Question 1

If a tax takes a constant fraction of income as income rises, it is

Accepted Answer

A)  regressive. 
B)  proportional. 
C)  progressive. 
D)  based on the ability-to-pay principle. 
A)  regressive. 
B)  proportional. 
C)  progressive. 
D)  based on the ability-to-pay principle.

Question 2

'The U.S. tax code gives preferential treatment to investors in municipal bonds. This is an example of

Accepted Answer

A)  a tax loophole. 
B)  tax evasion. 
C)  an administrative burden. 
D)  tax enforcement. 
A)  a tax loophole. 
B)  tax evasion. 
C)  an administrative burden. 
D)  tax enforcement.

Question 3

A budget deficit

Accepted Answer

A)  occurs when government receipts are less than spending. 
B)  occurs when government spending is less than receipts. 
C)  occurs when government receipts are equal to spending. 
D)  is the accumulation of years of government overspending. 
A)  occurs when government receipts are less than spending. 
B)  occurs when government spending is less than receipts. 
C)  occurs when government receipts are equal to spending. 
D)  is the accumulation of years of government overspending.

Question 4

Total taxes paid divided by total income is called the

Accepted Answer

A)  lump-sum tax liability. 
B)  marginal tax rate. 
C)  average tax rate. 
D)  average consumption tax liability. 
A)  lump-sum tax liability. 
B)  marginal tax rate. 
C)  average tax rate. 
D)  average consumption tax liability.

Question 5

Table 12-10  
-Refer to Table 12-10. If Si has $100,000 in taxable income, his marginal tax rate is

Accepted Answer

A)  25%. 
B)  28%. 
C)  33%. 
D)  35%. 
A)  25%. 
B)  28%. 
C)  33%. 
D)  35%.

Question 6

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. Assume that the government places a $4 tax on each slice of cheesecake and that the new equilibrium price is $9. What is Regina's consumer surplus from cheesecake?

Accepted Answer

A)  zero 
B)  $2 
C)  $3 
D)  $6 
A)  zero 
B)  $2 
C)  $3 
D)  $6

Question 7

Which of the following is not a cost of taxes to taxpayers?

Accepted Answer

A)  the tax payment itself 
B)  deadweight losses 
C)  administrative burdens 
D)  goods and services provided by the government 
A)  the tax payment itself 
B)  deadweight losses 
C)  administrative burdens 
D)  goods and services provided by the government

Question 8

Suppose the government levies a "fat tax" on naturally­sweetened carbonated beverages to try to reduce the number of overweight children. If the tax revenues pay for the health problems of overweight children, the tax would satisfy the

Accepted Answer

A)  ability-to-pay principle. 
B)  benefits principle. 
C)  vertical-equity principle. 
D)  horizontal-equity principle. 
A)  ability-to-pay principle. 
B)  benefits principle. 
C)  vertical-equity principle. 
D)  horizontal-equity principle.

Question 9

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

Accepted Answer

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

Question 10

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 tax liability for an individual with $280,000 in taxable income?

Accepted Answer

A)  $105,700 
B)  $108,900 
C)  $111,600 
D)  $117,300 
A)  $105,700 
B)  $108,900 
C)  $111,600 
D)  $117,300

Question 11

What has been the relationship over the past century between the U.S. economy's income and the percentage of that income that the government collects in revenues?

Accepted Answer

Both have increased over time, but the p

Question 12

The single largest expenditure by state and local governments is on

Accepted Answer

A)  highways. 
B)  police. 
C)  public welfare. 
D)  education. 
A)  highways. 
B)  police. 
C)  public welfare. 
D)  education.

Question 13

Why do some policymakers support a consumption tax rather than an earnings tax?

Accepted Answer

A)  The average tax rate would be lower under a consumption tax. 
B)  A consumption tax would encourage people to save earned income. 
C)  A consumption tax would raise more revenues than an income tax. 
D)  The marginal tax rate would be higher under an earnings tax. 
A)  The average tax rate would be lower under a consumption tax. 
B)  A consumption tax would encourage people to save earned income. 
C)  A consumption tax would raise more revenues than an income tax. 
D)  The marginal tax rate would be higher under an earnings tax.

Question 14

The equity of a tax system concerns whether the tax burden is distributed equally among the population.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A)  an average tax rate of 22.5 percent when her income is $30,000. 
B)  an average tax rate of 22.0 percent when her income is $50,000. 
C)  a marginal tax rate of 10 percent when her income rises from $40,000 to $40,001. 
D)  a marginal tax rate of 50 percent when her income rises from $60,000 to $60,001. 
A)  an average tax rate of 22.5 percent when her income is $30,000. 
B)  an average tax rate of 22.0 percent when her income is $50,000. 
C)  a marginal tax rate of 10 percent when her income rises from $40,000 to $40,001. 
D)  a marginal tax rate of 50 percent when her income rises from $60,000 to $60,001.

Question 16

State and local governments

Accepted Answer

A)  use a mix of taxes and fees to generate revenue. 
B)  are required by federal mandate to levy income taxes. 
C)  are required to tax property at a standard rate set by the federal government. 
D)  must tax wages more heavily than interest and dividend income. 
A)  use a mix of taxes and fees to generate revenue. 
B)  are required by federal mandate to levy income taxes. 
C)  are required to tax property at a standard rate set by the federal government. 
D)  must tax wages more heavily than interest and dividend income.

Question 17

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. Assume that the government places a $2 tax on each slice of cheesecake and that the new equilibrium price is $7. What is the deadweight loss of the tax?

Accepted Answer

A)  zero 
B)  $3 
C)  $6 
D)  $8 
A)  zero 
B)  $3 
C)  $6 
D)  $8

Question 18

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 19

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 20

The deadweight loss of a tax is

Accepted Answer

A)  the reduction in economic welfare of taxpayers that exceeds the revenue raised by the government. 
B)  the improved efficiency created as people reallocate resources according to the tax incentive rather than the true costs and benefits. 
C)  the loss in tax revenues. 
D)  Both a and b are correct. 
A)  the reduction in economic welfare of taxpayers that exceeds the revenue raised by the government. 
B)  the improved efficiency created as people reallocate resources according to the tax incentive rather than the true costs and benefits. 
C)  the loss in tax revenues. 
D)  Both a and b are correct.

Exam 12: The Design of the Tax System

If a tax takes a constant fraction of income as income rises, it is

'The U.S. tax code gives preferential treatment to investors in municipal bonds. This is an example of

A budget deficit

Total taxes paid divided by total income is called the

Table 12-10 -Refer to Table 12-10. If Si has $100,000 in taxable income, his marginal tax rate is

Which of the following is not a cost of taxes to taxpayers?

Suppose the government levies a "fat tax" on naturally­sweetened carbonated beverages to try to reduce the number of overweight children. If the tax revenues pay for the health problems of overweight children, the tax would satisfy the

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

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 tax liability for an individual with $280,000 in taxable income?

What has been the relationship over the past century between the U.S. economy's income and the percentage of that income that the government collects in revenues?

The single largest expenditure by state and local governments is on

Why do some policymakers support a consumption tax rather than an earnings tax?

The equity of a tax system concerns whether the tax burden is distributed equally among the population.

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

State and local governments

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

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 __________.

The deadweight loss of a tax is

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

Filters

Suppose the government levies a "fat tax" on naturallysweetened carbonated beverages to try to reduce the number of overweight children. If the tax revenues pay for the health problems of overweight children, the tax would satisfy the