Question 1

Horizontal equity in taxation refers to the idea that people

Accepted Answer

A)  in unequal conditions should be treated differently. 
B)  in equal conditions should pay equal taxes. 
C)  should be taxed according to their ability to pay. 
D)  should receive government benefits according to how much they have been taxed. 
A)  in unequal conditions should be treated differently. 
B)  in equal conditions should pay equal taxes. 
C)  should be taxed according to their ability to pay. 
D)  should receive government benefits according to how much they have been taxed.

Question 2

State and local governments

Accepted Answer

A)  are funded entirely by their own tax base. 
B)  receive the majority of their tax revenues from corporate income taxes. 
C)  are generally not responsible for collecting sales taxes. 
D)  receive some of their funds from the federal government. 
A)  are funded entirely by their own tax base. 
B)  receive the majority of their tax revenues from corporate income taxes. 
C)  are generally not responsible for collecting sales taxes. 
D)  receive some of their funds from the federal government.

Question 3

Taxes create deadweight loss when they

Accepted Answer

A)  distort behavior. 
B)  cause the price of the product to increase. 
C)  don't raise sufficient government revenue. 
D)  cannot be computed easily. 
A)  distort behavior. 
B)  cause the price of the product to increase. 
C)  don't raise sufficient government revenue. 
D)  cannot be computed easily.

Question 4

Rank the following state and local government expenditure categories from smallest to largest.

Accepted Answer

A)  education, health, highways 
B)  education, highways, health 
C)  highways, health, education 
D)  health, education, highways. 
A)  education, health, highways 
B)  education, highways, health 
C)  highways, health, education 
D)  health, education, highways.

Question 5

Table 12-17
The following table shows the marginal tax rates for unmarried individuals for two years.
2009 2010
  
-Refer to Table 12-17. Which of the following best describes the tax schedule in 2009?

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 6

In 2011, federal government receipts were approximately

Accepted Answer

A)  $4,000 per person and federal government spending was approximately $8,000 per person, resulting in a budget deficit. 
B)  $8,000 per person and federal government spending was approximately $12,000 per person, resulting in a budget deficit. 
C)  $12,000 per person and federal government spending was approximately $8,000 per person, resulting in a budget surplus. 
D)  $8,000 per person and federal government spending was approximately $4,000 per person, resulting in a budget surplus. 
A)  $4,000 per person and federal government spending was approximately $8,000 per person, resulting in a budget deficit. 
B)  $8,000 per person and federal government spending was approximately $12,000 per person, resulting in a budget deficit. 
C)  $12,000 per person and federal government spending was approximately $8,000 per person, resulting in a budget surplus. 
D)  $8,000 per person and federal government spending was approximately $4,000 per person, resulting in a budget surplus.

Question 7

Table 12-12
  
-Refer to Table 12-12. If the government imposes a $3,000 lump-sum tax, the marginal tax rate for Charles would be

Accepted Answer

A)  0 percent. 
B)  5 percent. 
C)  6.7 percent. 
D)  10 percent. 
A)  0 percent. 
B)  5 percent. 
C)  6.7 percent. 
D)  10 percent.

Question 8

Table 12-8
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 12-8. For an individual with $200,000 in taxable income, which tax schedule has the highest average tax rate?

Accepted Answer

A)  Tax Schedule A 
B)  Tax Schedule B 
C)  Tax Schedule C 
D)  Tax Schedule D 
A)  Tax Schedule A 
B)  Tax Schedule B 
C)  Tax Schedule C 
D)  Tax Schedule D

Question 9

Table 12-9
United States Income Tax Rates for a Single Individual, 2012 and 2013.
  
-Refer to Table 12-9. Darby is a single person whose taxable income is $320,000 a year. What happened to her average tax rate between 2012 and 2013?

Accepted Answer

A)  It increased. 
B)  It decreased. 
C)  It did not change. 
D)  We do not have enough information to answer this question. 
A)  It increased. 
B)  It decreased. 
C)  It did not change. 
D)  We do not have enough information to answer this question.

Question 10

If Christopher earns $80,000 in taxable income and pays $20,000 in taxes, his average tax rate is 20 percent.

Accepted Answer

A) True 
 B)False

Question 11

An estate tax is an example of a(n)

Accepted Answer

A)  individual income tax. 
B)  social insurance tax. 
C)  corporate income tax. 
D)  None of the above is correct. 
A)  individual income tax. 
B)  social insurance tax. 
C)  corporate income tax. 
D)  None of the above is correct.

Question 12

Table 12-10
  
-Refer to Table 12-10. If Miss Kay has $80,000 in taxable income, her tax liability is

Accepted Answer

A)  $11,581. 
B)  $16,181. 
C)  $20,000. 
D)  $24,881. 
A)  $11,581. 
B)  $16,181. 
C)  $20,000. 
D)  $24,881.

Question 13

Suppose the country of Mankiwland has a new king, King Gregory. For the purpose of efficiency King Gregory's chief economic advisor would encourage him to design his country's tax system to minimize (i) deadweight losses from taxes.
(ii) administrative burdens from taxes.
(iii) the tax payments themselves.
(iv) government expenditures to correct for market failures.

Accepted Answer

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

Question 14

Social Security is an income support program, designed primarily to maintain the living standards of the poor.

Accepted Answer

A) True 
 B)False

Question 15

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 16

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 $50,000?

Accepted Answer

A)  12 percent and 20 percent, respectively 
B)  12 percent and $50,000, respectively 
C)  $6,000 and 12 percent, respectively 
D)  $6,000 and 20 percent, respectively 
A)  12 percent and 20 percent, respectively 
B)  12 percent and $50,000, respectively 
C)  $6,000 and 12 percent, respectively 
D)  $6,000 and 20 percent, respectively

Question 17

Scenario 12-3
Suppose Roger and Regina receive great satisfaction from their consumption of cheesecake. Regina would be willing to purchase only one slice and would pay up to $8 for it. Roger would be willing to pay $11 for his first slice,$9 for his second slice, and $5 for his third slice. The current market price is $5 per slice.
-Refer to Scenario 12-3. Assume that the government places a $2 tax on each slice of cheesecake and that the new equilibrium price is $7. 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 18

Deadweight losses occur in markets in which

Accepted Answer

A)  firms decide to downsize. 
B)  the government imposes a tax. 
C)  profits fall because of low consumer demand. 
D)  equilibrium prices fall. 
A)  firms decide to downsize. 
B)  the government imposes a tax. 
C)  profits fall because of low consumer demand. 
D)  equilibrium prices fall.

Question 19

The principle that people should pay taxes based on the benefits they receive from government services is called the

Accepted Answer

A)  pay principle. 
B)  tax-benefit principle. 
C)  government services principle. 
D)  benefits principle. 
A)  pay principle. 
B)  tax-benefit principle. 
C)  government services principle. 
D)  benefits principle.

Question 20

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

Accepted Answer

A)  less like European tax systems than it otherwise would be. 
B)  more like a payroll tax than it otherwise would be. 
C)  more like an income tax than it otherwise would be. 
D)  more like a consumption tax than it otherwise would be. 
A)  less like European tax systems than it otherwise would be. 
B)  more like a payroll tax than it otherwise would be. 
C)  more like an income tax than it otherwise would be. 
D)  more like a consumption tax than it otherwise would be.

Horizontal equity in taxation refers to the idea that people

State and local governments

Taxes create deadweight loss when they

Rank the following state and local government expenditure categories from smallest to largest.

Table 12-17 The following table shows the marginal tax rates for unmarried individuals for two years. 2009 2010 -Refer to Table 12-17. Which of the following best describes the tax schedule in 2009?

In 2011, federal government receipts were approximately

Table 12-12 -Refer to Table 12-12. If the government imposes a $3,000 lump-sum tax, the marginal tax rate for Charles would be

Table 12-8 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 12-8. For an individual with $200,000 in taxable income, which tax schedule has the highest average tax rate?

Table 12-9 United States Income Tax Rates for a Single Individual, 2012 and 2013. -Refer to Table 12-9. Darby is a single person whose taxable income is $320,000 a year. What happened to her average tax rate between 2012 and 2013?

If Christopher earns $80,000 in taxable income and pays $20,000 in taxes, his average tax rate is 20 percent.

An estate tax is an example of a(n)

Table 12-10 -Refer to Table 12-10. If Miss Kay has $80,000 in taxable income, her tax liability is

Social Security is an income support program, designed primarily to maintain the living standards of the poor.

The notion that similar taxpayers should pay similar amounts of taxes is known as

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 $50,000?

Deadweight losses occur in markets in which

The principle that people should pay taxes based on the benefits they receive from government services is called the

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

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

Horizontal equity in taxation refers to the idea that people

State and local governments

Taxes create deadweight loss when they

Rank the following state and local government expenditure categories from smallest to largest.

Table 12-17 The following table shows the marginal tax rates for unmarried individuals for two years. 2009 2010 -Refer to Table 12-17. Which of the following best describes the tax schedule in 2009?

In 2011, federal government receipts were approximately

Table 12-12 -Refer to Table 12-12. If the government imposes a $3,000 lump-sum tax, the marginal tax rate for Charles would be

Table 12-8 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 12-8. For an individual with $200,000 in taxable income, which tax schedule has the highest average tax rate?

Table 12-9 United States Income Tax Rates for a Single Individual, 2012 and 2013. -Refer to Table 12-9. Darby is a single person whose taxable income is $320,000 a year. What happened to her average tax rate between 2012 and 2013?

If Christopher earns $80,000 in taxable income and pays $20,000 in taxes, his average tax rate is 20 percent.

An estate tax is an example of a(n)

Table 12-10 -Refer to Table 12-10. If Miss Kay has $80,000 in taxable income, her tax liability is

Social Security is an income support program, designed primarily to maintain the living standards of the poor.

The notion that similar taxpayers should pay similar amounts of taxes is known as

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 $50,000?

Deadweight losses occur in markets in which

The principle that people should pay taxes based on the benefits they receive from government services is called the

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

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