Question 1

As a nation gets richer,the government typically takes

Accepted Answer

A)  a constant share of income in taxes. 
B)  a smaller share of income in taxes. 
C)  a larger share of income in taxes. 
D)  There is little evidence of a relationship between income and taxes for most countries. 
A)  a constant share of income in taxes. 
B)  a smaller share of income in taxes. 
C)  a larger share of income in taxes. 
D)  There is little evidence of a relationship between income and taxes for most countries.

Question 2

One reason that deadweight losses are so difficult to avoid is that

Accepted Answer

A)  taxes affect the decisions that people make. 
B)  income taxes are not paid by everyone. 
C)  consumption taxes must be universally applied to all commodities. 
D)  the administrative burden is hard to calculate. 
A)  taxes affect the decisions that people make. 
B)  income taxes are not paid by everyone. 
C)  consumption taxes must be universally applied to all commodities. 
D)  the administrative burden is hard to calculate.

Question 3

If your income is $40,000 and your income tax liability is $5,000,your marginal tax rate is

Accepted Answer

A)  8 percent. 
B)  12.5 percent. 
C)  20 percent. 
D)  unknown.We do not have enough information to answer this question. 
A)  8 percent. 
B)  12.5 percent. 
C)  20 percent. 
D)  unknown.We do not have enough information to answer this question.

Question 4

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 $2 tax on each slice of cheesecake and that the new equilibrium price is $5.What is the deadweight loss of the tax?

Accepted Answer

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

Question 5

A transfer payment is a government payment

Accepted Answer

A)  to companies that provide goods or services to government agencies. 
B)  designed to transfer funds from one government agency to another. 
C)  which transfers revenue from the federal government to state government. 
D)  not made in exchange for a good or service. 
A)  to companies that provide goods or services to government agencies. 
B)  designed to transfer funds from one government agency to another. 
C)  which transfers revenue from the federal government to state government. 
D)  not made in exchange for a good or service.

Question 6

Tax evasion is illegal,but tax avoidance is legal.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A)  progressive tax. 
B)  regressive tax. 
C)  distortion-free tax. 
D)  proportional tax. 
A)  progressive tax. 
B)  regressive tax. 
C)  distortion-free tax. 
D)  proportional tax.

Question 8

Table 12-13
The following table shows the marginal tax rates for unmarried individuals for two years.
  
-Refer to Table 12-13.Which of the following best describes the tax schedule in 2005?

Accepted Answer

A)  Proportional tax 
B)  Progressive tax 
C)  Regressive tax 
D)  Vertical tax 
A)  Proportional tax 
B)  Progressive tax 
C)  Regressive tax 
D)  Vertical tax

Question 9

In choosing the form of a tax,there is often a tradeoff between

Accepted Answer

A)  allocative and productive efficiency. 
B)  profits and revenues. 
C)  efficiency and fairness. 
D)  fairness and profits. 
A)  allocative and productive efficiency. 
B)  profits and revenues. 
C)  efficiency and fairness. 
D)  fairness and profits.

Question 10

One reason for the projected increase,over the next several decades,in government spending as a percentage of GDP is the projected increase in the size of the elderly population.

Accepted Answer

A) True 
 B)False

Question 11

European countries tend to rely on which type of tax more so than the United States does?

Accepted Answer

A)  An income tax 
B)  A lump-sum tax 
C)  A value-added tax 
D)  A corrective tax 
A)  An income tax 
B)  A lump-sum tax 
C)  A value-added tax 
D)  A corrective tax

Question 12

Adam,Barb,and Carli each like to read novels.The current bestseller costs $10.Adam values it at $15,Barb at $13,and Carli at $11.Suppose that if the government taxes books at $2 each,the selling price will rise to $12.A consequence of the tax is that

Accepted Answer

A)  consumer surplus shrinks by $4 and tax revenues increase by $6,so there is a deadweight loss of $2. 
B)  consumer surplus shrinks by $6 and tax revenues increase by $6,so there is no deadweight loss. 
C)  consumer surplus shrinks by $5 and tax revenues increase by $6,so there is no deadweight loss. 
D)  consumer surplus shrinks by $5 and tax revenues increase by $4,so there is a deadweight loss of $1. 
A)  consumer surplus shrinks by $4 and tax revenues increase by $6,so there is a deadweight loss of $2. 
B)  consumer surplus shrinks by $6 and tax revenues increase by $6,so there is no deadweight loss. 
C)  consumer surplus shrinks by $5 and tax revenues increase by $6,so there is no deadweight loss. 
D)  consumer surplus shrinks by $5 and tax revenues increase by $4,so there is a deadweight loss of $1.

Question 13

Under a regressive tax system,

Accepted Answer

A)  the marginal tax rate for high income taxpayers is higher than the marginal tax rate for low income taxpayers. 
B)  the marginal tax rate for high income taxpayers is the same as the marginal tax rate for low income taxpayers. 
C)  the marginal tax rate for high income taxpayers is lower than the marginal tax rate for low income taxpayers. 
D)  Any of the above could be true under a regressive tax system. 
A)  the marginal tax rate for high income taxpayers is higher than the marginal tax rate for low income taxpayers. 
B)  the marginal tax rate for high income taxpayers is the same as the marginal tax rate for low income taxpayers. 
C)  the marginal tax rate for high income taxpayers is lower than the marginal tax rate for low income taxpayers. 
D)  Any of the above could be true under a regressive tax system.

Question 14

Table 12-14
The following table presents the total tax liability for an unmarried taxpayer under four different tax schedules for the income levels shown.
  
-The notion that similar taxpayers should pay similar amounts of taxes is known as

Accepted Answer

A)  vertical equity. 
B)  the benefits principle. 
C)  horizontal equity. 
D)  taxpayer efficiency. 
A)  vertical equity. 
B)  the benefits principle. 
C)  horizontal equity. 
D)  taxpayer efficiency.

Question 15

Table 12-5
  
-Refer to Table 12-5.What is the marginal tax rate for a person who makes $35,000?

Accepted Answer

A)  20% 
B)  30% 
C)  40% 
D)  50% 
A)  20% 
B)  30% 
C)  40% 
D)  50%

Question 16

The payroll tax differs from the individual income tax because the payroll tax is primarily earmarked to pay for

Accepted Answer

A)  employer-provided pensions. 
B)  Social Security and Medicare. 
C)  employer-provided health benefits. 
D)  job loss and training programs. 
A)  employer-provided pensions. 
B)  Social Security and Medicare. 
C)  employer-provided health benefits. 
D)  job loss and training programs.

Question 17

One tax system is less efficient than another if it

Accepted Answer

A)  places a lower tax burden on lower-income families than on higher-income families. 
B)  places a higher tax burden on lower-income families than on higher-income families. 
C)  raises the same amount of revenue at a higher cost to taxpayers. 
D)  raises less revenue at a lower cost to taxpayers. 
A)  places a lower tax burden on lower-income families than on higher-income families. 
B)  places a higher tax burden on lower-income families than on higher-income families. 
C)  raises the same amount of revenue at a higher cost to taxpayers. 
D)  raises less revenue at a lower cost to taxpayers.

Question 18

In 2007,which category represented the largest category of spending for the U.S.federal government?

Accepted Answer

A)  Medicare 
B)  Social Security 
C)  National defense 
D)  Net interest 
A)  Medicare 
B)  Social Security 
C)  National defense 
D)  Net interest

Question 19

Table 12-14
The following table presents the total tax liability for an unmarried taxpayer under four different tax schedules for the income levels shown.
  
-Refer to Table 12-14.Which tax schedules are progressive?

Accepted Answer

A)  Tax Schedule A only 
B)  Tax Schedule A and Tax Schedule B 
C)  Tax Schedule A,Tax Schedule B,and Tax Schedule C 
D)  All four Tax Schedules are progressive. 
A)  Tax Schedule A only 
B)  Tax Schedule A and Tax Schedule B 
C)  Tax Schedule A,Tax Schedule B,and Tax Schedule C 
D)  All four Tax Schedules are progressive.

Question 20

Which of the following statements is not correct?

Accepted Answer

A)  A gasoline tax can be an example of a benefits tax. 
B)  A progressive tax attempts to achieve vertical equity. 
C)  A progressive tax can be an example of the ability-to-pay principle. 
D)  A regressive tax attempts to achieve horizontal equity. 
A)  A gasoline tax can be an example of a benefits tax. 
B)  A progressive tax attempts to achieve vertical equity. 
C)  A progressive tax can be an example of the ability-to-pay principle. 
D)  A regressive tax attempts to achieve horizontal equity.

Exam 12: The Design of the Tax System

As a nation gets richer,the government typically takes

One reason that deadweight losses are so difficult to avoid is that

If your income is $40,000 and your income tax liability is $5,000,your marginal tax rate is

A transfer payment is a government payment

Tax evasion is illegal,but tax avoidance is legal.

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

Table 12-13 The following table shows the marginal tax rates for unmarried individuals for two years. -Refer to Table 12-13.Which of the following best describes the tax schedule in 2005?

In choosing the form of a tax,there is often a tradeoff between

One reason for the projected increase,over the next several decades,in government spending as a percentage of GDP is the projected increase in the size of the elderly population.

European countries tend to rely on which type of tax more so than the United States does?

Adam,Barb,and Carli each like to read novels.The current bestseller costs $10.Adam values it at $15,Barb at $13,and Carli at $11.Suppose that if the government taxes books at $2 each,the selling price will rise to $12.A consequence of the tax is that

Under a regressive tax system,

Table 12-14 The following table presents the total tax liability for an unmarried taxpayer under four different tax schedules for the income levels shown. -The notion that similar taxpayers should pay similar amounts of taxes is known as

Table 12-5 -Refer to Table 12-5.What is the marginal tax rate for a person who makes $35,000?

The payroll tax differs from the individual income tax because the payroll tax is primarily earmarked to pay for

One tax system is less efficient than another if it

In 2007,which category represented the largest category of spending for the U.S.federal government?

Table 12-14 The following table presents the total tax liability for an unmarried taxpayer under four different tax schedules for the income levels shown. -Refer to Table 12-14.Which tax schedules are progressive?

Which of the following statements is not correct?

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

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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