Question 1

When the marginal tax rate exceeds the average tax rate, the tax is:

Accepted Answer

A)  proportional 
B)  regressive 
C)  non-egalitarian 
D)  progressive 
A)  proportional 
B)  regressive 
C)  non-egalitarian 
D)  progressive

Question 2

If we are trying to gauge how much the income tax system distorts incentives, then:

Accepted Answer

A)  the average tax rate is the most meaningful measure 
B)  the distortion is entirely captured in the administrative burden of the tax 
C)  total tax revenue collected is the most meaningful measure 
D)  the marginal tax rate is the most meaningful measure 
A)  the average tax rate is the most meaningful measure 
B)  the distortion is entirely captured in the administrative burden of the tax 
C)  total tax revenue collected is the most meaningful measure 
D)  the marginal tax rate is the most meaningful measure

Question 3

Governments tax company income primarily on the basis of:

Accepted Answer

A)  profit 
B)  its total revenue 
C)  pollution levels 
D)  all of the above 
A)  profit 
B)  its total revenue 
C)  pollution levels 
D)  all of the above

Question 4

When the marginal tax rate exceeds the average tax rate, the tax is progressive.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements about the company income tax is false?

Accepted Answer

A)  a portion of the company income tax is paid by customers and workers of corporations 
B)  if the true incidence of the company income tax were widely known, the tax would be less popular among voters 
C)  the company income tax is the best example of the flypaper theory of tax incidence 
D)  all of the above are false 
A)  a portion of the company income tax is paid by customers and workers of corporations 
B)  if the true incidence of the company income tax were widely known, the tax would be less popular among voters 
C)  the company income tax is the best example of the flypaper theory of tax incidence 
D)  all of the above are false

Question 6

Jim and Celia receive great satisfaction from their consumption of micro-brewed beer. Celia would be willing to purchase only one 12-litre bottle and would pay up to $6 for it. Jim would be willing to pay $9 for his first 12-litre bottle, $7 for his second bottle, and $3 for his third bottle. The current market price is $3 per bottle.
-According to the information provided, if a tax of $4 is levied on each bottle of micro-brewed beer, what is the total deadweight loss of the tax?

Accepted Answer

A)  $13 
B)  $9 
C)  $6 
D)  $3 
A)  $13 
B)  $9 
C)  $6 
D)  $3

Question 7

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 8

A lump-sum tax results in equality between average and marginal tax rates.

Accepted Answer

A) True 
 B)False

Question 9

Outline the advantages and disadvantages of a lump-sum tax system.

Accepted Answer

The advantage of lump-sum taxes is that

Question 10

Jim and Celia receive great satisfaction from their consumption of micro-brewed beer. Celia would be willing to purchase only one 12-litre bottle and would pay up to $6 for it. Jim would be willing to pay $9 for his first 12-litre bottle, $7 for his second bottle, and $3 for his third bottle. The current market price is $3 per bottle.
-According to the information provided, if a tax of $2 is levied on each bottle of micro-brewed beer, what is the deadweight loss of the tax?

Accepted Answer

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

Question 11

A tax on all forms of income will:

Accepted Answer

A)  lower the effective rate of interest on savings 
B)  increase the potential income from saving 
C)  increase the amount of income received in the economy 
D)  enhance the incentives to save 
A)  lower the effective rate of interest on savings 
B)  increase the potential income from saving 
C)  increase the amount of income received in the economy 
D)  enhance the incentives to save

Question 12

Ambiguities or omission in the tax laws generate tax loopholes.

Accepted Answer

A) True 
 B)False

Question 13

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 neighbourhoods 
B)  the wealthy benefit more from services provided by government than the poor 
C)  the poor are more active in political processes 
D)  there is more crime in rich neighbourhoods than poor neighbourhoods 
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)  there is more crime in rich neighbourhoods than poor neighbourhoods

Question 14

Which of the following is a tax system in which all taxpayers pay the same percentage of their income in taxes?

Accepted Answer

A)  a regressive tax system 
B)  a proportional tax system 
C)  a progressive tax system 
D)  a tax system based on horizontal equity 
A)  a regressive tax system 
B)  a proportional tax system 
C)  a progressive tax system 
D)  a tax system based on horizontal equity

Question 15

Which of the following is a tax system in which higher income taxpayers have lower tax rates, even though they pay a larger amount of tax than lower income taxpayers?

Accepted Answer

A)  a proportional tax system 
B)  a progressive tax system 
C)  a regressive tax system 
D)  none of the above 
A)  a proportional tax system 
B)  a progressive tax system 
C)  a regressive tax system 
D)  none of the above

Question 16

Which of the following tax systems is the fairest?

Accepted Answer

A)  proportional tax 
B)  regressive tax 
C)  progressive tax 
D)  there is no objective way to assess fairness 
A)  proportional tax 
B)  regressive tax 
C)  progressive tax 
D)  there is no objective way to assess fairness

Question 17

The average tax rate of a taxpayer is only likely to equal the marginal tax rate when the taxpayer:

Accepted Answer

A)  collects a government salary 
B)  has a very high income 
C)  has a very low income 
D)  is a middle-income earner 
A)  collects a government salary 
B)  has a very high income 
C)  has a very low income 
D)  is a middle-income earner

Question 18

If the government imposes a tax of 20 per cent on the first $20 000 of income and 40 per cent on all incomes above $20 000, a person whose income is $30 000 would face a tax liability of $8000.

Accepted Answer

A) True 
 B)False

Question 19

Advocates for the poor claim that a sales tax on food is a regressive tax. Do you agree? Justify your position.

Accepted Answer

Yes. Since the poor are more l

Question 20

The amount of tax owed by a family is:

Accepted Answer

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

Exam 12: The Design of the Tax System

When the marginal tax rate exceeds the average tax rate, the tax is:

If we are trying to gauge how much the income tax system distorts incentives, then:

Governments tax company income primarily on the basis of:

When the marginal tax rate exceeds the average tax rate, the tax is progressive.

Which of the following statements about the company income tax is false?

The average tax rate measures the:

A lump-sum tax results in equality between average and marginal tax rates.

Outline the advantages and disadvantages of a lump-sum tax system.

A tax on all forms of income will:

Ambiguities or omission in the tax laws generate tax loopholes.

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

Which of the following is a tax system in which all taxpayers pay the same percentage of their income in taxes?

Which of the following is a tax system in which higher income taxpayers have lower tax rates, even though they pay a larger amount of tax than lower income taxpayers?

Which of the following tax systems is the fairest?

The average tax rate of a taxpayer is only likely to equal the marginal tax rate when the taxpayer:

If the government imposes a tax of 20 per cent on the first $20 000 of income and 40 per cent on all incomes above $20 000, a person whose income is $30 000 would face a tax liability of $8000.

Advocates for the poor claim that a sales tax on food is a regressive tax. Do you agree? Justify your position.

The amount of tax owed by a family is:

Ten Lessons From 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

Business Strategy

Competition Policy

Monopolistic Competition

The Markets for the Factors of Production

Earnings, Unions and Discrimination

Income Inequity 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 Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

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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