Question 1

The deadweight loss of an income tax is determined by the

Accepted Answer

A)  amount of total tax revenue to the government. 
B)  marginal tax rate. 
C)  average tax rate. 
D)  ability-to-pay principle. 
A)  amount of total tax revenue to the government. 
B)  marginal tax rate. 
C)  average tax rate. 
D)  ability-to-pay principle.

Question 2

Which of the following statements is correct?

Accepted Answer

A)  Vertical equity is the idea that taxpayers with similar abilities to pay taxes should pay the same amount. 
B)  Horizontal equity is the idea that taxes should be levied on a person according to how well that person can shoulder the burden. 
C)  A regressive tax would mean that high-income tax payers pay a larger fraction of their income in taxes than would low-income taxpayers. 
D)  A proportional tax would mean that high-income and low-income taxpayers pay the same fraction of income in taxes. 
A)  Vertical equity is the idea that taxpayers with similar abilities to pay taxes should pay the same amount. 
B)  Horizontal equity is the idea that taxes should be levied on a person according to how well that person can shoulder the burden. 
C)  A regressive tax would mean that high-income tax payers pay a larger fraction of their income in taxes than would low-income taxpayers. 
D)  A proportional tax would mean that high-income and low-income taxpayers pay the same fraction of income in taxes.

Question 3

Why do some policymakers support a consumption tax rather than an earnings tax?

Accepted Answer

A)  The average tax rate would be lower under a consumption tax. 
B)  A consumption tax would encourage people to save earned income. 
C)  A consumption tax would raise more revenues than an income tax. 
D)  The marginal tax rate would be higher under an earnings tax. 
A)  The average tax rate would be lower under a consumption tax. 
B)  A consumption tax would encourage people to save earned income. 
C)  A consumption tax would raise more revenues than an income tax. 
D)  The marginal tax rate would be higher under an earnings tax.

Question 4

When a state levies a sales tax, the tax

Accepted Answer

A)  is paid only by the state's residents. 
B)  occasionally excludes items that are deemed to be necessities. 
C)  is commonly levied on labor services. 
D)  applies to wholesale purchases but not retail purchases. 
A)  is paid only by the state's residents. 
B)  occasionally excludes items that are deemed to be necessities. 
C)  is commonly levied on labor services. 
D)  applies to wholesale purchases but not retail purchases.

Question 5

The deadweight loss of a tax is

Accepted Answer

A)  the reduction in economic welfare of taxpayers that exceeds the revenue raised by the government. 
B)  the improved efficiency created as people reallocate resources according to the tax incentive rather than the true costs and benefits. 
C)  the loss in tax revenues. 
D)  Both a and b are correct. 
A)  the reduction in economic welfare of taxpayers that exceeds the revenue raised by the government. 
B)  the improved efficiency created as people reallocate resources according to the tax incentive rather than the true costs and benefits. 
C)  the loss in tax revenues. 
D)  Both a and b are correct.

Question 6

Table 12-23
The dollar amounts in the last three columns are the taxes owed under the three different tax systems.
  
-Refer to Table 12-23. Which of the three tax systems is progressive?

Accepted Answer

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

Question 7

Antipoverty programs funded by taxes on the wealthy are sometimes advocated on the basis of the benefits principle.

Accepted Answer

A) True 
 B)False

Question 8

A budget deficit occurs when government receipts fall short of government spending.

Accepted Answer

A) True 
 B)False

Question 9

Table 12-5
  
-Refer to Table 12-5. What is the marginal tax rate for a person who makes $120,000?

Accepted Answer

A)  25% 
B)  35% 
C)  45% 
D)  60% 
A)  25% 
B)  35% 
C)  45% 
D)  60%

Question 10

Suppose a country imposes a lump-sum income tax of $5,000 on each individual in the country. What is the marginal income tax rate for an individual who earns $40,000 during the year?

Accepted Answer

A)  0% 
B)  10% 
C)  More than 10% 
D)  The marginal tax rate cannot be determined without knowing the entire tax schedule. 
A)  0% 
B)  10% 
C)  More than 10% 
D)  The marginal tax rate cannot be determined without knowing the entire tax schedule.

Question 11

As the economy's income has grown, the government has

Accepted Answer

A)  grown at about the same pace. 
B)  grown at a faster pace. 
C)  grown at a slower pace. 
D)  shrunk. 
A)  grown at about the same pace. 
B)  grown at a faster pace. 
C)  grown at a slower pace. 
D)  shrunk.

Question 12

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

Accepted Answer

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

Question 13

Define horizontal equity and briefly describe some features of the U.S. federal income tax system that may interfere with achieving it.

Accepted Answer

Horizontal equity is the idea that taxpa

Question 14

Suppose Tyler values a basketball at $20. Jacqui values a basketball at $25. The pre-tax price of a basketball $10. The government imposes a tax of $5 on each basketball, and the price rises to $15. The deadweight loss from the tax is

Accepted Answer

A)  $25. 
B)  $15. 
C)  $10. 
D)  $0. 
A)  $25. 
B)  $15. 
C)  $10. 
D)  $0.

Question 15

Vertical 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

Question 16

What are the three categories of the costs of taxes to taxpayers?

Accepted Answer

the tax payment itse

Question 17

Table 12-6
The table below shows the marginal tax rates for an unmarried taxpayer for various levels of taxable income.
  
-Refer to Table 12-6. For this tax schedule, what is the marginal tax rate for an individual with $212,000 in taxable income?

Accepted Answer

A)  0% 
B)  1% 
C)  2% 
D)  45% 
A)  0% 
B)  1% 
C)  2% 
D)  45%

Question 18

Which of the following statements is correct?

Accepted Answer

A)  National defense and health are the two largest spending categories for the federal government. 
B)  Welfare programs and highways are the two largest spending categories for state and local governments. 
C)  Sales taxes and property taxes are the two most important revenue sources for state and local governments. 
D)  Corporate income taxes are the largest source of revenue for the federal government. 
A)  National defense and health are the two largest spending categories for the federal government. 
B)  Welfare programs and highways are the two largest spending categories for state and local governments. 
C)  Sales taxes and property taxes are the two most important revenue sources for state and local governments. 
D)  Corporate income taxes are the largest source of revenue for the federal government.

Question 19

A mortgage interest deduction would be considered

Accepted Answer

A)  tax evasion. 
B)  a subsidy to the poor. 
C)  a deduction that benefits all members of society equally. 
D)  a tax loophole. 
A)  tax evasion. 
B)  a subsidy to the poor. 
C)  a deduction that benefits all members of society equally. 
D)  a tax loophole.

Question 20

Suppose a country imposes a lump-sum income tax of $6,000 on each individual in the country. What is the average income tax rate for an individual who earns $60,000 during the year?

Accepted Answer

A)  0% 
B)  10% 
C)  More than 10% 
D)  The average tax rate cannot be determined without knowing the entire tax schedule. 
A)  0% 
B)  10% 
C)  More than 10% 
D)  The average tax rate cannot be determined without knowing the entire tax schedule.

Exam 12: The Design of the Tax System

The deadweight loss of an income tax is determined by the

Which of the following statements is correct?

Why do some policymakers support a consumption tax rather than an earnings tax?

When a state levies a sales tax, the tax

The deadweight loss of a tax is

Table 12-23 The dollar amounts in the last three columns are the taxes owed under the three different tax systems. -Refer to Table 12-23. Which of the three tax systems is progressive?

Antipoverty programs funded by taxes on the wealthy are sometimes advocated on the basis of the benefits principle.

A budget deficit occurs when government receipts fall short of government spending.

Table 12-5 -Refer to Table 12-5. What is the marginal tax rate for a person who makes $120,000?

Suppose a country imposes a lump-sum income tax of $5,000 on each individual in the country. What is the marginal income tax rate for an individual who earns $40,000 during the year?

As the economy's income has grown, the government has

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

Define horizontal equity and briefly describe some features of the U.S. federal income tax system that may interfere with achieving it.

Suppose Tyler values a basketball at $20. Jacqui values a basketball at $25. The pre-tax price of a basketball $10. The government imposes a tax of $5 on each basketball, and the price rises to $15. The deadweight loss from the tax is

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

What are the three categories of the costs of taxes to taxpayers?

Table 12-6 The table below shows the marginal tax rates for an unmarried taxpayer for various levels of taxable income. -Refer to Table 12-6. For this tax schedule, what is the marginal tax rate for an individual with $212,000 in taxable income?

Which of the following statements is correct?

A mortgage interest deduction would be considered

Suppose a country imposes a lump-sum income tax of $6,000 on each individual in the country. What is the average income tax rate for an individual who earns $60,000 during the year?

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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