Question 1

What is a Children's Fitness Tax Credit considered to be

Accepted Answer

A) tax evasion 
B) a subsidy to the poor 
C) a deduction that benefits all members of society equally 
D) a tax loophole 
A) tax evasion 
B) a subsidy to the poor 
C) a deduction that benefits all members of society equally 
D) a tax loophole

Question 2

Scenario 12-1
Suppose Jeremy and Kelsey receive great satisfaction from their consumption of turkey.Kelsey would be willing to purchase only one slice and would pay up to $5 for it.Jeremy would be willing to pay $8 for his first slice, $6 for his second slice, and $2 for his third slice.The current market price is $2 per slice.
-Refer to Scenario 12-1.If a tax of $2 is levied on each slice of turkey,what is the deadweight loss of the tax

Accepted Answer

A) $0 
B) $3 
C) $6 
D) $8 
A) $0 
B) $3 
C) $6 
D) $8

Question 3

Approximately what percentage of the federal government's receipts come from personal income taxes

Accepted Answer

A) 10 
B) 25 
C) 35 
D) 48 
A) 10 
B) 25 
C) 35 
D) 48

Question 4

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

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 5

With a lump-sum tax,how is the average tax rate evaluated

Accepted Answer

A) The average tax rate is always equal to zero. 
B) The average tax rate is always less than the marginal tax rate. 
C) The average tax rate falls as income rises. 
D) The average tax rate rises as income rises. 
A) The average tax rate is always equal to zero. 
B) The average tax rate is always less than the marginal tax rate. 
C) The average tax rate falls as income rises. 
D) The average tax rate rises as income rises.

Question 6

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

Accepted Answer

A) Police services are more frequently used in poor neighbourhoods. 
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 places a greater dollar value on public goods than the rich. 
A) Police services are more frequently used in poor neighbourhoods. 
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 places a greater dollar value on public goods than the rich.

Question 7

The Canadian federal government spends its revenues in a number of ways.What is the rank of the following spending categories from largest to smallest

Accepted Answer

A) CHST, equalization, national defence, EI 
B) CHST, EI, Old Age Security, net interest 
C) Old Age Security, CHST, national defence, federal judicial system 
D) Old Age Security, EI, national defence, CHST 
A) CHST, equalization, national defence, EI 
B) CHST, EI, Old Age Security, net interest 
C) Old Age Security, CHST, national defence, federal judicial system 
D) Old Age Security, EI, national defence, CHST

Question 8

What does the "flypaper theory" of taxation suggest

Accepted Answer

A) The burden of a tax will seldom fall on its intended target and is, therefore, unfair. 
B) The benefits principle of taxation is not a viable option for policymakers. 
C) Tax loopholes are available to the wealthiest citizens. 
D) The burden of a tax will always fall on its intended target and is, therefore, equitable. 
A) The burden of a tax will seldom fall on its intended target and is, therefore, unfair. 
B) The benefits principle of taxation is not a viable option for policymakers. 
C) Tax loopholes are available to the wealthiest citizens. 
D) The burden of a tax will always fall on its intended target and is, therefore, equitable.

Question 9

What is one reason that deadweight losses are so difficult to avoid

Accepted Answer

A) Taxes distort the decisions that people make. 
B) Income taxes are not paid by everyone. 
C) Consumption taxes must be universally applied to all commodities. 
D) Administrative burden and deadweight loss reflect a clear tradeoff to policymakers. 
A) Taxes distort the decisions that people make. 
B) Income taxes are not paid by everyone. 
C) Consumption taxes must be universally applied to all commodities. 
D) Administrative burden and deadweight loss reflect a clear tradeoff to policymakers.

Question 10

What do social services primarily consist of

Accepted Answer

A) welfare programs for low-income people 
B) a government health plan for the poor 
C) the same services as Old Age Security 
D) pensions collected for the infirm 
A) welfare programs for low-income people 
B) a government health plan for the poor 
C) the same services as Old Age Security 
D) pensions collected for the infirm

Question 11

In 2013-2014,what was the total spending per person by the federal government

Accepted Answer

A) $4750 
B) $5445 
C) $6410 
D) $7644 
A) $4750 
B) $5445 
C) $6410 
D) $7644

Question 12

What is the most common explanation for payments to senior citizens accounting for a larger share of federal government expenditures

Accepted Answer

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

Question 13

What does a person's tax liability refer to

Accepted Answer

A) the percentage of income that a person must pay in taxes 
B) the amount of tax a person owes to the government 
C) the amount of tax the government is required to refund each person 
D) deductions that can be legally subtracted from a person's income each year 
A) the percentage of income that a person must pay in taxes 
B) the amount of tax a person owes to the government 
C) the amount of tax the government is required to refund each person 
D) deductions that can be legally subtracted from a person's income each year

Question 14

Tax evasion is legal,but tax avoidance is illegal.

Accepted Answer

A) True 
 B)False

Question 15

Why do taxes create deadweight losses

Accepted Answer

A) They reduce profits of firms. 
B) They distort incentives. 
C) They cause prices to rise. 
D) They create revenue for the government. 
A) They reduce profits of firms. 
B) They distort incentives. 
C) They cause prices to rise. 
D) They create revenue for the government.

Question 16

Why are lump-sum taxes rarely used in the real world

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 take the same amount of money from both poor and rich taxpayers. 
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 take the same amount of money from both poor and rich taxpayers. 
D) Lump-sum taxes are very inefficient.

Question 17

Table 12-3
  
-Refer to Table 12-3.If the government imposes a $2.00 tax on Delights,causing the price to increase from $5.00 to $7.00,why does a deadweight loss arise

Accepted Answer

A) Jennifer will pay more tax as a percentage of her value of Delights than Tsering. 
B) Tsering must pay the $2.00 tax from his consumer surplus. 
C) Tsering will have to pay a higher price for Delights. 
D) Jennifer will leave the market. 
A) Jennifer will pay more tax as a percentage of her value of Delights than Tsering. 
B) Tsering must pay the $2.00 tax from his consumer surplus. 
C) Tsering will have to pay a higher price for Delights. 
D) Jennifer will leave the market.

Question 18

"A $1000 tax paid by a poor person may be a larger sacrifice than a $10,000 tax paid by a wealthy person." What is this 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 19

What principle holds that people should pay taxes based on the benefits they receive from government services

Accepted Answer

A) the welfare principle 
B) the tax-benefit principle 
C) the government services principle 
D) the benefits principle 
A) the welfare principle 
B) the tax-benefit principle 
C) the government services principle 
D) the benefits principle

Question 20

Table 12-4  
-Refer to Table 12-4.What is the approximate average tax rate for a person who makes $60,000

Accepted Answer

A) 17% 
B) 27% 
C) 37% 
D) 47% 
A) 17% 
B) 27% 
C) 37% 
D) 47%

Exam 12: The Design of the Tax System

What is a Children's Fitness Tax Credit considered to be

Approximately what percentage of the federal government's receipts come from personal income taxes

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

With a lump-sum tax,how is the average tax rate evaluated

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

The Canadian federal government spends its revenues in a number of ways.What is the rank of the following spending categories from largest to smallest

What does the "flypaper theory" of taxation suggest

What is one reason that deadweight losses are so difficult to avoid

What do social services primarily consist of

In 2013-2014,what was the total spending per person by the federal government

What is the most common explanation for payments to senior citizens accounting for a larger share of federal government expenditures

What does a person's tax liability refer to

Tax evasion is legal,but tax avoidance is illegal.

Why do taxes create deadweight losses

Why are lump-sum taxes rarely used in the real world

Table 12-3 -Refer to Table 12-3.If the government imposes a $2.00 tax on Delights,causing the price to increase from $5.00 to $7.00,why does a deadweight loss arise

"A $1000 tax paid by a poor person may be a larger sacrifice than a $10,000 tax paid by a wealthy person." What is this argument based on

What principle holds that people should pay taxes based on the benefits they receive from government services

Table 12-4 -Refer to Table 12-4.What is the approximate average tax rate for a person who makes $60,000

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

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

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

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