Question 1

Which of the following is true about the percent of total income all levels of government in the U.S. take as taxes?

Accepted Answer

A)  In 1902 the government collected about 7 percent of total income. In recent years, it collected about 30 percent of total income. 
B)  In 1902 the government collected about 30 percent of total income. In recent years, it collected about 7 percent of total income. 
C)  In 1902 the government collected about 7 percent of total income. In recent years, it collected about 7 percent of total income. 
D)  In 1902 the government collected about 30 percent of total income. In recent years, it collected about 30 percent of total income. 
A)  In 1902 the government collected about 7 percent of total income. In recent years, it collected about 30 percent of total income. 
B)  In 1902 the government collected about 30 percent of total income. In recent years, it collected about 7 percent of total income. 
C)  In 1902 the government collected about 7 percent of total income. In recent years, it collected about 7 percent of total income. 
D)  In 1902 the government collected about 30 percent of total income. In recent years, it collected about 30 percent of total income.

Question 2

If transfer payments are included when evaluating tax burdens, then the average tax rate of the poorest quintile of taxpayers would be approximately

Accepted Answer

A)  negative 30 percent. 
B)  negative 10 percent. 
C)  positive 1 percent. 
D)  positive 8 percent. 
A)  negative 30 percent. 
B)  negative 10 percent. 
C)  positive 1 percent. 
D)  positive 8 percent.

Question 3

If we want to gauge the sacrifice made by a taxpayer, we should use the

Accepted Answer

A)  average tax rate. 
B)  marginal tax rate. 
C)  lump-sum tax rate. 
D)  sales tax rate. 
A)  average tax rate. 
B)  marginal tax rate. 
C)  lump-sum tax rate. 
D)  sales tax rate.

Question 4

If revenue from a cigarette tax is used to pay for healthcare for people with lung cancer, the cigarette tax may be justified on the basis of

Accepted Answer

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

Question 5

Briefly describe why some economists prefer a value-added tax (VAT) to an income tax.

Accepted Answer

Some economists believe that t

Question 6

Most people in the United States believe that our tax system should be both and .

Accepted Answer

efficient;

Question 7

Table 12-9
United States Income Tax Rates for a Single Individual, 2012 and 2013.
  
-Refer to Table 12-9. Harry is a single person whose taxable income is $35,000 a year. What is his marginal tax rate in 2013?

Accepted Answer

A)  10% 
B)  15% 
C)  27% 
D)  30% 
A)  10% 
B)  15% 
C)  27% 
D)  30%

Question 8

Most analysts expect the largest federal spending category to continue to grow in importance for many years into the future. What category of spending is this?

Accepted Answer

A)  national defense 
B)  education 
C)  income security 
D)  farm support programs 
A)  national defense 
B)  education 
C)  income security 
D)  farm support programs

Question 9

Which of the following in not a reason that a lump-sum tax imposes a minimal administrative burden on taxpayers?

Accepted Answer

A)  Everyone can easily compute the amount of tax owed. 
B)  There is no benefit to hiring an accountant to do your taxes. 
C)  Everyone owes the same amount of tax, regardless of earnings. 
D)  The government can easily forecast tax revenues. 
A)  Everyone can easily compute the amount of tax owed. 
B)  There is no benefit to hiring an accountant to do your taxes. 
C)  Everyone owes the same amount of tax, regardless of earnings. 
D)  The government can easily forecast tax revenues.

Question 10

Incentives to work and save are reduced when

Accepted Answer

A)  income taxes are higher. 
B)  consumption taxes replace income taxes. 
C)  corrective taxes are implemented. 
D)  All of the above are correct. 
A)  income taxes are higher. 
B)  consumption taxes replace income taxes. 
C)  corrective taxes are implemented. 
D)  All of the above are correct.

Question 11

Define the deadweight loss of a tax.

Accepted Answer

The deadweight loss of a tax i

Question 12

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. Total consumer surplus

Accepted Answer

A)  falls by less than the tax revenue generated. 
B)  falls by more than the tax revenue generated. 
C)  falls by the same amount as the tax revenue generated. 
D)  will not fall since Jennifer will no longer be in the market. 
A)  falls by less than the tax revenue generated. 
B)  falls by more than the tax revenue generated. 
C)  falls by the same amount as the tax revenue generated. 
D)  will not fall since Jennifer will no longer be in the market.

Question 13

As government debt increases,

Accepted Answer

A)  Congress will reduce spending by an equal proportion. 
B)  the government must spend more revenue on interest payments. 
C)  a trade-off with government deficits is inevitable. 
D)  tax rates must rise to cover the deficit. 
A)  Congress will reduce spending by an equal proportion. 
B)  the government must spend more revenue on interest payments. 
C)  a trade-off with government deficits is inevitable. 
D)  tax rates must rise to cover the deficit.

Question 14

Athos, Porthos,and Aramis each like to take fencing lessons. The price of a fencing lesson is $10. Athos values a fencing lesson at $15, Porthos at $13, and Aramis at $11. Suppose that if the government taxes fencing lessons at 50 cents each, the price rises to $10.50. A consequence of the tax is that consumer surplus shrinks by

Accepted Answer

A)  $1.50 and tax revenues increase by $1.50, so there is no deadweight loss. 
B)  $9.00 and tax revenues increase by $1.50, so there is a deadweight loss of $7.50. 
C)  $7.50 and tax revenues increase by $7.50, so there is no deadweight loss. 
D)  $7.50 and tax revenues increase by $1.50, so there is a deadweight loss of $6. 
A)  $1.50 and tax revenues increase by $1.50, so there is no deadweight loss. 
B)  $9.00 and tax revenues increase by $1.50, so there is a deadweight loss of $7.50. 
C)  $7.50 and tax revenues increase by $7.50, so there is no deadweight loss. 
D)  $7.50 and tax revenues increase by $1.50, so there is a deadweight loss of $6.

Question 15

Individual income taxes and social insurance taxes generate the highest tax revenue for the federal government.

Accepted Answer

A) True 
 B)False

Question 16

A person's tax liability refers to

Accepted Answer

A)  the percentage of income that a person must pay in taxes. 
B)  the amount of tax a person owes to the government. 
C)  the amount of tax the government is required to refund to each person. 
D)  deductions that can be legally subtracted from a person's income each year. 
A)  the percentage of income that a person must pay in taxes. 
B)  the amount of tax a person owes to the government. 
C)  the amount of tax the government is required to refund to each person. 
D)  deductions that can be legally subtracted from a person's income each year.

Question 17

If the government were to impose a tax that assigned everyone the same tax liability, it would be

Accepted Answer

A)  a lump-sum tax. 
B)  an equitable tax. 
C)  supported by the poor. 
D)  a progressive tax. 
A)  a lump-sum tax. 
B)  an equitable tax. 
C)  supported by the poor. 
D)  a progressive tax.

Question 18

The most common explanation for Social Security payments accounting for a larger share of federal government expenditures is

Accepted Answer

A)  increases in life expectancy. 
B)  people becoming eligible for Social Security benefits at an earlier age. 
C)  increases in birth rates among teenagers and the poor. 
D)  falling payroll tax receipts. 
A)  increases in life expectancy. 
B)  people becoming eligible for Social Security benefits at an earlier age. 
C)  increases in birth rates among teenagers and the poor. 
D)  falling payroll tax receipts.

Question 19

Table 12-4
  
-Refer to Table 12-4. What is the marginal tax rate for a person who makes $50,000?

Accepted Answer

A)  25% 
B)  28% 
C)  40% 
D)  60% 
A)  25% 
B)  28% 
C)  40% 
D)  60%

Question 20

When taxes are imposed on a commodity,

Accepted Answer

A)  there is never a deadweight loss. 
B)  some consumers alter their consumption by not purchasing the taxed commodity. 
C)  tax revenue will rise by the amount of the tax multiplied by the before-tax level of consumption. 
D)  the taxes do not distort incentives. 
A)  there is never a deadweight loss. 
B)  some consumers alter their consumption by not purchasing the taxed commodity. 
C)  tax revenue will rise by the amount of the tax multiplied by the before-tax level of consumption. 
D)  the taxes do not distort incentives.

Exam 12: The Design of the Tax System

Which of the following is true about the percent of total income all levels of government in the U.S. take as taxes?

If transfer payments are included when evaluating tax burdens, then the average tax rate of the poorest quintile of taxpayers would be approximately

If we want to gauge the sacrifice made by a taxpayer, we should use the

If revenue from a cigarette tax is used to pay for healthcare for people with lung cancer, the cigarette tax may be justified on the basis of

Briefly describe why some economists prefer a value-added tax (VAT) to an income tax.

Most people in the United States believe that our tax system should be both and .

Table 12-9 United States Income Tax Rates for a Single Individual, 2012 and 2013. -Refer to Table 12-9. Harry is a single person whose taxable income is $35,000 a year. What is his marginal tax rate in 2013?

Most analysts expect the largest federal spending category to continue to grow in importance for many years into the future. What category of spending is this?

Which of the following in not a reason that a lump-sum tax imposes a minimal administrative burden on taxpayers?

Incentives to work and save are reduced when

Define the deadweight loss of a tax.

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. Total consumer surplus

As government debt increases,

Individual income taxes and social insurance taxes generate the highest tax revenue for the federal government.

A person's tax liability refers to

If the government were to impose a tax that assigned everyone the same tax liability, it would be

The most common explanation for Social Security payments accounting for a larger share of federal government expenditures is

Table 12-4 -Refer to Table 12-4. What is the marginal tax rate for a person who makes $50,000?

When taxes are imposed on a commodity,

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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