Question 1

The most efficient tax possible is a

Accepted Answer

A)  marginal income tax. 
B)  lump-sum tax. 
C)  consumption tax. 
D)  corporate profit tax. 
A)  marginal income tax. 
B)  lump-sum tax. 
C)  consumption tax. 
D)  corporate profit tax.

Question 2

If a government sells debt to help meet its expenditures, then the government has a

Accepted Answer

A)  budget surplus. Other things the same, the surplus rises if government expenditures rise. 
B)  budget surplus. Other things the same, the surplus rises if government expenditures fall. 
C)  budget deficit. Other things the same, the deficit rises if government expenditures rise. 
D)  budget deficit. Other things the same the deficit rises if government expenditures fall 
A)  budget surplus. Other things the same, the surplus rises if government expenditures rise. 
B)  budget surplus. Other things the same, the surplus rises if government expenditures fall. 
C)  budget deficit. Other things the same, the deficit rises if government expenditures rise. 
D)  budget deficit. Other things the same the deficit rises if government expenditures fall

Question 3

Country A's tax system is more efficient than Country B's tax system if

Accepted Answer

A)  Country A collects less tax revenue than Country B, and the cost to taxpayers is the same in both countries. 
B)  Country A collects more tax revenue than Country B, even though the cost to taxpayers is greater in Country A than in Country B. 
C)  the same amount of revenue is raised in both countries, but the cost to taxpayers is smaller in Country A than in Country c. 
D)  the same amount of revenue is raised in both countries, but the taxes are collected in a shorter amount of time in Country A than in Country B. 
A)  Country A collects less tax revenue than Country B, and the cost to taxpayers is the same in both countries. 
B)  Country A collects more tax revenue than Country B, even though the cost to taxpayers is greater in Country A than in Country B. 
C)  the same amount of revenue is raised in both countries, but the cost to taxpayers is smaller in Country A than in Country c. 
D)  the same amount of revenue is raised in both countries, but the taxes are collected in a shorter amount of time in Country A than in Country B.

Question 4

In 2011, the largest source of receipts for state and local governments was corporate income taxes.

Accepted Answer

A) True 
 B)False

Question 5

Costas faces a progressive federal income tax structure that has the following marginal tax rates: 0 percent on the first $10,000, 10 percent on the next $10,000, 15 percent on the next $10,000, 25 percent on the next $10,000, and 50 percent on all additional income. In addition, he must pay 5 percent of his income in state income tax and 15.3 percent of his labor income in federal payroll taxes. Costas earns $70,000 per year in salary and another $20,000 per year in non-labor income. What is his average tax rate, and what is his marginal tax rate on his salary?

Accepted Answer

A)  His average tax rate is 17.19 percent, and the marginal tax rate on his salary is 55 percent. 
B)  His average tax rate is 50.23 percent, and the marginal tax rate on his salary is 70.3 percent. 
C)  His average tax rate is 53.63 percent, and the marginal tax rate on his salary is 70.3 percent. 
D)  His average tax rate is 55.79 percent, and the marginal tax rate on his salary is 70.3 percent. 
A)  His average tax rate is 17.19 percent, and the marginal tax rate on his salary is 55 percent. 
B)  His average tax rate is 50.23 percent, and the marginal tax rate on his salary is 70.3 percent. 
C)  His average tax rate is 53.63 percent, and the marginal tax rate on his salary is 70.3 percent. 
D)  His average tax rate is 55.79 percent, and the marginal tax rate on his salary is 70.3 percent.

Question 6

Horizontal equity can be difficult to assess because it is difficult to compare the similarity of tax payers.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Table 12-9
United States Income Tax Rates for a Single Individual, 2012 and 2013.
  
-Refer to Table 12-9. Samantha is a single person whose taxable income is $100,000 a year. What is her average tax rate in 2012?

Accepted Answer

A)  22.3% 
B)  25.3% 
C)  27.8% 
D)  28.4% 
A)  22.3% 
B)  25.3% 
C)  27.8% 
D)  28.4%

Question 9

Tax systems that impose recordkeeping requirements on taxpayers are said to have a(n)

Accepted Answer

A)  auditing burden. 
B)  lower incidence of compliance. 
C)  administrative burden. 
D)  certification requirement. 
A)  auditing burden. 
B)  lower incidence of compliance. 
C)  administrative burden. 
D)  certification requirement.

Question 10

The two taxes that together provide the U.S. federal government with almost 80 percent of its revenue are

Accepted Answer

A)  individual income taxes and property taxes. 
B)  individual income taxes and corporate income taxes. 
C)  individual income taxes and payroll taxes. 
D)  sales taxes and payroll taxes. 
A)  individual income taxes and property taxes. 
B)  individual income taxes and corporate income taxes. 
C)  individual income taxes and payroll taxes. 
D)  sales taxes and payroll taxes.

Question 11

Individual Retirement Accounts and 401(k) plans make the current U.S. tax system

Accepted Answer

A)  more like a consumption tax and so more like the tax system of many European countries. 
B)  more like a consumption tax and so less like the tax system of many European countries. 
C)  less like a consumption tax and so more like the tax system of many European countries. 
D)  less like a consumption tax and so less like the tax system of many European countries. 
A)  more like a consumption tax and so more like the tax system of many European countries. 
B)  more like a consumption tax and so less like the tax system of many European countries. 
C)  less like a consumption tax and so more like the tax system of many European countries. 
D)  less like a consumption tax and so less like the tax system of many European countries.

Question 12

The income tax requires that taxpayers pay 10percent on the first $40,000 of income and 20 percent on all income over $40,000. Karen paid $6,000 in taxes. What were her marginal and average tax rates?

Accepted Answer

A)  20 percent and 12 percent, respectively 
B)  20 percent and 15 percent, respectively 
C)  10 percent and 12 percent respectively 
D)  10 percent and 15 percent respectively 
A)  20 percent and 12 percent, respectively 
B)  20 percent and 15 percent, respectively 
C)  10 percent and 12 percent respectively 
D)  10 percent and 15 percent respectively

Question 13

Taxes create deadweight losses because they

Accepted Answer

A)  reduce costs for firms. 
B)  distort incentives. 
C)  cause prices to decrease. 
D)  create revenue for the government. 
A)  reduce costs for firms. 
B)  distort incentives. 
C)  cause prices to decrease. 
D)  create revenue for the government.

Question 14

Table 12-16
  
-Refer to Table 12-16. In this tax system which of the following is possible?

Accepted Answer

A)  vertical and horizontal equity 
B)  vertical but not horizontal equity 
C)  horizontal but not vertical equity 
D)  neither horizontal nor vertical equity 
A)  vertical and horizontal equity 
B)  vertical but not horizontal equity 
C)  horizontal but not vertical equity 
D)  neither horizontal nor vertical equity

Question 15

Citizens expect the government to provide various goods and services making taxes

Accepted Answer

A)  inefficient. 
B)  equitable. 
C)  inevitable. 
D)  intolerable. 
A)  inefficient. 
B)  equitable. 
C)  inevitable. 
D)  intolerable.

Question 16

In 2010, the co­chairmen of President Obama's deficit reduction commission proposed curtailing or eliminating many tax deductions such as the one for mortgage interest. Economists who favor the proposal argue that it would (i) correct a misallocation of resources because too much of the economy's capital stock is tied up in residential housing and too little is invested in corporate capital.
(ii) cut both spending and taxes.
(iii) encourage private philanthropy.

Accepted Answer

A)  (i) only 
B)  (ii) only 
C)  (i) and (ii) only 
D)  (i), (ii), and (iii) 
A)  (i) only 
B)  (ii) only 
C)  (i) and (ii) only 
D)  (i), (ii), and (iii)

Question 17

Scenario 12-1
Ken places a $20 value on a cigar, and Mark places a $17 value on it. The equilibrium price for this brand of cigar is $15.
-Refer to Scenario 12-1. Suppose the government levies a tax of $3 on each cigar, and the equilibrium price of a cigar increases to $18. How much tax revenue is collected?

Accepted Answer

A)  $0 
B)  $2 
C)  $3 
D)  $6 
A)  $0 
B)  $2 
C)  $3 
D)  $6

Question 18

Most people agree that the tax system

Accepted Answer

A)  should be both efficient and equitable. 
B)  cannot raise enough revenue to cover government expenditures. 
C)  would raise more revenue if tax rates were lowered. 
D)  should be rewritten to require everyone to pay the same percentage of income in taxes. 
A)  should be both efficient and equitable. 
B)  cannot raise enough revenue to cover government expenditures. 
C)  would raise more revenue if tax rates were lowered. 
D)  should be rewritten to require everyone to pay the same percentage of income in taxes.

Question 19

Table 12-9
United States Income Tax Rates for a Single Individual, 2012 and 2013.
  
-Refer to Table 12-9. Jake is a single person whose taxable income is $20,000 a year. What is his average tax rate in 2013?

Accepted Answer

A)  10% 
B)  15% 
C)  12.5% 
D)  28% 
A)  10% 
B)  15% 
C)  12.5% 
D)  28%

Question 20

James earns income of $90,000 per year. His average tax rate is 40percent. James paid $5,500 in taxes on the first $40,000 he earned. What was the marginal tax rate on the rest of his income?

Accepted Answer

A)  6.1 percent 
B)  44 percent 
C)  55 percent 
D)  61 percent 
A)  6.1 percent 
B)  44 percent 
C)  55 percent 
D)  61 percent

The most efficient tax possible is a

If a government sells debt to help meet its expenditures, then the government has a

Country A's tax system is more efficient than Country B's tax system if

In 2011, the largest source of receipts for state and local governments was corporate income taxes.

Horizontal equity can be difficult to assess because it is difficult to compare the similarity of tax payers.

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

Table 12-9 United States Income Tax Rates for a Single Individual, 2012 and 2013. -Refer to Table 12-9. Samantha is a single person whose taxable income is $100,000 a year. What is her average tax rate in 2012?

Tax systems that impose recordkeeping requirements on taxpayers are said to have a(n)

The two taxes that together provide the U.S. federal government with almost 80 percent of its revenue are

Individual Retirement Accounts and 401(k) plans make the current U.S. tax system

The income tax requires that taxpayers pay 10percent on the first $40,000 of income and 20 percent on all income over $40,000. Karen paid $6,000 in taxes. What were her marginal and average tax rates?

Taxes create deadweight losses because they

Table 12-16 -Refer to Table 12-16. In this tax system which of the following is possible?

Citizens expect the government to provide various goods and services making taxes

Most people agree that the tax system

Table 12-9 United States Income Tax Rates for a Single Individual, 2012 and 2013. -Refer to Table 12-9. Jake is a single person whose taxable income is $20,000 a year. What is his average tax rate in 2013?

James earns income of $90,000 per year. His average tax rate is 40percent. James paid $5,500 in taxes on the first $40,000 he earned. What was the marginal tax rate on the rest of his income?

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

Filters

Exam 12: The Design of the Tax System

The most efficient tax possible is a

If a government sells debt to help meet its expenditures, then the government has a

Country A's tax system is more efficient than Country B's tax system if

In 2011, the largest source of receipts for state and local governments was corporate income taxes.

Horizontal equity can be difficult to assess because it is difficult to compare the similarity of tax payers.

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

Table 12-9 United States Income Tax Rates for a Single Individual, 2012 and 2013. -Refer to Table 12-9. Samantha is a single person whose taxable income is $100,000 a year. What is her average tax rate in 2012?

Tax systems that impose recordkeeping requirements on taxpayers are said to have a(n)

The two taxes that together provide the U.S. federal government with almost 80 percent of its revenue are

Individual Retirement Accounts and 401(k) plans make the current U.S. tax system

The income tax requires that taxpayers pay 10percent on the first $40,000 of income and 20 percent on all income over $40,000. Karen paid $6,000 in taxes. What were her marginal and average tax rates?

Taxes create deadweight losses because they

Table 12-16 -Refer to Table 12-16. In this tax system which of the following is possible?

Citizens expect the government to provide various goods and services making taxes

Most people agree that the tax system

Table 12-9 United States Income Tax Rates for a Single Individual, 2012 and 2013. -Refer to Table 12-9. Jake is a single person whose taxable income is $20,000 a year. What is his average tax rate in 2013?

James earns income of $90,000 per year. His average tax rate is 40percent. James paid $5,500 in taxes on the first $40,000 he earned. What was the marginal tax rate on the rest of his income?

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

Filters