Question 1

If revenue from a cigarette tax is used to pay for healthcare for people with lung cancer, the cigarette tax may be justified on the basis of

Accepted Answer

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

Question 2

To fully understand the progressivity of government policies, one should only look at the proportion of total income that individuals pay in taxes each year.

Accepted Answer

A) True 
 B)False

Question 3

A budget deficit occurs when government receipts fall short of government spending.

Accepted Answer

A) True 
 B)False

Question 4

One tax system is less efficient than another if it

Accepted Answer

A)  places a lower tax burden on lower-income families than on higher-income families. 
B)  places a higher tax burden on lower-income families than on higher-income families. 
C)  raises the same amount of revenue at a higher cost to taxpayers. 
D)  raises less revenue at a lower cost to taxpayers. 
A)  places a lower tax burden on lower-income families than on higher-income families. 
B)  places a higher tax burden on lower-income families than on higher-income families. 
C)  raises the same amount of revenue at a higher cost to taxpayers. 
D)  raises less revenue at a lower cost to taxpayers.

Question 5

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 $3 on a movie ticket and that, as a result, the price of a movie ticket increases to $8. What is total consumer surplus after the tax is imposed?

Accepted Answer

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

Question 6

Suppose Tyler values a basketball at $20. Jacqui values a basketball at $25. The pre-tax price of a basketball $10. The government imposes a tax of $5 on each basketball, and the price rises to $15. The deadweight loss from the tax is

Accepted Answer

A)  $25. 
B)  $15. 
C)  $10. 
D)  $0. 
A)  $25. 
B)  $15. 
C)  $10. 
D)  $0.

Question 7

A person's marginal tax rate equals

Accepted Answer

A)  her tax obligation divided by her average tax rate. 
B)  the increase in taxes she would pay as a percentage of the rise in her income. 
C)  her tax obligation divided by her income. 
D)  the increase in taxes if her average tax rate were to rise by 1percent. 
A)  her tax obligation divided by her average tax rate. 
B)  the increase in taxes she would pay as a percentage of the rise in her income. 
C)  her tax obligation divided by her income. 
D)  the increase in taxes if her average tax rate were to rise by 1percent.

Question 8

If the government were to impose a tax that assigned everyone the same tax liability, it would be

Accepted Answer

A)  a lump-sum tax. 
B)  an equitable tax. 
C)  supported by the poor. 
D)  a progressive tax. 
A)  a lump-sum tax. 
B)  an equitable tax. 
C)  supported by the poor. 
D)  a progressive tax.

Question 9

Table 12-14  
-Refer to Table 12-14. The tax system is

Accepted Answer

A)  progressive. 
B)  regressive. 
C)  proportional. 
D)  lump sum. 
A)  progressive. 
B)  regressive. 
C)  proportional. 
D)  lump sum.

Question 10

Table 12-23
The dollar amounts in the last three columns are the taxes owed under the three different tax systems.  
-Refer to Table 12-23. Which of the three tax systems is regressive?

Accepted Answer

A)  Tax System A 
B)  Tax System B 
C)  Tax System C 
D)  None of the systems are regressive. 
A)  Tax System A 
B)  Tax System B 
C)  Tax System C 
D)  None of the systems are regressive.

Question 11

Deadweight losses are associated with

Accepted Answer

A)  taxes that distort the incentives that people face. 
B)  taxes that target expenditures on survivor's benefits for Social Security. 
C)  taxes that have no efficiency losses. 
D)  lump-sum taxes. 
A)  taxes that distort the incentives that people face. 
B)  taxes that target expenditures on survivor's benefits for Social Security. 
C)  taxes that have no efficiency losses. 
D)  lump-sum taxes.

Question 12

Suppose the government taxes 10 percent of the first $20,000 in income, 20 percent of the next $20,000 in income, and 30 percent of all income over $40,000. Calculate the marginal tax rate and the average tax rate for a person who earns $100,000.

Accepted Answer

The marginal tax rate would be 30 percen

Question 13

Which of the following statements is correct?

Accepted Answer

A)  Equity is more important than efficiency as a goal of the tax system. 
B)  Efficiency is more important than equity as a goal of the tax system. 
C)  Both equity and efficiency are important goals of the tax system. 
D)  Neither equity nor efficiency is an important goal of the tax system. 
A)  Equity is more important than efficiency as a goal of the tax system. 
B)  Efficiency is more important than equity as a goal of the tax system. 
C)  Both equity and efficiency are important goals of the tax system. 
D)  Neither equity nor efficiency is an important goal of the tax system.

Question 14

If tax revenues from a cigarette tax are used to pay for healthcare expenses related to lung cancer, the cigarette tax could be justified using the .

Accepted Answer

The answer of If tax revenues from a cigarette tax...

Question 15

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

Accepted Answer

A)  $1,920. 
B)  $4,400. 
C)  $6,320. 
D)  $8,175. 
A)  $1,920. 
B)  $4,400. 
C)  $6,320. 
D)  $8,175.

Question 16

Table 12-24  
-Refer to Table 12-24. The tax system is an example of a tax.

Accepted Answer

regressive; the perc

Question 17

An advantage of a consumption tax is that it does not distort the incentive to save.

Accepted Answer

A) True 
 B)False

Question 18

A tax system based on the ability-to-pay principle claims that all citizens should

Accepted Answer

A)  pay taxes based on the benefits they receive from government services. 
B)  pay the same amount in taxes. 
C)  pay taxes based on consumption rather than income. 
D)  make an equal sacrifice. 
A)  pay taxes based on the benefits they receive from government services. 
B)  pay the same amount in taxes. 
C)  pay taxes based on consumption rather than income. 
D)  make an equal sacrifice.

Question 19

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 taxes based on a person's ability to pay?

Accepted Answer

A)  Senator Filch only 
B)  Senator Moody only 
C)  Senators Fudge and Malfoy only 
D)  Senators Malfoy and Moody only 
A)  Senator Filch only 
B)  Senator Moody only 
C)  Senators Fudge and Malfoy only 
D)  Senators Malfoy and Moody only

Question 20

"A $1,000 tax paid by a poor person may be a larger sacrifice than a $10,000 tax paid by a wealthy person" is an argument in favor of

Accepted Answer

A)  the horizontal equity principle. 
B)  the benefits principle. 
C)  a regressive tax argument. 
D)  the ability-to-pay principle. 
A)  the horizontal equity principle. 
B)  the benefits principle. 
C)  a regressive tax argument. 
D)  the ability-to-pay principle.

Exam 12: The Design of the Tax System

If revenue from a cigarette tax is used to pay for healthcare for people with lung cancer, the cigarette tax may be justified on the basis of

To fully understand the progressivity of government policies, one should only look at the proportion of total income that individuals pay in taxes each year.

A budget deficit occurs when government receipts fall short of government spending.

One tax system is less efficient than another if it

Suppose Tyler values a basketball at $20. Jacqui values a basketball at $25. The pre-tax price of a basketball $10. The government imposes a tax of $5 on each basketball, and the price rises to $15. The deadweight loss from the tax is

A person's marginal tax rate equals

If the government were to impose a tax that assigned everyone the same tax liability, it would be

Table 12-14 -Refer to Table 12-14. The tax system is

Table 12-23 The dollar amounts in the last three columns are the taxes owed under the three different tax systems. -Refer to Table 12-23. Which of the three tax systems is regressive?

Deadweight losses are associated with

Suppose the government taxes 10 percent of the first $20,000 in income, 20 percent of the next $20,000 in income, and 30 percent of all income over $40,000. Calculate the marginal tax rate and the average tax rate for a person who earns $100,000.

Which of the following statements is correct?

If tax revenues from a cigarette tax are used to pay for healthcare expenses related to lung cancer, the cigarette tax could be justified using the .

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

Table 12-24 -Refer to Table 12-24. The tax system is an example of a tax.

An advantage of a consumption tax is that it does not distort the incentive to save.

A tax system based on the ability-to-pay principle claims that all citizens should

"A $1,000 tax paid by a poor person may be a larger sacrifice than a $10,000 tax paid by a wealthy person" is an argument in favor of

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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