Question 1

The marginal tax rate for a lump-sum tax

Accepted Answer

A)  is always positive. 
B)  is always negative. 
C)  is zero. 
D)  can take on any value but must be greater than the average tax rate. 
A)  is always positive. 
B)  is always negative. 
C)  is zero. 
D)  can take on any value but must be greater than the average tax rate.

Question 2

Wilma values a decorative garden rock at $15, while Fred values it at $10. The price of a decorative garden rock is $9. If the government imposes a $2 tax per decorative garden rock and the price of the rock rises to $11, what part of the deadweight loss comes from Wilma, and what part comes from Fred?

Accepted Answer

A)  none comes from Wilma; $1 comes from Fred 
B)  none comes from Wilma; $3 comes from Fred 
C)  $2 comes from Wilma; $1 comes from Fred 
D)  $4 comes from Wilma; $3 comes from Fred 
A)  none comes from Wilma; $1 comes from Fred 
B)  none comes from Wilma; $3 comes from Fred 
C)  $2 comes from Wilma; $1 comes from Fred 
D)  $4 comes from Wilma; $3 comes from Fred

Question 3

Suppose that in 2020 the average citizen's federal tax bill is $12,466, and total federal spending is $10,824 per person. In 2020, the federal government will have

Accepted Answer

A)  a budget surplus. 
B)  a budget deficit. 
C)  horizontal equity. 
D)  vertical equity. 
A)  a budget surplus. 
B)  a budget deficit. 
C)  horizontal equity. 
D)  vertical equity.

Question 4

Some states do not have a state income tax.

Accepted Answer

A) True 
 B)False

Question 5

Table 12-22
  
-Refer to Table 12-22. A progressive tax is illustrated by tax

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 6

Medicaid is

Accepted Answer

A)  the government's health plan for the elderly. 
B)  the government's health plan for the poor. 
C)  another name for Social Security. 
D)  Both a and c are correct. 
A)  the government's health plan for the elderly. 
B)  the government's health plan for the poor. 
C)  another name for Social Security. 
D)  Both a and c are correct.

Question 7

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 $1 on each cigar, and the equilibrium price of a cigar increases to $16. How much tax revenue is collected?

Accepted Answer

A)  $0 
B)  $1 
C)  $2 
D)  $4 
A)  $0 
B)  $1 
C)  $2 
D)  $4

Question 8

Suppose Luke values a scoop of Italian gelato at $4. Leia values a scoop of Italian gelato at $6. The pre-tax price of a scoop of Italian gelato is $2. The government imposes a "fat tax" of $3 oneach scoop of Italian gelato, and the price rises to $5. The deadweight loss from the tax is

Accepted Answer

A)  $4, and the deadweight loss comes from both Luke and Leia. 
B)  $4, and the deadweight loss comes only from Luke because he does not buy gelato after the tax. 
C)  $2, and the deadweight loss comes from both Luke and Leia. 
D)  $2, and the deadweight loss comes only from Luke because he does not buy gelato after the tax. 
A)  $4, and the deadweight loss comes from both Luke and Leia. 
B)  $4, and the deadweight loss comes only from Luke because he does not buy gelato after the tax. 
C)  $2, and the deadweight loss comes from both Luke and Leia. 
D)  $2, and the deadweight loss comes only from Luke because he does not buy gelato after the tax.

Question 9

The most efficient tax possible is a

Accepted Answer

A)  lump-sum tax. 
B)  marginal tax. 
C)  proportional tax. 
D)  value-added tax. 
A)  lump-sum tax. 
B)  marginal tax. 
C)  proportional tax. 
D)  value-added tax.

Question 10

Some colleges charge all students the same fee for access to campus computing services. Suppose that students differ by how many hours of campus computing services they use. For example, some students print all their papers and assignment in the campus computer labs, while others use their own printers in their apartments. The computing services fee is most like a(n)

Accepted Answer

A)  excise tax that conforms to the benefits principle. 
B)  excise tax that violates the benefits principle. 
C)  lump-sum tax that conforms to the benefits principle. 
D)  lump-sum tax that violates the benefits principle. 
A)  excise tax that conforms to the benefits principle. 
B)  excise tax that violates the benefits principle. 
C)  lump-sum tax that conforms to the benefits principle. 
D)  lump-sum tax that violates the benefits principle.

Question 11

Suppose that in 2020 the average citizen's federal tax bill is $14,888 per person, and total federal spending is $13,997 per person. In 2020, the federal government will have

Accepted Answer

A)  a per person budget surplus of $891. 
B)  a per person budget deficit of $891. 
C)  horizontal equity. 
D)  vertical equity. 
A)  a per person budget surplus of $891. 
B)  a per person budget deficit of $891. 
C)  horizontal equity. 
D)  vertical equity.

Question 12

Table 12-11
  
-Refer to Table 12-11. If Peggy has taxable income of $43,000, her marginal tax rate is

Accepted Answer

A)  16%. 
B)  8%. 
C)  24%. 
D)  34%. 
A)  16%. 
B)  8%. 
C)  24%. 
D)  34%.

Question 13

Table 12-14
  
-Refer to Table 12-14. The tax system is

Accepted Answer

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

Question 14

The government finances the budget deficit by

Accepted Answer

A)  borrowing from the public. 
B)  borrowing solely from the Federal Reserve Bank. 
C)  printing currency in the amount of the budget deficit. 
D)  requiring that budget surpluses occur every other year to pay off the deficits. 
A)  borrowing from the public. 
B)  borrowing solely from the Federal Reserve Bank. 
C)  printing currency in the amount of the budget deficit. 
D)  requiring that budget surpluses occur every other year to pay off the deficits.

Question 15

The resources that a taxpayer devotes to complying with the tax laws are a type of

Accepted Answer

A)  marginal tax. 
B)  administrative burden. 
C)  deadweight loss. 
D)  Both b and c are correct. 
A)  marginal tax. 
B)  administrative burden. 
C)  deadweight loss. 
D)  Both b and c are correct.

Question 16

Suppose Darby values a certain smart phone at $400. Jake values the same smart phone at $300. The pre-tax price of this smart phone is $250. The government imposes a tax of $75 on each smart phone, and the price rises to $325. The deadweight loss from the tax is

Accepted Answer

A)  $150. 
B)  $50. 
C)  $0. 
D)  $100. 
A)  $150. 
B)  $50. 
C)  $0. 
D)  $100.

Question 17

Which of the following statements is correct?

Accepted Answer

A)  A general sales tax on food is regressive when low-income taxpayers spend a larger proportion of their income on food than high-income taxpayers. 
B)  A general sales tax on food is regressive when middle income taxpayers spend a smaller proportion of their income on food than high-income taxpayers. 
C)  A general sales tax on food is regressive when high-income taxpayers spend a larger proportion of their income on food than middle income taxpayers. 
D)  A general sales tax on food is regressive when high-income taxpayers spend a larger proportion of their income on food than low-income taxpayers. 
A)  A general sales tax on food is regressive when low-income taxpayers spend a larger proportion of their income on food than high-income taxpayers. 
B)  A general sales tax on food is regressive when middle income taxpayers spend a smaller proportion of their income on food than high-income taxpayers. 
C)  A general sales tax on food is regressive when high-income taxpayers spend a larger proportion of their income on food than middle income taxpayers. 
D)  A general sales tax on food is regressive when high-income taxpayers spend a larger proportion of their income on food than low-income taxpayers.

Question 18

When the government levies a tax on a corporation,

Accepted Answer

A)  all the burden of the tax ultimately falls on the corporation's owners. 
B)  the corporation is more like a tax collector than a taxpayer. 
C)  output must increase to compensate for reduced profits. 
D)  less deadweight loss will occur since corporations are entities and not people who respond to incentives. 
A)  all the burden of the tax ultimately falls on the corporation's owners. 
B)  the corporation is more like a tax collector than a taxpayer. 
C)  output must increase to compensate for reduced profits. 
D)  less deadweight loss will occur since corporations are entities and not people who respond to incentives.

Question 19

Sue earns income of $80,000 per year. Her average tax rate is 50 percent. Sue paid $5,000 in taxes on the first $30,000 she earned. What was the marginal tax rate on the first $30,000 she earned, and what was the marginal tax rate on the remaining $50,000?

Accepted Answer

A)  6.25 percent and 50.00 percent, respectively 
B)  10.00 percent and 70.00 percent, respectively 
C)  16.67 percent and 60.00 percent, respectively 
D)  16.67 percent and 70.00 percent, respectively 
A)  6.25 percent and 50.00 percent, respectively 
B)  10.00 percent and 70.00 percent, respectively 
C)  16.67 percent and 60.00 percent, respectively 
D)  16.67 percent and 70.00 percent, respectively

Question 20

Suppose that the government taxes income in the following fashion: 30 percent of the first $20,000, 50 percent of the next $30,000, and 60 percent of all income over $50,000. Ted earns $40,000, and Robin earns $60,000. Which of the following statements is correct?

Accepted Answer

A)  Ted's marginal tax rate is 60 percent, and his average tax rate is 50 percent. 
B)  Ted's marginal tax rate is 50 percent, and his average tax rate is 40 percent. 
C)  Robin's marginal tax rate is 50 percent, and her average tax rate is 45 percent. 
D)  Robin's marginal tax rate is 60 percent, and her average tax rate is 40 percent. 
A)  Ted's marginal tax rate is 60 percent, and his average tax rate is 50 percent. 
B)  Ted's marginal tax rate is 50 percent, and his average tax rate is 40 percent. 
C)  Robin's marginal tax rate is 50 percent, and her average tax rate is 45 percent. 
D)  Robin's marginal tax rate is 60 percent, and her average tax rate is 40 percent.

The marginal tax rate for a lump-sum tax

Suppose that in 2020 the average citizen's federal tax bill is $12,466, and total federal spending is $10,824 per person. In 2020, the federal government will have

Some states do not have a state income tax.

Table 12-22 -Refer to Table 12-22. A progressive tax is illustrated by tax

Medicaid is

Suppose Luke values a scoop of Italian gelato at $4. Leia values a scoop of Italian gelato at $6. The pre-tax price of a scoop of Italian gelato is $2. The government imposes a "fat tax" of $3 oneach scoop of Italian gelato, and the price rises to $5. The deadweight loss from the tax is

The most efficient tax possible is a

Suppose that in 2020 the average citizen's federal tax bill is $14,888 per person, and total federal spending is $13,997 per person. In 2020, the federal government will have

Table 12-11 -Refer to Table 12-11. If Peggy has taxable income of $43,000, her marginal tax rate is

Table 12-14 -Refer to Table 12-14. The tax system is

The government finances the budget deficit by

The resources that a taxpayer devotes to complying with the tax laws are a type of

Suppose Darby values a certain smart phone at $400. Jake values the same smart phone at $300. The pre-tax price of this smart phone is $250. The government imposes a tax of $75 on each smart phone, and the price rises to $325. The deadweight loss from the tax is

Which of the following statements is correct?

When the government levies a tax on a corporation,

Sue earns income of $80,000 per year. Her average tax rate is 50 percent. Sue paid $5,000 in taxes on the first $30,000 she earned. What was the marginal tax rate on the first $30,000 she earned, and what was the marginal tax rate on the remaining $50,000?

Suppose that the government taxes income in the following fashion: 30 percent of the first $20,000, 50 percent of the next $30,000, and 60 percent of all income over $50,000. Ted earns $40,000, and Robin earns $60,000. Which of the following statements is correct?

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 marginal tax rate for a lump-sum tax

Suppose that in 2020 the average citizen's federal tax bill is $12,466, and total federal spending is $10,824 per person. In 2020, the federal government will have

Some states do not have a state income tax.

Table 12-22 -Refer to Table 12-22. A progressive tax is illustrated by tax

Medicaid is

Suppose Luke values a scoop of Italian gelato at $4. Leia values a scoop of Italian gelato at $6. The pre-tax price of a scoop of Italian gelato is $2. The government imposes a "fat tax" of $3 oneach scoop of Italian gelato, and the price rises to $5. The deadweight loss from the tax is

The most efficient tax possible is a

Suppose that in 2020 the average citizen's federal tax bill is $14,888 per person, and total federal spending is $13,997 per person. In 2020, the federal government will have

Table 12-11 -Refer to Table 12-11. If Peggy has taxable income of $43,000, her marginal tax rate is

Table 12-14 -Refer to Table 12-14. The tax system is

The government finances the budget deficit by

The resources that a taxpayer devotes to complying with the tax laws are a type of

Suppose Darby values a certain smart phone at $400. Jake values the same smart phone at $300. The pre-tax price of this smart phone is $250. The government imposes a tax of $75 on each smart phone, and the price rises to $325. The deadweight loss from the tax is

Which of the following statements is correct?

When the government levies a tax on a corporation,

Sue earns income of $80,000 per year. Her average tax rate is 50 percent. Sue paid $5,000 in taxes on the first $30,000 she earned. What was the marginal tax rate on the first $30,000 she earned, and what was the marginal tax rate on the remaining $50,000?

Suppose that the government taxes income in the following fashion: 30 percent of the first $20,000, 50 percent of the next $30,000, and 60 percent of all income over $50,000. Ted earns $40,000, and Robin earns $60,000. Which of the following statements is correct?

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