Question 1

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 2

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. What is total consumer surplus after the tax is levied?

Accepted Answer

A)  $2 
B)  $3 
C)  $4 
D)  $5 
A)  $2 
B)  $3 
C)  $4 
D)  $5

Question 3

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 4

For state and local governments, in 2011, education accounted for approximately what percentage of spending?

Accepted Answer

A)  25 percent 
B)  34 percent 
C)  50 percent 
D)  75 percent 
A)  25 percent 
B)  34 percent 
C)  50 percent 
D)  75 percent

Question 5

Suppose Hillary values a large order of French fries at $4. Bill values a large order of French fries at $7. The pre- tax price of a large order of French fries is $2. The government imposes a "fat tax" of $3 on each large order of French fries, and the price rises to $5. The deadweight loss from the tax is

Accepted Answer

A)  $4, and the deadweight loss comes from both Hillary and Bill. 
B)  $4, and the deadweight loss comes only from Hillary because she does not buy a large French fries after the tax. 
C)  $2, and the deadweight loss comes from both Hillary and Bill. 
D)  $2, and the deadweight loss comes only from Hillary because she does not buy a large French fries after the tax. 
A)  $4, and the deadweight loss comes from both Hillary and Bill. 
B)  $4, and the deadweight loss comes only from Hillary because she does not buy a large French fries after the tax. 
C)  $2, and the deadweight loss comes from both Hillary and Bill. 
D)  $2, and the deadweight loss comes only from Hillary because she does not buy a large French fries after the tax.

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 is his average tax rate in 2013?

Accepted Answer

A)  15.3% 
B)  17.6% 
C)  21.3% 
D)  24.8% 
A)  15.3% 
B)  17.6% 
C)  21.3% 
D)  24.8%

Question 7

Deadweight losses occur in markets in which

Accepted Answer

A)  firms decide to downsize. 
B)  the government imposes a tax. 
C)  profits fall because of low consumer demand. 
D)  equilibrium prices fall. 
A)  firms decide to downsize. 
B)  the government imposes a tax. 
C)  profits fall because of low consumer demand. 
D)  equilibrium prices fall.

Question 8

Define the average tax rate.

Accepted Answer

The average tax rate

Question 9

If your income is $50,000, your income tax liability is $10,000, and you paid $0.25 in taxes on the last dollar you earned, your

Accepted Answer

A)  marginal tax rate is 20 percent. 
B)  average tax rate is 5 percent. 
C)  marginal tax rate is 25 percent. 
D)  average tax rate is 25 percent. 
A)  marginal tax rate is 20 percent. 
B)  average tax rate is 5 percent. 
C)  marginal tax rate is 25 percent. 
D)  average tax rate is 25 percent.

Question 10

The three largest categories of spending by the Federal government in order from first to third would be

Accepted Answer

A)  income security, net interest, and national defense 
B)  national defense, net interest, and income security 
C)  income security, health, and national defense 
D)  health, income security, and national defense 
A)  income security, net interest, and national defense 
B)  national defense, net interest, and income security 
C)  income security, health, and national defense 
D)  health, income security, and national defense

Question 11

Which tax system requires all taxpayers to pay the same percentage of their income in taxes?

Accepted Answer

A)  a regressive tax 
B)  a proportional tax 
C)  a progressive tax 
D)  a horizontal equity tax 
A)  a regressive tax 
B)  a proportional tax 
C)  a progressive tax 
D)  a horizontal equity tax

Question 12

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 13

According to the benefits principle, it is fair for people to pay taxes based on their ability to shoulder the tax burden.

Accepted Answer

A) True 
 B)False

Question 14

A family's tax liability is the amount of money it owes in taxes.

Accepted Answer

A) True 
 B)False

Question 15

Scenario 12-3
Suppose Roger and Regina receive great satisfaction from their consumption of cheesecake. Regina would be willing to purchase only one slice and would pay up to $8 for it. Roger would be willing to pay $11 for his first slice,$9 for his second slice, and $5 for his third slice. The current market price is $5 per slice.
-Refer to Scenario 12-3. How much total consumer surplus do Regina and Roger collectively receive from consuming cheesecake?

Accepted Answer

A)  $3 
B)  $6 
C)  $9 
D)  $13 
A)  $3 
B)  $6 
C)  $9 
D)  $13

Question 16

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 17

Suppose the government taxes 10 percent of the first $30,000 in income and 20 percent of all income over $30,000.
Calculate the marginal tax rate and the average tax rate for a person who earns $70,000.

Accepted Answer

The marginal tax rate would be 20 percen

Question 18

An optimal tax is one that minimizes the

Accepted Answer

A)  external benefit. 
B)  total deadweight loss from the tax. 
C)  income taxes. 
D)  horizontal equity. 
A)  external benefit. 
B)  total deadweight loss from the tax. 
C)  income taxes. 
D)  horizontal equity.

Question 19

Which type of tax is used to finance the Social Security program in the United States?

Accepted Answer

A)  consumption tax 
B)  income tax 
C)  payroll tax 
D)  property tax 
A)  consumption tax 
B)  income tax 
C)  payroll tax 
D)  property tax

Question 20

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%

Exam 12: The Design of the Tax System

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

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?

For state and local governments, in 2011, education accounted for approximately what percentage of spending?

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 2013?

Deadweight losses occur in markets in which

Define the average tax rate.

If your income is $50,000, your income tax liability is $10,000, and you paid $0.25 in taxes on the last dollar you earned, your

The three largest categories of spending by the Federal government in order from first to third would be

Which tax system requires all taxpayers to pay the same percentage of their income in taxes?

The government finances the budget deficit by

According to the benefits principle, it is fair for people to pay taxes based on their ability to shoulder the tax burden.

A family's tax liability is the amount of money it owes in taxes.

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?

Suppose the government taxes 10 percent of the first $30,000 in income and 20 percent of all income over $30,000. Calculate the marginal tax rate and the average tax rate for a person who earns $70,000.

An optimal tax is one that minimizes the

Which type of tax is used to finance the Social Security program in the United States?

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

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

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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