Question 1

A budget deficit occurs when government receipts exceed government spending.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is not a cost of taxes to taxpayers?

Accepted Answer

A) the tax payment itself 
B) deadweight losses 
C) administrative burdens 
D) goods and services provided by the government 
A) the tax payment itself 
B) deadweight losses 
C) administrative burdens 
D) goods and services provided by the government

Question 3

The U.S.federal government collects taxes in a number of ways.Rank the following sources of revenue from largest to the smallest.

Accepted Answer

A) corporate income taxes, social security taxes, personal income taxes, import taxes 
B) estate taxes, corporate income taxes, excise taxes, individual income taxes 
C) corporate income taxes, payroll taxes, individual income taxes, excise taxes 
D) individual income taxes, payroll taxes, corporate income taxes, excise taxes 
A) corporate income taxes, social security taxes, personal income taxes, import taxes 
B) estate taxes, corporate income taxes, excise taxes, individual income taxes 
C) corporate income taxes, payroll taxes, individual income taxes, excise taxes 
D) individual income taxes, payroll taxes, corporate income taxes, excise taxes

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

Lump-sum taxes are rarely used in the real world because

Accepted Answer

A) while lump-sum taxes have low administrative burdens, they have high deadweight losses. 
B) while lump-sum taxes have low deadweight losses, they have high administrative burdens. 
C) lump-sum taxes are often viewed as unfair because they take the same amount of money from both poor and rich. 
D) lump-sum taxes are very inefficient. 
A) while lump-sum taxes have low administrative burdens, they have high deadweight losses. 
B) while lump-sum taxes have low deadweight losses, they have high administrative burdens. 
C) lump-sum taxes are often viewed as unfair because they take the same amount of money from both poor and rich. 
D) lump-sum taxes are very inefficient.

Question 6

Lump-sum taxes are equitable but not efficient.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following tax systems could not be structured to satisfy conditions of vertical equity?

Accepted Answer

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

Question 8

Which tax system requires higher-income taxpayers to pay a higher percentage of their income in taxes?

Accepted Answer

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

Question 9

Part of the administrative burden of a tax is

Accepted Answer

A) the money people pay to the government in taxes. 
B) reducing the size of the market because of the tax. 
C) the hassle of filling out tax forms that is imposed on taxpayers who comply with the tax. 
D) the cost of administering programs that use tax revenue. 
A) the money people pay to the government in taxes. 
B) reducing the size of the market because of the tax. 
C) the hassle of filling out tax forms that is imposed on taxpayers who comply with the tax. 
D) the cost of administering programs that use tax revenue.

Question 10

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 2003?

Accepted Answer

A) $22,740.65 
B) $33,526.75 
C) $39,553 
D) $52,500 
A) $22,740.65 
B) $33,526.75 
C) $39,553 
D) $52,500

Question 11

The most common explanation for Social Security payments accounting for a larger share of federal government expenditures is

Accepted Answer

A) increases in life expectancy. 
B) people becoming eligible for Social Security benefits at an earlier age. 
C) increases in birth rates among teenagers and the poor. 
D) falling payroll tax receipts. 
A) increases in life expectancy. 
B) people becoming eligible for Social Security benefits at an earlier age. 
C) increases in birth rates among teenagers and the poor. 
D) falling payroll tax receipts.

Question 12

In designing a tax system,policymakers have two objectives that are often conflicting.They are

Accepted Answer

A) maximizing revenue and minimizing costs to taxpayers. 
B) efficiency and minimizing costs to taxpayers. 
C) efficiency and equity. 
D) maximizing revenue and reducing the national debt. 
A) maximizing revenue and minimizing costs to taxpayers. 
B) efficiency and minimizing costs to taxpayers. 
C) efficiency and equity. 
D) maximizing revenue and reducing the national debt.

Question 13

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 happened to his average 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 14

Today the typical American pays what percent of her income in taxes,including property taxes,personal income taxes,corporate income taxes,payroll taxes,and sales taxes?

Accepted Answer

A) 5 percent 
B) 18 percent 
C) 33 percent 
D) 50 percent 
A) 5 percent 
B) 18 percent 
C) 33 percent 
D) 50 percent

Question 15

Approximately what percent of the federal government's receipts come from individual income taxes?

Accepted Answer

A) 8 
B) 15 
C) 43 
D) 67 
A) 8 
B) 15 
C) 43 
D) 67

Question 16

Sue earns income of $80,000 per year.Her average tax rate is 50 percent.Sue paid $5,000 in taxes on the first $30,000 she earned.What was the marginal tax rate on the first $30,000 she earned,and what was the marginal tax rate on the remaining $50,000?

Accepted Answer

A) 6.25 percent and 50.00 percent, respectively 
B) 10.00 percent and 70.00 percent, respectively 
C) 16.67 percent and 60.00 percent, respectively 
D) 16.67 percent and 70.00 percent, respectively 
A) 6.25 percent and 50.00 percent, respectively 
B) 10.00 percent and 70.00 percent, respectively 
C) 16.67 percent and 60.00 percent, respectively 
D) 16.67 percent and 70.00 percent, respectively

Question 17

When the government levies a tax on a corporation,

Accepted Answer

A) all the burden of the tax ultimately falls on the corporation's owners. 
B) the corporation is more like a tax collector than a taxpayer. 
C) output must increase to compensate for reduced profits. 
D) less deadweight loss will occur since corporations are entities and not people who respond to incentives. 
A) all the burden of the tax ultimately falls on the corporation's owners. 
B) the corporation is more like a tax collector than a taxpayer. 
C) output must increase to compensate for reduced profits. 
D) less deadweight loss will occur since corporations are entities and not people who respond to incentives.

Question 18

Because the marginal tax rate rises as income rises,

Accepted Answer

A) higher income families, in general, pay a larger percentage of their income in taxes. 
B) lower income families, in general, pay a larger percentage of their income in taxes. 
C) a disproportionately large share of the tax burden falls upon the poor. 
D) higher income families pay the same percentage of their income in taxes as lower-income families. 
A) higher income families, in general, pay a larger percentage of their income in taxes. 
B) lower income families, in general, pay a larger percentage of their income in taxes. 
C) a disproportionately large share of the tax burden falls upon the poor. 
D) higher income families pay the same percentage of their income in taxes as lower-income families.

Question 19

Tax evasion is illegal,but tax avoidance is legal.

Accepted Answer

A) True 
 B)False

Question 20

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.How much tax revenue will be generated from sales to Jim and Joan?

Accepted Answer

A) zero 
B) $4 
C) $8 
D) $12 
A) zero 
B) $4 
C) $8 
D) $12

Exam 12: The Design of the Tax System

A budget deficit occurs when government receipts exceed government spending.

Which of the following is not a cost of taxes to taxpayers?

The U.S.federal government collects taxes in a number of ways.Rank the following sources of revenue from largest to the smallest.

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

Lump-sum taxes are rarely used in the real world because

Lump-sum taxes are equitable but not efficient.

Which of the following tax systems could not be structured to satisfy conditions of vertical equity?

Which tax system requires higher-income taxpayers to pay a higher percentage of their income in taxes?

Part of the administrative burden of a tax 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 is her total tax due in 2003?

The most common explanation for Social Security payments accounting for a larger share of federal government expenditures is

In designing a tax system,policymakers have two objectives that are often conflicting.They are

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 happened to his average tax rate between 2002 and 2003?

Today the typical American pays what percent of her income in taxes,including property taxes,personal income taxes,corporate income taxes,payroll taxes,and sales taxes?

Approximately what percent of the federal government's receipts come from individual income taxes?

Sue earns income of $80,000 per year.Her average tax rate is 50 percent.Sue paid $5,000 in taxes on the first $30,000 she earned.What was the marginal tax rate on the first $30,000 she earned,and what was the marginal tax rate on the remaining $50,000?

When the government levies a tax on a corporation,

Because the marginal tax rate rises as income rises,

Tax evasion is illegal,but tax avoidance is legal.

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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