Question 1

As a nation gets richer,the government typically takes

Accepted Answer

A) a constant share of income in taxes. 
B) a smaller share of income in taxes. 
C) a larger share of income in taxes. 
D) There is little evidence of a relationship between income and taxes for most countries. 
A) a constant share of income in taxes. 
B) a smaller share of income in taxes. 
C) a larger share of income in taxes. 
D) There is little evidence of a relationship between income and taxes for most countries.

Question 2

Which of the following statements is not correct?

Accepted Answer

A) A gasoline tax can be an example of a benefits tax. 
B) A progressive tax attempts to achieve vertical equity. 
C) A progressive tax can be an example of the ability-to-pay principle. 
D) A regressive tax attempts to achieve horizontal equity. 
A) A gasoline tax can be an example of a benefits tax. 
B) A progressive tax attempts to achieve vertical equity. 
C) A progressive tax can be an example of the ability-to-pay principle. 
D) A regressive tax attempts to achieve horizontal equity.

Question 3

"A $1,000 tax paid by a poor person may be a larger sacrifice than a $10,000 tax paid by a wealthy person" is an argument based on

Accepted Answer

A) the horizontal equity principle. 
B) the benefits principle. 
C) a regressive tax argument. 
D) the ability-to-pay principle. 
A) the horizontal equity principle. 
B) the benefits principle. 
C) a regressive tax argument. 
D) the ability-to-pay principle.

Question 4

In the 1980s,President Ronald Reagan argued that high tax rates distorted economic incentives to work and save.In the 1990s,President Bill Clinton argued that the rich were not paying their fair share of taxes.Which of the following statements best summarizes the economic theories behind the differing philosophies?

Accepted Answer

A) President Reagan was concerned about vertical equity, whereas President Clinton was concerned about horizontal equity. 
B) President Reagan was concerned about average tax rates, whereas President Clinton was concerned about horizontal equity. 
C) President Reagan was concerned about marginal tax rates, whereas President Clinton was concerned about vertical equity. 
D) None of the above is correct. 
A) President Reagan was concerned about vertical equity, whereas President Clinton was concerned about horizontal equity. 
B) President Reagan was concerned about average tax rates, whereas President Clinton was concerned about horizontal equity. 
C) President Reagan was concerned about marginal tax rates, whereas President Clinton was concerned about vertical equity. 
D) None of the above is correct.

Question 5

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.What is the value of the surplus that accrues to all four skiers from their weekend trip?

Accepted Answer

A) $265 
B) $113 
C) $140 
D) $105 
A) $265 
B) $113 
C) $140 
D) $105

Question 6

A budget surplus occurs when government receipts exceed government spending.

Accepted Answer

A) True 
 B)False

Question 7

Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000.What is the average tax rate when income is $50,000?

Accepted Answer

A) 20 percent 
B) 15 percent 
C) 12 percent 
D) 10 percent 
A) 20 percent 
B) 15 percent 
C) 12 percent 
D) 10 percent

Question 8

Table 12-6
  
-Refer to Table 12-6.What is the marginal tax rate for a person who makes $50,000?

Accepted Answer

A) 25% 
B) 28% 
C) 40% 
D) 60% 
A) 25% 
B) 28% 
C) 40% 
D) 60%

Question 9

If the government were to impose a tax that assigned everyone the same tax liability,it would be

Accepted Answer

A) a lump-sum tax. 
B) an equitable tax. 
C) supported by the poor. 
D) a progressive tax. 
A) a lump-sum tax. 
B) an equitable tax. 
C) supported by the poor. 
D) a progressive tax.

Question 10

State and local governments generate revenue from all of the following sources except

Accepted Answer

A) sales taxes. 
B) the federal government. 
C) corporate income taxes. 
D) customs duties. 
A) sales taxes. 
B) the federal government. 
C) corporate income taxes. 
D) customs duties.

Question 11

Table 12-4
  
-Refer to Table 12-4.Suppose that the government imposes a $2 tax on delights,causing the price to increase from $5.00 to $7.00.Total consumer surplus

Accepted Answer

A) falls by less than the tax revenue generated. 
B) falls by more than the tax revenue generated. 
C) falls by the same amount as the tax revenue generated. 
D) will not fall since Jennifer will no longer be in the market. 
A) falls by less than the tax revenue generated. 
B) falls by more than the tax revenue generated. 
C) falls by the same amount as the tax revenue generated. 
D) will not fall since Jennifer will no longer be in the market.

Question 12

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 13

If a tax takes a smaller fraction of income as income rises,it is

Accepted Answer

A) proportional. 
B) regressive. 
C) progressive. 
D) based on the ability-to-pay principle. 
A) proportional. 
B) regressive. 
C) progressive. 
D) based on the ability-to-pay principle.

Question 14

In many cases,tax loopholes are designed by Congress to

Accepted Answer

A) give special treatment to specific types of behavior. 
B) reduce the overall administrative burden of the tax system. 
C) raise revenues for special projects. 
D) All of the above are correct. 
A) give special treatment to specific types of behavior. 
B) reduce the overall administrative burden of the tax system. 
C) raise revenues for special projects. 
D) All of the above are correct.

Question 15

The U.S.federal government collects about one-half of the taxes in our economy.

Accepted Answer

A) True 
 B)False

Question 16

If we want to gauge the sacrifice made by a taxpayer,we should use the

Accepted Answer

A) average tax rate. 
B) marginal tax rate. 
C) lump-sum tax rate. 
D) sales tax rate. 
A) average tax rate. 
B) marginal tax rate. 
C) lump-sum tax rate. 
D) sales tax rate.

Question 17

Rank the following state and local government expenditure categories from largest to smallest.

Accepted Answer

A) education, public welfare, highways 
B) transfer payments to the poor, education, public safety 
C) police, road maintenance, education 
D) public health, public safety, public utilities 
A) education, public welfare, highways 
B) transfer payments to the poor, education, public safety 
C) police, road maintenance, education 
D) public health, public safety, public utilities

Question 18

Which of the following is true about the percent of total income the U.S.government takes as taxes?

Accepted Answer

A) In 1902 the government collected 7 percent of total income; in 2004, it collected 30 percent. 
B) In 1902 the government collected 30 percent of total income; in 2004, it collected 7 percent. 
C) In 1902 the government collected 7 percent of total income; in 2004, it collected 7 percent. 
D) In 1902 the government collected 30 percent of total income; in 2004, it collected 30 percent. 
A) In 1902 the government collected 7 percent of total income; in 2004, it collected 30 percent. 
B) In 1902 the government collected 30 percent of total income; in 2004, it collected 7 percent. 
C) In 1902 the government collected 7 percent of total income; in 2004, it collected 7 percent. 
D) In 1902 the government collected 30 percent of total income; in 2004, it collected 30 percent.

Question 19

Which of the following countries has the largest tax burden?

Accepted Answer

A) Mexico 
B) Russia 
C) United States 
D) France 
A) Mexico 
B) Russia 
C) United States 
D) France

Question 20

The most important revenue-generating taxes for the federal government are individual income taxes and payroll taxes for social insurance.

Accepted Answer

A) True 
 B)False

Exam 12: The Design of the Tax System

As a nation gets richer,the government typically takes

Which of the following statements is not correct?

"A $1,000 tax paid by a poor person may be a larger sacrifice than a $10,000 tax paid by a wealthy person" is an argument based on

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.What is the value of the surplus that accrues to all four skiers from their weekend trip?

A budget surplus occurs when government receipts exceed government spending.

Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000.What is the average tax rate when income is $50,000?

Table 12-6 -Refer to Table 12-6.What is the marginal tax rate for a person who makes $50,000?

If the government were to impose a tax that assigned everyone the same tax liability,it would be

State and local governments generate revenue from all of the following sources except

Table 12-4 -Refer to Table 12-4.Suppose that the government imposes a $2 tax on delights,causing the price to increase from $5.00 to $7.00.Total consumer surplus

Vertical equity and horizontal equity are associated with

If a tax takes a smaller fraction of income as income rises,it is

In many cases,tax loopholes are designed by Congress to

The U.S.federal government collects about one-half of the taxes in our economy.

If we want to gauge the sacrifice made by a taxpayer,we should use the

Rank the following state and local government expenditure categories from largest to smallest.

Which of the following is true about the percent of total income the U.S.government takes as taxes?

Which of the following countries has the largest tax burden?

The most important revenue-generating taxes for the federal government are individual income taxes and payroll taxes for social insurance.

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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