Question 1

Table 12-10  
-Refer to Table 12-10. If Si has $100,000 in taxable income, his tax liability will be

Accepted Answer

A)  $838. 
B)  $3,844. 
C)  $12,100. 
D)  $21,709. 
A)  $838. 
B)  $3,844. 
C)  $12,100. 
D)  $21,709.

Question 2

Table 12-2  
-Refer to Table 12-2. Suppose that the government imposes a $2 tax on delights, causing the price to increase from $4.00 to $6.00. Total consumer surplus

Accepted Answer

A)  falls by less than the tax revenue generated. 
B)  falls by more than the tax revenue generated. 
C)  falls by the same amount as the tax revenue generated. 
D)  will not fall since Jennifer will no longer be in the market. 
A)  falls by less than the tax revenue generated. 
B)  falls by more than the tax revenue generated. 
C)  falls by the same amount as the tax revenue generated. 
D)  will not fall since Jennifer will no longer be in the market.

Question 3

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

Accepted Answer

A)  13.7%. 
B)  15.2%. 
C)  21.7%. 
D)  28.3%. 
A)  13.7%. 
B)  15.2%. 
C)  21.7%. 
D)  28.3%.

Question 4

Taxes on specific goods such as cigarettes, gasoline, and alcoholic beverages are called

Accepted Answer

A)  sales taxes. 
B)  excise taxes. 
C)  social insurance taxes. 
D)  consumption taxes. 
A)  sales taxes. 
B)  excise taxes. 
C)  social insurance taxes. 
D)  consumption taxes.

Question 5

In the United States, the payroll tax is also called a

Accepted Answer

A)  dividend income tax. 
B)  social insurance tax. 
C)  value added tax. 
D)  capital gains tax. 
A)  dividend income tax. 
B)  social insurance tax. 
C)  value added tax. 
D)  capital gains tax.

Question 6

As tax laws become more complex,

Accepted Answer

A)  the administrative burden of taxes will increase. 
B)  compliance costs are likely to decrease. 
C)  the government will collect more in tax revenue. 
D)  the amount of tax revenue lost to tax evasion will decrease. 
A)  the administrative burden of taxes will increase. 
B)  compliance costs are likely to decrease. 
C)  the government will collect more in tax revenue. 
D)  the amount of tax revenue lost to tax evasion will decrease.

Question 7

Because taxes distort incentives, they typically result in

Accepted Answer

A)  deadweight losses. 
B)  reductions in consumer surplus. 
C)  reductions in producer surplus. 
D)  All of the above are correct. 
A)  deadweight losses. 
B)  reductions in consumer surplus. 
C)  reductions in producer surplus. 
D)  All of the above are correct.

Question 8

Table 12-9
United States Income Tax Rates for a Single Individual, 2012 and 2013.  
-Refer to Table 12-9. Ruby Sue is a single person whose taxable income is $100,000 a year. What is her marginal tax rate in 2012?

Accepted Answer

A)  15% 
B)  28% 
C)  31% 
D)  36% 
A)  15% 
B)  28% 
C)  31% 
D)  36%

Question 9

Which of the following statements is not correct?

Accepted Answer

A)  All states have state income taxes, but the percentages vary widely. 
B)  Sales taxes and property taxes are important revenue sources for state and local governments. 
C)  Medicare spending has increased because the percentage of the population that is elderly and the cost of healthcare have both increased. 
D)  A budget deficit occurs when government spending exceeds government receipts. 
A)  All states have state income taxes, but the percentages vary widely. 
B)  Sales taxes and property taxes are important revenue sources for state and local governments. 
C)  Medicare spending has increased because the percentage of the population that is elderly and the cost of healthcare have both increased. 
D)  A budget deficit occurs when government spending exceeds government receipts.

Question 10

Suppose Luke values a scoop of Italian gelato at $4. Leia values a scoop of Italian gelato at $6. The pre-tax price of a scoop of Italian gelato is $2. The government imposes a "fat tax" of $3 on each scoop of Italian gelato, and the price rises to $5. The deadweight loss from the tax is

Accepted Answer

A)  $1. 
B)  $2. 
C)  $3. 
D)  $4. 
A)  $1. 
B)  $2. 
C)  $3. 
D)  $4.

Question 11

A person's tax obligation divided by her income is called her

Accepted Answer

A)  marginal social tax rate. 
B)  marginal private tax rate. 
C)  marginal tax rate. 
D)  average tax rate. 
A)  marginal social tax rate. 
B)  marginal private tax rate. 
C)  marginal tax rate. 
D)  average tax rate.

Question 12

Table 12-20
The following table presents the total tax liability for an unmarried taxpayer under four different tax schedules for the income levels shown.  
-Refer to Table 12-20. Which tax schedules are proportional?

Accepted Answer

A)  Tax Schedule B only 
B)  Tax Schedule B and Tax Schedule C 
C)  Tax Schedule D only 
D)  Tax Schedule A and Tax Schedule B 
A)  Tax Schedule B only 
B)  Tax Schedule B and Tax Schedule C 
C)  Tax Schedule D only 
D)  Tax Schedule A and Tax Schedule B

Question 13

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 14

Lump-sum taxes are rarely used in the real world because

Accepted Answer

A)  while lump-sum taxes have low administrative burdens, they have high deadweight losses. 
B)  while lump-sum taxes have low deadweight losses, they have high administrative burdens. 
C)  lump-sum taxes are often viewed as unfair because they take the same amount of money from both poor and rich. 
D)  lump-sum taxes are very inefficient. 
A)  while lump-sum taxes have low administrative burdens, they have high deadweight losses. 
B)  while lump-sum taxes have low deadweight losses, they have high administrative burdens. 
C)  lump-sum taxes are often viewed as unfair because they take the same amount of money from both poor and rich. 
D)  lump-sum taxes are very inefficient.

Question 15

Table 12-3  
-Refer to Table 12-3. What is the marginal tax rate for a person who makes $60,000?

Accepted Answer

A)  20% 
B)  30% 
C)  40% 
D)  50% 
A)  20% 
B)  30% 
C)  40% 
D)  50%

Question 16

If we want to gauge the sacrifice made by a taxpayer, we should use the

Accepted Answer

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

Question 17

If revenue from a gasoline tax is used to build and maintain public roads, the gasoline 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 18

Corporate profits are

Accepted Answer

A)  included in payroll taxes. 
B)  exempt from taxes. 
C)  taxed twice, once as profit and once as dividends. 
D)  taxed to pay for Medicare. 
A)  included in payroll taxes. 
B)  exempt from taxes. 
C)  taxed twice, once as profit and once as dividends. 
D)  taxed to pay for Medicare.

Question 19

Table 12-1  
-Refer to Table 12-1. Assume that the price of a weekend ski pass is $45 and that the price reflects the actual unit cost of providing a weekend of skiing. What is the value of the surplus that accrues to all four skiers from their weekend trip?

Accepted Answer

A)  $75 
B)  $105 
C)  $185 
D)  $215 
A)  $75 
B)  $105 
C)  $185 
D)  $215

Question 20

Vertical and horizontal equity are widely accepted and applying them to evaluate a tax system is always straightforward.

Accepted Answer

A) True 
 B)False

Exam 12: The Design of the Tax System

Table 12-10 -Refer to Table 12-10. If Si has $100,000 in taxable income, his tax liability will be

Table 12-2 -Refer to Table 12-2. Suppose that the government imposes a $2 tax on delights, causing the price to increase from $4.00 to $6.00. Total consumer surplus

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

Taxes on specific goods such as cigarettes, gasoline, and alcoholic beverages are called

In the United States, the payroll tax is also called a

As tax laws become more complex,

Because taxes distort incentives, they typically result in

Table 12-9 United States Income Tax Rates for a Single Individual, 2012 and 2013. -Refer to Table 12-9. Ruby Sue is a single person whose taxable income is $100,000 a year. What is her marginal tax rate in 2012?

Which of the following statements is not correct?

Suppose Luke values a scoop of Italian gelato at $4. Leia values a scoop of Italian gelato at $6. The pre-tax price of a scoop of Italian gelato is $2. The government imposes a "fat tax" of $3 on each scoop of Italian gelato, and the price rises to $5. The deadweight loss from the tax is

A person's tax obligation divided by her income is called her

Table 12-20 The following table presents the total tax liability for an unmarried taxpayer under four different tax schedules for the income levels shown. -Refer to Table 12-20. Which tax schedules are proportional?

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

Lump-sum taxes are rarely used in the real world because

Table 12-3 -Refer to Table 12-3. What is the marginal tax rate for a person who makes $60,000?

If we want to gauge the sacrifice made by a taxpayer, we should use the

If revenue from a gasoline tax is used to build and maintain public roads, the gasoline tax may be justified on the basis of

Corporate profits are

Table 12-1 -Refer to Table 12-1. Assume that the price of a weekend ski pass is $45 and that the price reflects the actual unit cost of providing a weekend of skiing. What is the value of the surplus that accrues to all four skiers from their weekend trip?

Vertical and horizontal equity are widely accepted and applying them to evaluate a tax system is always straightforward.

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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