Question 1

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

Accepted Answer

A)  14.7%. 
B)  16.3%. 
C)  20.8%. 
D)  24.0%. 
A)  14.7%. 
B)  16.3%. 
C)  20.8%. 
D)  24.0%.

Question 2

Which of the following contributes to the projected rise in government spending on Social Security and Medicare as a percentage of GDP?

Accepted Answer

A)  increasing life expectancies 
B)  increasing healthcare costs 
C)  increasing fertility rates 
D)  Both a and b are correct. 
A)  increasing life expectancies 
B)  increasing healthcare costs 
C)  increasing fertility rates 
D)  Both a and b are correct.

Question 3

The average tax rate measures the

Accepted Answer

A)  fraction of spending paid in taxes. 
B)  fraction of income paid in taxes. 
C)  incremental rate of tax on income. 
D)  average deadweight loss from all taxes. 
A)  fraction of spending paid in taxes. 
B)  fraction of income paid in taxes. 
C)  incremental rate of tax on income. 
D)  average deadweight loss from all taxes.

Question 4

Sales taxes generate nearly 50% of the tax revenue for state and local governments.

Accepted Answer

A) True 
 B)False

Question 5

The argument that each person should pay taxes according to how well the individual can shoulder the burden is called

Accepted Answer

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

Question 6

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. What is total consumer surplus for Bob and Lisa?

Accepted Answer

A)  $0 
B)  $2 
C)  $5 
D)  $7 
A)  $0 
B)  $2 
C)  $5 
D)  $7

Question 7

Table 12-10
  
-Refer to Table 12-10. If Jace has $33,000 in taxable income, his tax liability will be

Accepted Answer

A)  $4,531. 
B)  $4,678. 
C)  $4,950. 
D)  $8,269. 
A)  $4,531. 
B)  $4,678. 
C)  $4,950. 
D)  $8,269.

Question 8

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 happened to his marginal tax rate between 2012 and 2013?

Accepted Answer

A)  It increased. 
B)  It decreased. 
C)  It did not change. 
D)  We do not have enough information to answer this question. 
A)  It increased. 
B)  It decreased. 
C)  It did not change. 
D)  We do not have enough information to answer this question.

Question 9

Suppose the government taxes 25 percent of the first $60,000 of income and 40 percent of all income above $60,000. For a person earning $200,000, the marginal tax rate is

Accepted Answer

A)  25 percent, and the average tax rate is 32.5 percent. 
B)  25 percent, and the average tax rate is 36 percent. 
C)  40 percent, and the average tax rate is 32.5 percent. 
D)  40 percent, and the average tax rate is 36 percent. 
A)  25 percent, and the average tax rate is 32.5 percent. 
B)  25 percent, and the average tax rate is 36 percent. 
C)  40 percent, and the average tax rate is 32.5 percent. 
D)  40 percent, and the average tax rate is 36 percent.

Question 10

Which of the following describes a situation where tax laws give preferential treatment to specific types of behavior?

Accepted Answer

A)  tax evasion 
B)  a political payoff 
C)  a tax loophole 
D)  compensation for the benefit of society 
A)  tax evasion 
B)  a political payoff 
C)  a tax loophole 
D)  compensation for the benefit of society

Question 11

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

Accepted Answer

A)  17.6% 
B)  20.5% 
C)  21.3% 
D)  26.2% 
A)  17.6% 
B)  20.5% 
C)  21.3% 
D)  26.2%

Question 12

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 taxable income of $49,000?

Accepted Answer

A)  0% 
B)  10% 
C)  25% 
D)  35% 
A)  0% 
B)  10% 
C)  25% 
D)  35%

Question 13

The U.S. federal government collects about one-half of the taxes in our economy.

Accepted Answer

A) True 
 B)False

Question 14

The U.S. income tax

Accepted Answer

A)  discourages saving. 
B)  encourages saving. 
C)  has no effect on saving. 
D)  will reduce the administrative burden of taxation. 
A)  discourages saving. 
B)  encourages saving. 
C)  has no effect on saving. 
D)  will reduce the administrative burden of taxation.

Question 15

If your income is $40,000 and your income tax liability is $5,000, your marginal tax rate is

Accepted Answer

A)  8 percent. 
B)  12.5 percent. 
C)  20 percent. 
D)  unknown. We do not have enough information to answer this question. 
A)  8 percent. 
B)  12.5 percent. 
C)  20 percent. 
D)  unknown. We do not have enough information to answer this question.

Question 16

Briefly describe the tradeoff between equity and efficiency of tax systems using a few examples.

Accepted Answer

Although most Americans agree that equit

Question 17

Over the past century in the U.S., what has been federal government revenue as a percentage of GDP? What has been state and local government revenue as a percentage of GDP?

Accepted Answer

According to Figure 1, in 1913, the fede

Question 18

What are the two main sources of tax revenues for state and local governments?

Accepted Answer

sales taxe

Question 19

One of the most difficult issues associated with trying to structure a tax policy to satisfy horizontal equity is determining

Accepted Answer

A)  whether or not a taxpayer falls within the highest income quintile. 
B)  the level of transfer payments made to low-income groups. 
C)  the source of income for taxpayers. 
D)  what differences are relevant to a family's ability to pay. 
A)  whether or not a taxpayer falls within the highest income quintile. 
B)  the level of transfer payments made to low-income groups. 
C)  the source of income for taxpayers. 
D)  what differences are relevant to a family's ability to pay.

Question 20

Many economists believe that

Accepted Answer

A)  the corporate income tax satisfies the goal of horizontal equity. 
B)  the corporate income tax does not distort the incentives of customers. 
C)  the corporate income tax is more efficient than the personal income tax. 
D)  workers and customers bear much of the burden of the corporate income tax. 
A)  the corporate income tax satisfies the goal of horizontal equity. 
B)  the corporate income tax does not distort the incentives of customers. 
C)  the corporate income tax is more efficient than the personal income tax. 
D)  workers and customers bear much of the burden of the corporate income tax.

Exam 12: The Design of the Tax System

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

Which of the following contributes to the projected rise in government spending on Social Security and Medicare as a percentage of GDP?

The average tax rate measures the

Sales taxes generate nearly 50% of the tax revenue for state and local governments.

The argument that each person should pay taxes according to how well the individual can shoulder the burden is called

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. What is total consumer surplus for Bob and Lisa?

Table 12-10 -Refer to Table 12-10. If Jace has $33,000 in taxable income, his tax liability will be

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 happened to his marginal tax rate between 2012 and 2013?

Suppose the government taxes 25 percent of the first $60,000 of income and 40 percent of all income above $60,000. For a person earning $200,000, the marginal tax rate is

Which of the following describes a situation where tax laws give preferential treatment to specific types of behavior?

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

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 taxable income of $49,000?

The U.S. federal government collects about one-half of the taxes in our economy.

The U.S. income tax

If your income is $40,000 and your income tax liability is $5,000, your marginal tax rate is

Briefly describe the tradeoff between equity and efficiency of tax systems using a few examples.

Over the past century in the U.S., what has been federal government revenue as a percentage of GDP? What has been state and local government revenue as a percentage of GDP?

What are the two main sources of tax revenues for state and local governments?

One of the most difficult issues associated with trying to structure a tax policy to satisfy horizontal equity is determining

Many economists believe that

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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