Question 1

Tax evasion is illegal, but tax avoidance is legal.

Accepted Answer

A) True 
 B)False

Question 2

The largest category of federal spending is national defense.

Accepted Answer

A) True 
 B)False

Question 3

A person's tax obligation divided by her income is called her

Accepted Answer

A)  marginal social tax rate. 
B)  marginal private tax rate. 
C)  marginal tax rate. 
D)  average tax rate. 
A)  marginal social tax rate. 
B)  marginal private tax rate. 
C)  marginal tax rate. 
D)  average tax rate.

Question 4

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. How much total consumer surplus do Ken and Mark get when each purchases one cigar?

Accepted Answer

A)  $1 
B)  $2 
C)  $5 
D)  $7 
A)  $1 
B)  $2 
C)  $5 
D)  $7

Question 5

The claim that all citizens should make an "equal sacrifice" to support government programs is usually associated with

Accepted Answer

A)  the ability-to-pay principle. 
B)  the benefits principle. 
C)  efficiency arguments. 
D)  regressive tax arguments. 
A)  the ability-to-pay principle. 
B)  the benefits principle. 
C)  efficiency arguments. 
D)  regressive tax arguments.

Question 6

The marginal tax rates on the richest Americans when Ronald Reagan was elected and when he left office were

Accepted Answer

A)  28 percent and 50 percent, respectively. 
B)  70 percent and 40 percent, respectively. 
C)  40 percent and 70 percent, respectively. 
D)  50 percent and 28 percent, respectively. 
A)  28 percent and 50 percent, respectively. 
B)  70 percent and 40 percent, respectively. 
C)  40 percent and 70 percent, respectively. 
D)  50 percent and 28 percent, respectively.

Question 7

The government's health plan for the elderly is called

Accepted Answer

A)  Medicaid. 
B)  Medicare. 
C)  Social Security. 
D)  food stamps. 
A)  Medicaid. 
B)  Medicare. 
C)  Social Security. 
D)  food stamps.

Question 8

Calculate the marginal tax rate and the average tax rate of a lump-sum tax of $5,000.

Accepted Answer

The marginal tax rate would be $0 becaus

Question 9

Deadweight losses arise because a tax causes some individuals to change their behavior.

Accepted Answer

A) True 
 B)False

Question 10

A tax system exhibits vertical equity when taxpayers with similar abilities to pay contribute the same amount.

Accepted Answer

A) True 
 B)False

Question 11

Most Americans agree that our tax system should (i) be fair.
(ii) be efficient.
(iii) impose as small a cost on society as possible.
(iv) use a value-added tax (VAT) instead of an income tax.

Accepted Answer

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

Question 12

If revenue from a gasoline tax is used to build and maintain public roads, the gasoline 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 13

Table 12-15
  
-Refer to Table 12-15. The tax system is

Accepted Answer

A)  proportional. 
B)  regressive. 
C)  progressive. 
D)  lump sum. 
A)  proportional. 
B)  regressive. 
C)  progressive. 
D)  lump sum.

Question 14

The "other" category of federal spending consists of many less expensive functions of government, including all of the following except

Accepted Answer

A)  housing credit programs. 
B)  farm support programs. 
C)  funding for the National Institutes of Health. 
D)  the federal court system. 
A)  housing credit programs. 
B)  farm support programs. 
C)  funding for the National Institutes of Health. 
D)  the federal court system.

Question 15

Scenario 12-4
A taxpayer faces the following tax rates on her income: 20 percent of the first $40,000 of her income; 30 percent of all her income above $40,000.
-Refer to Scenario 12-4. The taxpayer faces

Accepted Answer

A)  an average tax rate of 22.5 percent when her income is $30,000. 
B)  an average tax rate of 22.0 percent when her income is $50,000. 
C)  a marginal tax rate of 10 percent when her income rises from $40,000 to $40,001. 
D)  a marginal tax rate of 50 percent when her income rises from $60,000 to $60,001. 
A)  an average tax rate of 22.5 percent when her income is $30,000. 
B)  an average tax rate of 22.0 percent when her income is $50,000. 
C)  a marginal tax rate of 10 percent when her income rises from $40,000 to $40,001. 
D)  a marginal tax rate of 50 percent when her income rises from $60,000 to $60,001.

Question 16

When interest income from savings is taxed, people will save

Accepted Answer

A)  more to make up for what is lost in taxes. 
B)  the same amount as they would have without the tax. 
C)  less than they would without the tax. 
D)  None of the above is correct since the government would not tax interest on savings. 
A)  more to make up for what is lost in taxes. 
B)  the same amount as they would have without the tax. 
C)  less than they would without the tax. 
D)  None of the above is correct since the government would not tax interest on savings.

Question 17

When the marginal tax rate equals the average tax rate, the tax is

Accepted Answer

A)  proportional. 
B)  progressive. 
C)  regressive. 
D)  egalitarian. 
A)  proportional. 
B)  progressive. 
C)  regressive. 
D)  egalitarian.

Question 18

Which of the following statements is correct?

Accepted Answer

A)  The U.S. federal government collected a higher percentage of income in taxes in the early 1900s than in the early 2000s. 
B)  The U.S. federal government collects a higher percentage of income in taxes than many European countries, including France and Germany. 
C)  The U.S. federal government collects a lower percentage of income in taxes than many developing countries, including Mexico and India. 
D)  The U.S. federal government collects a similar percentage of income in taxes as Brazil and Japan. 
A)  The U.S. federal government collected a higher percentage of income in taxes in the early 1900s than in the early 2000s. 
B)  The U.S. federal government collects a higher percentage of income in taxes than many European countries, including France and Germany. 
C)  The U.S. federal government collects a lower percentage of income in taxes than many developing countries, including Mexico and India. 
D)  The U.S. federal government collects a similar percentage of income in taxes as Brazil and Japan.

Question 19

Use Table A to complete Table B.
TABLE A
     TABLE B

Accepted Answer

The answer of Use Table A to complete Table B.
TABLE...

Question 20

State and local governments generate revenue from all of the following sources except

Accepted Answer

A)  sales taxes. 
B)  the federal government. 
C)  corporate income taxes. 
D)  customs duties. 
A)  sales taxes. 
B)  the federal government. 
C)  corporate income taxes. 
D)  customs duties.

Exam 12: The Design of the Tax System

Tax evasion is illegal, but tax avoidance is legal.

The largest category of federal spending is national defense.

A person's tax obligation divided by her income is called her

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. How much total consumer surplus do Ken and Mark get when each purchases one cigar?

The claim that all citizens should make an "equal sacrifice" to support government programs is usually associated with

The marginal tax rates on the richest Americans when Ronald Reagan was elected and when he left office were

The government's health plan for the elderly is called

Calculate the marginal tax rate and the average tax rate of a lump-sum tax of $5,000.

Deadweight losses arise because a tax causes some individuals to change their behavior.

A tax system exhibits vertical equity when taxpayers with similar abilities to pay contribute the same amount.

Most Americans agree that our tax system should (i) be fair. (ii) be efficient. (iii) impose as small a cost on society as possible. (iv) use a value-added tax (VAT) instead of an income tax.

If revenue from a gasoline tax is used to build and maintain public roads, the gasoline tax may be justified on the basis of

Table 12-15 -Refer to Table 12-15. The tax system is

The "other" category of federal spending consists of many less expensive functions of government, including all of the following except

Scenario 12-4 A taxpayer faces the following tax rates on her income: 20 percent of the first $40,000 of her income; 30 percent of all her income above $40,000. -Refer to Scenario 12-4. The taxpayer faces

When interest income from savings is taxed, people will save

When the marginal tax rate equals the average tax rate, the tax is

Which of the following statements is correct?

Use Table A to complete Table B. TABLE A TABLE B

State and local governments generate revenue from all of the following sources except

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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