Exam 12: The Design of the Tax System

Which of the following factors will influence the size of the deadweight loss from the individual income tax? (i) on average, people will choose to not work as hard as they would if income was not taxed (ii) on average, people will choose to save less and consume more (iii) on average, people will choose to reduce their leisure time

If vertical equity is being used as the basis of a tax, then taxpayers with a lesser ability to pay should:

Determination of the incidence of a tax:

Deadweight losses from taxation are associated with:

Which of the following tax systems could be structured to satisfy conditions of vertical equity?

Vertical equity states that taxpayers with similar abilities to pay should contribute the same amount, while horizontal equity states that taxpayers with a great ability to pay taxes should contribute a larger amount.

Tax evasion is another term for tax avoidance.

The most appropriate measure of the sacrifice made by a taxpayer is the:

When the government levies a tax on a corporation, who pays the tax?

An income tax in which the average tax rate is the same for all taxpayers would be considered a regressive tax.

It is rarely straightforward applying the concepts of vertical and horizontal equity to the tax system.

The claim that all citizens should make an 'equal sacrifice' to support government programs is usually associated with:

When taxes are imposed on a commodity:

'Tax loopholes increase the efficiency of tax systems'. Evaluate this statement.

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, how much total consumer surplus do Celia and Jim collectively receive from consuming micro-brewed beer when it is priced at $3 a bottle?

When a tax does not have a deadweight loss, the reduction in surplus is exactly offset by tax revenue collected by the government.

If airline travellers are charged a departure tax to help maintain an airport, this tax is justified on the basis of:

Part of the deadweight loss from taxing labour earnings is that people will:

Lump-sum taxes:

Use an example to demonstrate the difference between marginal and average tax rates. What useful information is conveyed by each of these measures?