Question 1

Horizontal equity refers to a tax system in which individuals with similar incomes pay similar taxes.

Accepted Answer

A) True 
 B)False  True

Question 2

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

Accepted Answer

A) True 
 B)False  False

Question 3

In 2011, which category represented the largest source of receipts for the U.S. federal government?

Accepted Answer

A)  Medicare 
B)  Social Security 
C)  corporate income taxes 
D)  individual income taxes 
A)  Medicare 
B)  Social Security 
C)  corporate income taxes 
D)  individual income taxes D

Question 4

Table 12-24
  
-Refer to Table 12-24. Would the tax system be justified due to the benefits principle?

Accepted Answer

Based only on the information

Question 5

Table 12-21
The dollar amounts in the last three columns are the taxes owed under the three different tax systems.
  
-Refer to Table 12-21. Which of the three tax systems is proportional?

Accepted Answer

A)  Tax System A 
B)  Tax System B 
C)  Tax System C 
D)  None of the systems are proportional. 
A)  Tax System A 
B)  Tax System B 
C)  Tax System C 
D)  None of the systems are proportional.

Question 6

The U.S. federal government collects about

Accepted Answer

A)  one-third of the taxes in our economy. 
B)  one-half of the taxes in our economy. 
C)  two-thirds of the taxes in our economy. 
D)  three-fourths of the taxes in our economy. 
A)  one-third of the taxes in our economy. 
B)  one-half of the taxes in our economy. 
C)  two-thirds of the taxes in our economy. 
D)  three-fourths of the taxes in our economy.

Question 7

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.

Accepted Answer

A) True 
 B)False

Question 8

The idea that people in equal conditions should pay equal taxes is referred to as

Accepted Answer

A)  horizontal equity. 
B)  vertical equity. 
C)  the ability-to-pay principle. 
D)  the marriage tax. 
A)  horizontal equity. 
B)  vertical equity. 
C)  the ability-to-pay principle. 
D)  the marriage tax.

Question 9

Which of the following is not true about government spending on national defense?

Accepted Answer

A)  It is the third-largest spending category for the U.S. federal government. 
B)  It includes salaries of military personnel. 
C)  It fluctuates over time as the political climate changes. 
D)  It is not financed with tax revenue. 
A)  It is the third-largest spending category for the U.S. federal government. 
B)  It includes salaries of military personnel. 
C)  It fluctuates over time as the political climate changes. 
D)  It is not financed with tax revenue.

Question 10

In 1789, the average American paid approximately what percent of income in taxes?

Accepted Answer

A)  5% 
B)  15% 
C)  33% 
D)  50% 
A)  5% 
B)  15% 
C)  33% 
D)  50%

Question 11

Which type of tax is used to finance the Social Security program in the United States?

Accepted Answer

A)  consumption tax 
B)  income tax 
C)  payroll tax 
D)  property tax 
A)  consumption tax 
B)  income tax 
C)  payroll tax 
D)  property tax

Question 12

The tax that generates the most revenue for state and local government is the

Accepted Answer

A)  corporate income tax. 
B)  individual income tax. 
C)  property tax. 
D)  sales tax. 
A)  corporate income tax. 
B)  individual income tax. 
C)  property tax. 
D)  sales tax.

Question 13

Table 12-22
  
-Refer to Table 12-22. A lump-sum tax is illustrated by tax

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 14

A person's average tax rate equals her

Accepted Answer

A)  tax obligation divided by her marginal tax rate. 
B)  increase in taxes if her income were to rise by $1. 
C)  tax obligation divided by her income. 
D)  increase in taxes if her marginal tax rate were to rise 1percent. 
A)  tax obligation divided by her marginal tax rate. 
B)  increase in taxes if her income were to rise by $1. 
C)  tax obligation divided by her income. 
D)  increase in taxes if her marginal tax rate were to rise 1percent.

Question 15

Table 12-20
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 12-20. 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 16

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

Accepted Answer

A)  It would not cause deadweight loss. 
B)  It imposes a minimal administrative burden on taxpayers. 
C)  It is more equitable. 
D)  It is more efficient. 
A)  It would not cause deadweight loss. 
B)  It imposes a minimal administrative burden on taxpayers. 
C)  It is more equitable. 
D)  It is more efficient.

Question 17

Table 12-7
The following table shows the marginal tax rates for unmarried individuals for two years.
  
-Refer to Table 12-7. For an individual who earned $80,000 of taxable income in 2009, what was the individual's average tax rate in 2009?

Accepted Answer

A)  12.7% 
B)  15.0% 
C)  16.1% 
D)  16.9% 
A)  12.7% 
B)  15.0% 
C)  16.1% 
D)  16.9%

Question 18

Table 12-2
  
-Refer to Table 12-2. Suppose that the government imposes a $2 tax on delights, causing the price to increase from $4.00 to $6.00. Deadweight loss arises because

Accepted Answer

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

Question 19

The single largest expenditure by state and local governments is on

Accepted Answer

A)  highways. 
B)  police. 
C)  public welfare. 
D)  education. 
A)  highways. 
B)  police. 
C)  public welfare. 
D)  education.

Question 20

A family's income tax liability is

Accepted Answer

A)  a standard percentage of all income earned. 
B)  determined by wage income rather than dividend and interest income. 
C)  based on total income. 
D)  constant from year to year. 
A)  a standard percentage of all income earned. 
B)  determined by wage income rather than dividend and interest income. 
C)  based on total income. 
D)  constant from year to year.

Exam 12: The Design of the Tax System

Horizontal equity refers to a tax system in which individuals with similar incomes pay similar taxes.

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

In 2011, which category represented the largest source of receipts for the U.S. federal government?

Table 12-24 -Refer to Table 12-24. Would the tax system be justified due to the benefits principle?

Table 12-21 The dollar amounts in the last three columns are the taxes owed under the three different tax systems. -Refer to Table 12-21. Which of the three tax systems is proportional?

The U.S. federal government collects about

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.

The idea that people in equal conditions should pay equal taxes is referred to as

Which of the following is not true about government spending on national defense?

In 1789, the average American paid approximately what percent of income in taxes?

Which type of tax is used to finance the Social Security program in the United States?

The tax that generates the most revenue for state and local government is the

Table 12-22 -Refer to Table 12-22. A lump-sum tax is illustrated by tax

A person's average tax rate equals her

Table 12-20 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 12-20. Which tax schedules are progressive?

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

Table 12-7 The following table shows the marginal tax rates for unmarried individuals for two years. -Refer to Table 12-7. For an individual who earned $80,000 of taxable income in 2009, what was the individual's average tax rate in 2009?

Table 12-2 -Refer to Table 12-2. Suppose that the government imposes a $2 tax on delights, causing the price to increase from $4.00 to $6.00. Deadweight loss arises because

The single largest expenditure by state and local governments is on

A family's income tax liability is

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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