Question 1

In order to construct a more complete picture of the economic burden of government across income classes, economists usually

Accepted Answer

A)  include tax payments as well as transfer payments received. 
B)  focus only on the tax payments of wealthy tax payers. 
C)  limit their analysis to taxes based on the ability-to-pay principle. 
D)  focus their analysis on issues of tax efficiency. 
A)  include tax payments as well as transfer payments received. 
B)  focus only on the tax payments of wealthy tax payers. 
C)  limit their analysis to taxes based on the ability-to-pay principle. 
D)  focus their analysis on issues of tax efficiency.

Question 2

Table 12-10
  
-Refer to Table 12-10. If Willie has $170,000 in taxable income, his tax liability will be

Accepted Answer

A)  $16,781. 
B)  $41,309. 
C)  $41,827. 
D)  $47,600. 
A)  $16,781. 
B)  $41,309. 
C)  $41,827. 
D)  $47,600.

Question 3

Suppose the government taxes 10 percent of the first $20,000 in income, 20 percent of the next $20,000 in income, and 30 percent of all income over $40,000. Calculate the marginal tax rate and the average tax rate for a person who earns $100,000.

Accepted Answer

The marginal tax rate would be 30 percen

Question 4

In 2009, the top 1 percent of income earners made about

Accepted Answer

A)  1 percent of all income and paid about 1 percent of all taxes. 
B)  13 percent of all income and paid about 22 percent of all taxes. 
C)  22 percent of all income and paid about 13 percent of all taxes. 
D)  50 percent of all income and paid about 50 percent of all taxes. 
A)  1 percent of all income and paid about 1 percent of all taxes. 
B)  13 percent of all income and paid about 22 percent of all taxes. 
C)  22 percent of all income and paid about 13 percent of all taxes. 
D)  50 percent of all income and paid about 50 percent of all taxes.

Question 5

Table 12-11
  
-Refer to Table 12-11. If Bud has taxable income of $78,000, his tax liability is

Accepted Answer

A)  $7,800. 
B)  $9,900. 
C)  $10,200. 
D)  $15,020. 
A)  $7,800. 
B)  $9,900. 
C)  $10,200. 
D)  $15,020.

Question 6

An optimal tax is one that minimizes the

Accepted Answer

A)  external benefit. 
B)  total deadweight loss from the tax. 
C)  income taxes. 
D)  horizontal equity. 
A)  external benefit. 
B)  total deadweight loss from the tax. 
C)  income taxes. 
D)  horizontal equity.

Question 7

Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000. What are the tax liability and the marginal tax rate for a person whose income is $30,000?

Accepted Answer

A)  both are 10 percent 
B)  10 percent and $2,000, respectively 
C)  $3,000 and 10 percent, respectively 
D)  $3,000 and 20 percent, respectively 
A)  both are 10 percent 
B)  10 percent and $2,000, respectively 
C)  $3,000 and 10 percent, respectively 
D)  $3,000 and 20 percent, respectively

Question 8

Taxes on specific goods such as gasoline and alcoholic beverages are called

Accepted Answer

A)  excise taxes. 
B)  payroll taxes. 
C)  sales taxes. 
D)  social insurance taxes. 
A)  excise taxes. 
B)  payroll taxes. 
C)  sales taxes. 
D)  social insurance taxes.

Question 9

Like spending on Social Security, the share of federal government spending on Medicare has risen substantially over time. This is most likely a result of

Accepted Answer

A)  a rising population of poor in the economy. 
B)  a rising population of the elderly in the economy. 
C)  an immigration policy that promotes an influx of migrant farm workers. 
D)  All of the above are important factors. 
A)  a rising population of poor in the economy. 
B)  a rising population of the elderly in the economy. 
C)  an immigration policy that promotes an influx of migrant farm workers. 
D)  All of the above are important factors.

Question 10

The resources that a taxpayer devotes to complying with the tax laws are a type of

Accepted Answer

A)  consumption tax. 
B)  value-added tax. 
C)  deadweight loss. 
D)  producer surplus. 
A)  consumption tax. 
B)  value-added tax. 
C)  deadweight loss. 
D)  producer surplus.

Question 11

If all taxpayers pay the same percentage of income in taxes, the tax system is progressive.

Accepted Answer

A) True 
 B)False

Question 12

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 total consumer surplus after the tax is imposed?

Accepted Answer

A)  $0 
B)  $1 
C)  $2 
D)  $3 
A)  $0 
B)  $1 
C)  $2 
D)  $3

Question 13

An excise tax is a tax on a specific good, like gasoline.

Accepted Answer

A) True 
 B)False

Question 14

Lump-sum taxes are rarely used in the real world because

Accepted Answer

A)  while lump-sum taxes have low administrative burdens, they have high deadweight losses. 
B)  while lump-sum taxes have low deadweight losses, they have high administrative burdens. 
C)  lump-sum taxes are often viewed as unfair because they take the same amount of money from both poor and rich. 
D)  lump-sum taxes are very inefficient. 
A)  while lump-sum taxes have low administrative burdens, they have high deadweight losses. 
B)  while lump-sum taxes have low deadweight losses, they have high administrative burdens. 
C)  lump-sum taxes are often viewed as unfair because they take the same amount of money from both poor and rich. 
D)  lump-sum taxes are very inefficient.

Question 15

Suppose the government taxes 10 percent of the first $30,000 in income and 20 percent of all income over $30,000.
Calculate the marginal tax rate and the average tax rate for a person who earns $70,000.

Accepted Answer

The marginal tax rate would be 20 percen

Question 16

Pat calculates that for every extra dollar she earns, she owes the government 33 cents. Her total income now is $35,000, on which she pays taxes of $7,000. Determine her average tax rate and her marginal tax rate.

Accepted Answer

A)  Her average tax rate is 33 percent and her marginal tax rate is 20 percent. 
B)  Her average tax rate is 20 percent and her marginal tax rate is 33 percent. 
C)  Her average tax rate is 20 percent and her marginal tax rate is 20 percent. 
D)  Her average tax rate is 33 percent and her marginal tax rate is 33 percent. 
A)  Her average tax rate is 33 percent and her marginal tax rate is 20 percent. 
B)  Her average tax rate is 20 percent and her marginal tax rate is 33 percent. 
C)  Her average tax rate is 20 percent and her marginal tax rate is 20 percent. 
D)  Her average tax rate is 33 percent and her marginal tax rate is 33 percent.

Question 17

Taxes can create deadweight losses because they

Accepted Answer

A)  allow the government to fund private goods. 
B)  create administrative burdens as people comply with tax laws. 
C)  allow the government to fund public goods. 
D)  Both b and c are correct. 
A)  allow the government to fund private goods. 
B)  create administrative burdens as people comply with tax laws. 
C)  allow the government to fund public goods. 
D)  Both b and c are correct.

Question 18

In the United States, the payroll tax is also called a

Accepted Answer

A)  dividend income tax. 
B)  social insurance tax. 
C)  value added tax. 
D)  capital gains tax. 
A)  dividend income tax. 
B)  social insurance tax. 
C)  value added tax. 
D)  capital gains tax.

Question 19

Table 12-10
  
-Refer to Table 12-10. If Jace has $33,000 in taxable income, his marginal tax rate is

Accepted Answer

A)  10%. 
B)  15%. 
C)  25%. 
D)  28%. 
A)  10%. 
B)  15%. 
C)  25%. 
D)  28%.

Question 20

If a government simplified its tax system the likeliest result would be a decrease in

Accepted Answer

A)  consumer surplus. 
B)  producer surplus. 
C)  in deadweight loss. 
D)  tax revenues. 
A)  consumer surplus. 
B)  producer surplus. 
C)  in deadweight loss. 
D)  tax revenues.

Exam 12: The Design of the Tax System

In order to construct a more complete picture of the economic burden of government across income classes, economists usually

Table 12-10 -Refer to Table 12-10. If Willie has $170,000 in taxable income, his tax liability will be

Suppose the government taxes 10 percent of the first $20,000 in income, 20 percent of the next $20,000 in income, and 30 percent of all income over $40,000. Calculate the marginal tax rate and the average tax rate for a person who earns $100,000.

In 2009, the top 1 percent of income earners made about

Table 12-11 -Refer to Table 12-11. If Bud has taxable income of $78,000, his tax liability is

An optimal tax is one that minimizes the

Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000. What are the tax liability and the marginal tax rate for a person whose income is $30,000?

Taxes on specific goods such as gasoline and alcoholic beverages are called

Like spending on Social Security, the share of federal government spending on Medicare has risen substantially over time. This is most likely a result of

The resources that a taxpayer devotes to complying with the tax laws are a type of

If all taxpayers pay the same percentage of income in taxes, the tax system is progressive.

An excise tax is a tax on a specific good, like gasoline.

Lump-sum taxes are rarely used in the real world because

Suppose the government taxes 10 percent of the first $30,000 in income and 20 percent of all income over $30,000. Calculate the marginal tax rate and the average tax rate for a person who earns $70,000.

Pat calculates that for every extra dollar she earns, she owes the government 33 cents. Her total income now is $35,000, on which she pays taxes of $7,000. Determine her average tax rate and her marginal tax rate.

Taxes can create deadweight losses because they

In the United States, the payroll tax is also called a

Table 12-10 -Refer to Table 12-10. If Jace has $33,000 in taxable income, his marginal tax rate is

If a government simplified its tax system the likeliest result would be a decrease in

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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