Exam 12: The Design of the Tax System

Scenario 12-2 Suppose that Bob places a value of $10 on a movie ticket and that Lisa places a value of $7 on a movie ticket.In addition,suppose the price of a movie ticket is $5. -Refer to Scenario 12-2.Suppose the government levies a tax of $3 on a movie ticket and that,as a result,the price of a movie ticket increases to $8.What is the deadweight loss from the tax?

Table 12-12 United States Income Tax Rates for a Single Individual,2002 and 2003. -Refer to Table 12-12.Charles is a single person whose taxable income is $35,000 a year.What is his average tax rate in 2002?

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?

Horizontal equity refers to a tax system in which individuals with higher incomes pay more in taxes than individuals with lower incomes.

Table 12-7 -Refer to Table 12-7.What is the marginal tax rate for a person who makes $60,000?

Suppose the government imposes a tax of 20 percent on the first $50,000 of income and 30 percent on all income above $50,000.What is the marginal tax rate when income is $60,000?

A budget deficit

Why do some policymakers support a consumption tax rather than an earnings tax?

Stacy places a $20 value on a bottle of wine,and Andrea places a $17 value on it.The equilibrium price for a bottle of wine is $15.Suppose the government levies a tax of $3 on each bottle of wine,and the equilibrium price of a bottle of wine increases to $18.How much tax revenue is collected?

The two types of taxes that are most important to state and local governments as sources of revenue are

A person's marginal tax rate equals

Taxes create deadweight losses because they

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.How much consumer surplus accrues to Allyn and Greg individually?

Which of the following is not an advantage of a lump-sum tax in comparison to other types of taxes?

State and local governments

Suppose a country imposes a lump-sum income tax of $5,000 on each individual in the country.What is the average income tax rate for an individual who earns $40,000 during the year?

Which of the following is not an administrative burden of our tax system?

Which tax system requires higher-income taxpayers to have lower tax rates,even though they pay a larger amount of tax when compared to lower-income taxpayers?

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

Table 12-7 -Refer to Table 12-7.What is the marginal tax rate for a person who makes $37,000?