Question 1

With a lump-sum tax, the

Accepted Answer

A)  marginal tax rate is always less than the average tax rate. 
B)  average tax rate is always less than the marginal tax rate. 
C)  marginal tax rate falls as income rises. 
D)  marginal tax rate rises as income rises. 
A)  marginal tax rate is always less than the average tax rate. 
B)  average tax rate is always less than the marginal tax rate. 
C)  marginal tax rate falls as income rises. 
D)  marginal tax rate rises as income rises.

Question 2

From the time of Benjamin Franklin to the present, the percentage of the average American's income that goes to pay taxes has

Accepted Answer

A)  decreased from about 20 percent to about 10 percent. 
B)  remained constant at about 10 percent. 
C)  has risen from less than 2 percent to about 33.3 percent. 
D)  has risen from less than 5 percent to about 25 percent. 
A)  decreased from about 20 percent to about 10 percent. 
B)  remained constant at about 10 percent. 
C)  has risen from less than 2 percent to about 33.3 percent. 
D)  has risen from less than 5 percent to about 25 percent.

Question 3

If the government imposes a tax of $3,000 on everyone, the tax would be a(n)

Accepted Answer

A)  income tax. 
B)  consumption tax. 
C)  lump-sum tax. 
D)  marginal tax. 
A)  income tax. 
B)  consumption tax. 
C)  lump-sum tax. 
D)  marginal tax.

Question 4

List the three most important expenditure programs of the federal government. How do they differ from the three most important expenditure programs of state and local governments? Explain why it makes more sense for the federal government to purchase "national defense" rather than state governments.

Accepted Answer

The three most important expenditure pro

Question 5

Some colleges charge all students the same fee for a weekly dining services meal plan. Suppose that students differ by how much food they consume each week. For example, members of the women's swimming team consume, on average, twice as much food as the average female college student, and the average male college student consumes 20 percent more food than the average female college student. The dining 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 6

Which of the following types of taxes achieves vertical equity: a proportional tax, regressive tax, and/or progressive tax?

Accepted Answer

proportion

Question 7

Suppose that the government collected taxes in the following fashion: people who earn less than $50,000 pay 25 percent in taxes, people who earn between $50,000 and $100,000 pay 35 percent in taxes, people who earn between $100,000 and $200,000 pay 30 percent in taxes, and people who earn more than $200,000 pay 28 percent in taxes. Which of the following statements is correct?

Accepted Answer

A)  The tax system is proportional for income levels less than $50,000 and regressive for income levels above $50,000. 
B)  The tax system is regressive for income levels less than $100,000 and progressive for income levels above $100,000. 
C)  The tax system is progressive for income levels less than $100,000 and regressive for income levels above $100,000. 
D)  The tax system is progressive for income levels less than $50,000 and proportional for income levels above $100,000. 
A)  The tax system is proportional for income levels less than $50,000 and regressive for income levels above $50,000. 
B)  The tax system is regressive for income levels less than $100,000 and progressive for income levels above $100,000. 
C)  The tax system is progressive for income levels less than $100,000 and regressive for income levels above $100,000. 
D)  The tax system is progressive for income levels less than $50,000 and proportional for income levels above $100,000.

Question 8

In 2011 the largest percentage of federal government spending was on

Accepted Answer

A)  national defense. The largest source of federal revenues was from corporate income taxes. 
B)  health. The largest source of federal revenues was from individual income taxes. 
C)  income security. The largest source of federal revenues was from corporate income taxes. 
D)  income security. The largest source of federal revenues was from individual income taxes. 
A)  national defense. The largest source of federal revenues was from corporate income taxes. 
B)  health. The largest source of federal revenues was from individual income taxes. 
C)  income security. The largest source of federal revenues was from corporate income taxes. 
D)  income security. The largest source of federal revenues was from individual income taxes.

Question 9

Bert faces a progressive tax structure that has the following marginal tax rates: 0 percent on the first $10,000, 10 percent on the next $10,000, 15 percent on the next $10,000, 25 percent on the next $10,000, and 50 percent on all additional income. If Bert earns $75,000, what is his average tax rate?

Accepted Answer

A)  20 percent 
B)  25 percent 
C)  30 percent 
D)  36.67 percent 
A)  20 percent 
B)  25 percent 
C)  30 percent 
D)  36.67 percent

Question 10

Table 12-1
  
-Refer to Table 12-1. Assume that the price of a weekend ski pass is $45 and that the price reflects the actual unit cost of providing a weekend of skiing. Suppose the government imposes a tax of $12 on skiing, which raises the price of a weekend ski pass to $57. What is the value of the surplus that accrues to all four skiers from their weekend trip?

Accepted Answer

A)  $41. 
B)  $95. 
C)  $144. 
D)  $185. 
A)  $41. 
B)  $95. 
C)  $144. 
D)  $185.

Question 11

The average American pays a higher percent of his income in taxes today than he would have in the late 18th century.

Accepted Answer

A) True 
 B)False

Question 12

Table 12-1
  
-Refer to Table 12-1. Assume that the price of a weekend ski pass is $45 and that the price reflects the actual unit cost of providing a weekend of skiing. Suppose the government imposes a tax of $12 on skiing, which raises the price of a weekend ski pass to $57. How much tax revenue is collected from these four skiers?

Accepted Answer

A)  $0. 
B)  $12. 
C)  $36. 
D)  $48. 
A)  $0. 
B)  $12. 
C)  $36. 
D)  $48.

Question 13

Scenario 12-5
Senator Filch argues that a tax must be paid by people who benefit from government services. Senator Fudge argues that a tax must be paid in accordance with a person's ability to bear the tax burden. Senator Malfoy argues that people with a greater ability to pay a tax should pay a larger amount. Senator Moody argues that taxpayers with similar abilities to pay should contribute the same amount.
-Refer to Scenario 12-5. Which Senator is advocating for taxes based on horizontal equity?

Accepted Answer

A)  Senator Filch 
B)  Senator Fudge 
C)  Senator Malfoy 
D)  Senator Moody 
A)  Senator Filch 
B)  Senator Fudge 
C)  Senator Malfoy 
D)  Senator Moody

Question 14

Medicare is the

Accepted Answer

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

Question 15

In 2011, the federal government spent 9 percent of the budget on net interest. Which of the following statements regarding net interest is correct?

Accepted Answer

A)  If the government pays down its debt, the amount of the budget needed for net interest decreases. 
B)  If the government accrues more debt, the amount of the budget needed for net interest increases. 
C)  In 2011, the federal government spent 325 billion dollars to cover interest payments on its loans. 
D)  All of the above are correct. 
A)  If the government pays down its debt, the amount of the budget needed for net interest decreases. 
B)  If the government accrues more debt, the amount of the budget needed for net interest increases. 
C)  In 2011, the federal government spent 325 billion dollars to cover interest payments on its loans. 
D)  All of the above are correct.

Question 16

The U.S. federal government finances budget deficits by

Accepted Answer

A)  selling stock, much like a corporation. 
B)  printing additional currency. 
C)  borrowing from the public. 
D)  raising property taxes. 
A)  selling stock, much like a corporation. 
B)  printing additional currency. 
C)  borrowing from the public. 
D)  raising property taxes.

Question 17

Scenario 12-2
Suppose that Bob places a value of $10 on a movie ticket and that Lisa places a value of $7 on a movie ticket. In addition, suppose the price of a movie ticket is $5.
-Refer to Scenario 12-2. Suppose the government levies a tax of $1 on a movie ticket and that, as a result, the price of a movie ticket increases to $6. If Bob and Lisa both purchase a movie ticket, what is the deadweight loss from the tax?

Accepted Answer

A)  $0 
B)  $1 
C)  $2 
D)  $3 
A)  $0 
B)  $1 
C)  $2 
D)  $3

Question 18

Which of the following is an example of a payroll tax?

Accepted Answer

A)  a tax on the wages that a firm pays its workers 
B)  a "sin" tax on distilled alcohol 
C)  a tax on corporate profits 
D)  the portion of federal income taxes earmarked to pay for national defense 
A)  a tax on the wages that a firm pays its workers 
B)  a "sin" tax on distilled alcohol 
C)  a tax on corporate profits 
D)  the portion of federal income taxes earmarked to pay for national defense

Question 19

The income tax requires that taxpayers pay 10 percent on the first $50,000 of income and 20 percent on all income over $50,000. Andy paid $9,000 in taxes. What were his marginal and average tax rates?

Accepted Answer

A)  20 percent and 13 percent, respectively 
B)  20 percent and 15 percent, respectively 
C)  10 percent and 13 percent respectively 
D)  10 percent and 15 percent respectively 
A)  20 percent and 13 percent, respectively 
B)  20 percent and 15 percent, respectively 
C)  10 percent and 13 percent respectively 
D)  10 percent and 15 percent respectively

Question 20

Of all the taxes collected in the U.S. economy, what percentage is collected by the federal government?

Accepted Answer

The answer of Of all the taxes collected in the...

With a lump-sum tax, the

From the time of Benjamin Franklin to the present, the percentage of the average American's income that goes to pay taxes has

If the government imposes a tax of $3,000 on everyone, the tax would be a(n)

List the three most important expenditure programs of the federal government. How do they differ from the three most important expenditure programs of state and local governments? Explain why it makes more sense for the federal government to purchase "national defense" rather than state governments.

Which of the following types of taxes achieves vertical equity: a proportional tax, regressive tax, and/or progressive tax?

In 2011 the largest percentage of federal government spending was on

The average American pays a higher percent of his income in taxes today than he would have in the late 18th century.

Medicare is the

In 2011, the federal government spent 9 percent of the budget on net interest. Which of the following statements regarding net interest is correct?

The U.S. federal government finances budget deficits by

Which of the following is an example of a payroll tax?

The income tax requires that taxpayers pay 10 percent on the first $50,000 of income and 20 percent on all income over $50,000. Andy paid $9,000 in taxes. What were his marginal and average tax rates?

Of all the taxes collected in the U.S. economy, what percentage is collected by the federal government?

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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Exam 12: The Design of the Tax System

With a lump-sum tax, the

From the time of Benjamin Franklin to the present, the percentage of the average American's income that goes to pay taxes has

If the government imposes a tax of $3,000 on everyone, the tax would be a(n)

Which of the following types of taxes achieves vertical equity: a proportional tax, regressive tax, and/or progressive tax?

In 2011 the largest percentage of federal government spending was on

The average American pays a higher percent of his income in taxes today than he would have in the late 18th century.

Medicare is the

In 2011, the federal government spent 9 percent of the budget on net interest. Which of the following statements regarding net interest is correct?

The U.S. federal government finances budget deficits by

Which of the following is an example of a payroll tax?

The income tax requires that taxpayers pay 10 percent on the first $50,000 of income and 20 percent on all income over $50,000. Andy paid $9,000 in taxes. What were his marginal and average tax rates?

Of all the taxes collected in the U.S. economy, what percentage is collected by the federal government?

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