Question 1

When government receipts exceed total government spending during a fiscal year, the difference is

Accepted Answer

A)  a budget surplus. 
B)  a budget deficit. 
C)  the national debt. 
D)  automatically refunded. 
A)  a budget surplus. 
B)  a budget deficit. 
C)  the national debt. 
D)  automatically refunded.

Question 2

Which of the following is not a way that a corporate tax on the income of U.S. car companies will affect markets?

Accepted Answer

A)  The price of cars will rise. 
B)  The wages of auto workers will fall. 
C)  Owners of car companies (stockholders) will receive less profit. 
D)  Less deadweight loss will occur since corporations are entities and not people who respond to incentives. 
A)  The price of cars will rise. 
B)  The wages of auto workers will fall. 
C)  Owners of car companies (stockholders) will receive less profit. 
D)  Less deadweight loss will occur since corporations are entities and not people who respond to incentives.

Question 3

Federal government spending on Social Security, Medicare, and Medicaid as a percentage of GDP rose from

Accepted Answer

A)  10 percent in 1950 to more than 50 percent today. 
B)  10 percent in 1950 to more than 20 percent today. 
C)  1 percent in 1950 to more than 10 percent today. 
D)  1 percent in 1950 to more than 20 percent today. 
A)  10 percent in 1950 to more than 50 percent today. 
B)  10 percent in 1950 to more than 20 percent today. 
C)  1 percent in 1950 to more than 10 percent today. 
D)  1 percent in 1950 to more than 20 percent today.

Question 4

The United States federal government has a large budget deficit. Long-term projections suggest that under current law, taxes, as a percentage of GDP, will and government spending, as a percentage of GDP, will
__________.

Accepted Answer

remain con

Question 5

In addition to tax payments, the two other primary costs that a tax system inevitably imposes on taxpayers are

Accepted Answer

A)  deadweight losses and administrative burdens. 
B)  deadweight losses and frustration with the political system. 
C)  administrative burdens and tax-preparation costs. 
D)  administrative burdens and the risk of punishment for failure to comply with tax laws. 
A)  deadweight losses and administrative burdens. 
B)  deadweight losses and frustration with the political system. 
C)  administrative burdens and tax-preparation costs. 
D)  administrative burdens and the risk of punishment for failure to comply with tax laws.

Question 6

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 happened to his average 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 7

Corporate profits distributed as dividends are

Accepted Answer

A)  tax free. 
B)  taxed once. 
C)  taxed twice. 
D)  taxed three times. 
A)  tax free. 
B)  taxed once. 
C)  taxed twice. 
D)  taxed three times.

Question 8

Part of the administrative burden of a tax is

Accepted Answer

A)  the money people pay to the government in taxes. 
B)  reducing the size of the market because of the tax. 
C)  the hassle of filling out tax forms that is imposed on taxpayers who comply with the tax. 
D)  the cost of administering programs that use tax revenue. 
A)  the money people pay to the government in taxes. 
B)  reducing the size of the market because of the tax. 
C)  the hassle of filling out tax forms that is imposed on taxpayers who comply with the tax. 
D)  the cost of administering programs that use tax revenue.

Question 9

Table 12-5
  
-Refer to Table 12-5. What is the marginal tax rate for a person who makes $37,000?

Accepted Answer

A)  20% 
B)  9.25% 
C)  25% 
D)  40% 
A)  20% 
B)  9.25% 
C)  25% 
D)  40%

Question 10

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 a marginal tax rate of

Accepted Answer

A)  20 percent when her income rises from $40,000 to $40,001. 
B)  20 percent when her income rises from $30,000 to $30,001. 
C)  0 percent when her income rises from $30,000 to $30,001. 
D)  10 percent when her income rises from $40,000 to $40,001. 
A)  20 percent when her income rises from $40,000 to $40,001. 
B)  20 percent when her income rises from $30,000 to $30,001. 
C)  0 percent when her income rises from $30,000 to $30,001. 
D)  10 percent when her income rises from $40,000 to $40,001.

Question 11

Many economists believe that the U.S. tax system would be made more efficient if the basis of taxation were changed so that people paid taxes, more so than they do now, based on their

Accepted Answer

A)  saving rather than their income. 
B)  spending rather than their income. 
C)  income rather than their wealth. 
D)  wealth rather than their spending. 
A)  saving rather than their income. 
B)  spending rather than their income. 
C)  income rather than their wealth. 
D)  wealth rather than their spending.

Question 12

All of the following are transfer payments except

Accepted Answer

A)  welfare payments. 
B)  unemployment compensation. 
C)  personal income taxes. 
D)  Social Security. 
A)  welfare payments. 
B)  unemployment compensation. 
C)  personal income taxes. 
D)  Social Security.

Question 13

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 total income tax due for an individual with $49,000 in taxable income?

Accepted Answer

A)  $12,650 
B)  $14,370 
C)  $15,960 
D)  $16,220 
A)  $12,650 
B)  $14,370 
C)  $15,960 
D)  $16,220

Question 14

Give an example of a tax system where the marginal tax rate would equal the average tax rate.

Accepted Answer

The marginal tax rate would equal the av

Question 15

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. Because total consumer surplus has

Accepted Answer

A)  fallen by more than the tax revenue, the tax has a deadweight loss. 
B)  fallen by less than the tax revenue, the tax has no deadweight loss. 
C)  fallen by exactly the amount of the tax revenue, the tax has no deadweight loss. 
D)  increased by less than the tax revenue, the tax has a deadweight loss. 
A)  fallen by more than the tax revenue, the tax has a deadweight loss. 
B)  fallen by less than the tax revenue, the tax has no deadweight loss. 
C)  fallen by exactly the amount of the tax revenue, the tax has no deadweight loss. 
D)  increased by less than the tax revenue, the tax has a deadweight loss.

Question 16

The largest budgetary expense for the federal government in 2011 was

Accepted Answer

A)  interest on the national debt. 
B)  health. 
C)  highways. 
D)  income security. 
A)  interest on the national debt. 
B)  health. 
C)  highways. 
D)  income security.

Question 17

Table 12-4
  
-Refer to Table 12-4. What is the average tax rate for a person who makes $130,000?

Accepted Answer

A)  30% 
B)  40% 
C)  50% 
D)  60% 
A)  30% 
B)  40% 
C)  50% 
D)  60%

Question 18

In 2011, state and local government education spending was more than five times highway spending.

Accepted Answer

A) True 
 B)False

Question 19

The largest source of revenue for the federal government is the

Accepted Answer

A)  individual income tax. 
B)  property tax. 
C)  sales tax. 
D)  corporate income tax. 
A)  individual income tax. 
B)  property tax. 
C)  sales tax. 
D)  corporate income tax.

Question 20

What are the two types of costs that a well-designed tax policy tries to avoid or minimize?

Accepted Answer

1. the deadweight loss that oc

Exam 12: The Design of the Tax System

When government receipts exceed total government spending during a fiscal year, the difference is

Which of the following is not a way that a corporate tax on the income of U.S. car companies will affect markets?

Federal government spending on Social Security, Medicare, and Medicaid as a percentage of GDP rose from

The United States federal government has a large budget deficit. Long-term projections suggest that under current law, taxes, as a percentage of GDP, will and government spending, as a percentage of GDP, will __________.

In addition to tax payments, the two other primary costs that a tax system inevitably imposes on taxpayers are

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 happened to his average tax rate between 2012 and 2013?

Corporate profits distributed as dividends are

Part of the administrative burden of a tax is

Table 12-5 -Refer to Table 12-5. What is the marginal tax rate for a person who makes $37,000?

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 a marginal tax rate of

Many economists believe that the U.S. tax system would be made more efficient if the basis of taxation were changed so that people paid taxes, more so than they do now, based on their

All of the following are transfer payments except

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 total income tax due for an individual with $49,000 in taxable income?

Give an example of a tax system where the marginal tax rate would equal the average tax rate.

The largest budgetary expense for the federal government in 2011 was

Table 12-4 -Refer to Table 12-4. What is the average tax rate for a person who makes $130,000?

In 2011, state and local government education spending was more than five times highway spending.

The largest source of revenue for the federal government is the

What are the two types of costs that a well-designed tax policy tries to avoid or minimize?

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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