 
D) All of the above are correct.

Question 8

Suppose that the government taxes income in the following fashion: 20 percent of the first $50,000,40 percent of the next $50,000,and 60 percent of all income over $100,000.John earns $200,000,and Theresa earns $600,000.Which of the following statements is correct?

Accepted Answer

A) John's marginal tax rate is higher than Theresa's marginal tax rate. 
B) John's average tax rate is higher than his marginal tax rate. 
C) Theresa's average tax rate is higher than her marginal tax rate. 
D) Theresa's average tax rate is higher than John's average tax rate. 
A) John's marginal tax rate is higher than Theresa's marginal tax rate. 
B) John's average tax rate is higher than his marginal tax rate. 
C) Theresa's average tax rate is higher than her marginal tax rate. 
D) Theresa's average tax rate is higher than John's average tax rate.

Question 9

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 10

The theory that the wealthy should contribute more to police protection than the poor because they have more to protect is based on

Accepted Answer

A) the ability-to-pay principle. 
B) a consumption tax plan. 
C) the benefits principle. 
D) property tax assessments. 
A) the ability-to-pay principle. 
B) a consumption tax plan. 
C) the benefits principle. 
D) property tax assessments.

Question 11

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

Accepted Answer

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

Question 12

The most important revenue-generating taxes for state and local governments are income taxes and property taxes.

Accepted Answer

A) True 
 B)False

Question 13

Table 12-5
  
-Refer to Table 12-5.What is the marginal tax rate for a person who makes $35,000?

Accepted Answer

A) 20% 
B) 30% 
C) 40% 
D) 50% 
A) 20% 
B) 30% 
C) 40% 
D) 50%

Question 14

If the government imposes a tax of $3,000 on everyone,the tax would be

Accepted Answer

A) an income tax. 
B) a consumption tax. 
C) a lump-sum tax. 
D) a marginal tax. 
A) an income tax. 
B) a consumption tax. 
C) a lump-sum tax. 
D) a marginal tax.

Question 15

The amount of income tax owed by a family is

Accepted Answer

A) not simply proportional to its total income. 
B) unaffected by deductions. 
C) total income minus tax credits. 
D) a constant fraction of income. 
A) not simply proportional to its total income. 
B) unaffected by deductions. 
C) total income minus tax credits. 
D) a constant fraction of income.

Question 16

Scenario 12-1
Suppose Jim and Joan receive great satisfaction from their consumption of cheesecake. Joan would be willing to purchase only one slice and would pay up to $6 for it. Jim would be willing to pay $9 for his first slice, $7 for his second slice, and $3 for his third slice. The current market price is $3 per slice.
-Refer to Scenario 12-1.Assume that the government places a $4 tax on each slice of cheesecake and that the new equilibrium price is $7.What is the deadweight loss of the tax?

Accepted Answer

A) $3 
B) $6 
C) $8 
D) $9 
A) $3 
B) $6 
C) $8 
D) $9

Question 17

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 happened to her marginal tax rate between 2002 and 2003?

Accepted Answer

A) It increased. 
B) It decreased. 
C) It did not change. 
D) We do not have enough information to answer this question. 
A) It increased. 
B) It decreased. 
C) It did not change. 
D) We do not have enough information to answer this question.

Question 18

If your income is $40,000 and your income tax liability is $5,000,your marginal tax rate is

Accepted Answer

A) 8 percent. 
B) 12.5 percent. 
C) 20 percent. 
D) unknown.We do not have enough information to answer this question. 
A) 8 percent. 
B) 12.5 percent. 
C) 20 percent. 
D) unknown.We do not have enough information to answer this question.

Question 19

Table 12-8
  
-Refer to Table 12-8.If the government imposes a $3,000 lump-sum tax,the marginal tax rate for Charles would be

Accepted Answer

A) 0 percent. 
B) 5 percent. 
C) 6.7 percent. 
D) 10 percent. 
A) 0 percent. 
B) 5 percent. 
C) 6.7 percent. 
D) 10 percent.

Question 20

An efficient tax system is one that imposes small

Accepted Answer

A) deadweight losses and administrative burdens. 
B) marginal rates and deadweight losses. 
C) administrative burdens and transfers of money. 
D) marginal rates and transfers of money. 
A) deadweight losses and administrative burdens. 
B) marginal rates and deadweight losses. 
C) administrative burdens and transfers of money. 
D) marginal rates and transfers of money.

Exam 12: The Design of the Tax System

According to the ability-to-pay principle,it is fair for people to pay taxes based on the amount of government services that they receive.

One tax system is less efficient than another if it

Medicare has been the focus of many proposed reforms over the last several years because

High marginal income tax rates

Tax systems that impose record keeping requirements on taxpayers are said to have

The public welfare spending category for state and local governments includes

Suppose that the government taxes income in the following fashion: 20 percent of the first $50,000,40 percent of the next $50,000,and 60 percent of all income over $100,000.John earns $200,000,and Theresa earns $600,000.Which of the following statements is correct?

Taxes can create deadweight losses because they

The theory that the wealthy should contribute more to police protection than the poor because they have more to protect is based on

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

The most important revenue-generating taxes for state and local governments are income taxes and property taxes.

Table 12-5 -Refer to Table 12-5.What is the marginal tax rate for a person who makes $35,000?

If the government imposes a tax of $3,000 on everyone,the tax would be

The amount of income tax owed by a family is

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 happened to her marginal tax rate between 2002 and 2003?

If your income is $40,000 and your income tax liability is $5,000,your marginal tax rate is

Table 12-8 -Refer to Table 12-8.If the government imposes a $3,000 lump-sum tax,the marginal tax rate for Charles would be

An efficient tax system is one that imposes small

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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