Question 1

Which of the following is true about the percent of total income all levels of government in the U.S. take as taxes?

Accepted Answer

A)  In 1902 the government collected about 7 percent of total income. In recent years, it collected about 30 percent of total income. 
B)  In 1902 the government collected about 30 percent of total income. In recent years, it collected about 7 percent of total income. 
C)  In 1902 the government collected about 7 percent of total income. In recent years, it collected about 7 percent of total income. 
D)  In 1902 the government collected about 30 percent of total income. In recent years, it collected about 30 percent of total income. 
A)  In 1902 the government collected about 7 percent of total income. In recent years, it collected about 30 percent of total income. 
B)  In 1902 the government collected about 30 percent of total income. In recent years, it collected about 7 percent of total income. 
C)  In 1902 the government collected about 7 percent of total income. In recent years, it collected about 7 percent of total income. 
D)  In 1902 the government collected about 30 percent of total income. In recent years, it collected about 30 percent of total income.

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 $3 on each cigar, and the equilibrium price of a cigar increases to $18. What is total consumer surplus after the tax is levied?

Accepted Answer

A)  $0 
B)  $2 
C)  $5 
D)  $6 
A)  $0 
B)  $2 
C)  $5 
D)  $6

Question 3

The two types of taxes that are most important to state and local governments as sources of revenue are

Accepted Answer

A)  individual income taxes and corporate income taxes. 
B)  sales taxes and individual income taxes. 
C)  sales taxes and property taxes. 
D)  social insurance taxes and property taxes. 
A)  individual income taxes and corporate income taxes. 
B)  sales taxes and individual income taxes. 
C)  sales taxes and property taxes. 
D)  social insurance taxes and property taxes.

Question 4

Which of the following types of taxes achieves vertical equity: a proportional tax, regressive tax, and/or progressive tax?

Accepted Answer

proportion

Question 5

One advantage of a lump-sum tax over other taxes is that it

Accepted Answer

A)  is both equitable and efficient. 
B)  doesn't cause deadweight loss. 
C)  would place a larger tax burden on the rich. 
D)  would raise more revenues. 
A)  is both equitable and efficient. 
B)  doesn't cause deadweight loss. 
C)  would place a larger tax burden on the rich. 
D)  would raise more revenues.

Question 6

Suppose the government imposes a tax of 20 percent on the first $50,000 of income and 30 percent on all income above $50,000. What is the average tax rate when income is $60,000?

Accepted Answer

A)  21.7 percent 
B)  25.0 percent 
C)  46.7 percent 
D)  50.0 percent 
A)  21.7 percent 
B)  25.0 percent 
C)  46.7 percent 
D)  50.0 percent

Question 7

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

Accepted Answer

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

Question 8

If Mary earns $80,000 in taxable income and pays $40,000 in taxes, her marginal tax rate must be 50 percent.

Accepted Answer

A) True 
 B)False

Question 9

Deadweight losses and administrative burdens are key factors considered when determining the efficiency of the tax system.

Accepted Answer

A) True 
 B)False

Question 10

Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000. What are the tax liability and the marginal tax rate for a person whose income is $50,000?

Accepted Answer

A)  12 percent and 20 percent, respectively 
B)  12 percent and $50,000, respectively 
C)  $6,000 and 12 percent, respectively 
D)  $6,000 and 20 percent, respectively 
A)  12 percent and 20 percent, respectively 
B)  12 percent and $50,000, respectively 
C)  $6,000 and 12 percent, respectively 
D)  $6,000 and 20 percent, respectively

Question 11

In order to construct a more complete picture of the economic burden of government across income classes, economists usually

Accepted Answer

A)  include tax payments as well as transfer payments received. 
B)  focus only on the tax payments of wealthy tax payers. 
C)  limit their analysis to taxes based on the ability-to-pay principle. 
D)  focus their analysis on issues of tax efficiency. 
A)  include tax payments as well as transfer payments received. 
B)  focus only on the tax payments of wealthy tax payers. 
C)  limit their analysis to taxes based on the ability-to-pay principle. 
D)  focus their analysis on issues of tax efficiency.

Question 12

A budget surplus occurs when government receipts exceed government spending.

Accepted Answer

A) True 
 B)False

Question 13

If New York City imposed a 50 cent tax on soft-drink beverages that contain sugar or high-fructose corn syrup, it would

Accepted Answer

A)  be an excise tax. 
B)  be an income tax. 
C)  reduce tax revenue. 
D)  cause the supply of corn to rise. 
A)  be an excise tax. 
B)  be an income tax. 
C)  reduce tax revenue. 
D)  cause the supply of corn to rise.

Question 14

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. At what level of income would the taxpayer's marginal tax rate be 30 percent and her average tax rate be 25 percent?

Accepted Answer

A)  $42,000 
B)  $57,000 
C)  $60,000 
D)  $80,000 
A)  $42,000 
B)  $57,000 
C)  $60,000 
D)  $80,000

Question 15

If a poor family has three children in public school and a rich family has two children in private school, the benefits principle would suggest that

Accepted Answer

A)  the poor family should pay more in taxes to pay for public education than the rich family. 
B)  the rich family should pay more in taxes to pay for public education than the poor family. 
C)  the benefits of private school exceed those of public school. 
D)  public schools should be financed by property taxes. 
A)  the poor family should pay more in taxes to pay for public education than the rich family. 
B)  the rich family should pay more in taxes to pay for public education than the poor family. 
C)  the benefits of private school exceed those of public school. 
D)  public schools should be financed by property taxes.

Question 16

If a tax generates a reduction in surplus that is exactly offset by the tax revenue collected by the government, the tax does not have a deadweight loss.

Accepted Answer

A) True 
 B)False

Question 17

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 18

Table 12-3  
-Refer to Table 12-3. What is the marginal tax rate for a person who makes $35,000?

Accepted Answer

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

Question 19

A mortgage interest deduction would be considered

Accepted Answer

A)  tax evasion. 
B)  a subsidy to the poor. 
C)  a deduction that benefits all members of society equally. 
D)  a tax loophole. 
A)  tax evasion. 
B)  a subsidy to the poor. 
C)  a deduction that benefits all members of society equally. 
D)  a tax loophole.

Question 20

Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000. What are the tax liability and the marginal tax rate for a person whose income is $30,000?

Accepted Answer

A)  both are 10 percent 
B)  10 percent and $2,000, respectively 
C)  $3,000 and 10 percent, respectively 
D)  $3,000 and 20 percent, respectively 
A)  both are 10 percent 
B)  10 percent and $2,000, respectively 
C)  $3,000 and 10 percent, respectively 
D)  $3,000 and 20 percent, respectively

Exam 12: The Design of the Tax System

Which of the following is true about the percent of total income all levels of government in the U.S. take as taxes?

The two types of taxes that are most important to state and local governments as sources of revenue are

Which of the following types of taxes achieves vertical equity: a proportional tax, regressive tax, and/or progressive tax?

One advantage of a lump-sum tax over other taxes is that it

Suppose the government imposes a tax of 20 percent on the first $50,000 of income and 30 percent on all income above $50,000. What is the average tax rate when income is $60,000?

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

If Mary earns $80,000 in taxable income and pays $40,000 in taxes, her marginal tax rate must be 50 percent.

Deadweight losses and administrative burdens are key factors considered when determining the efficiency of the tax system.

Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000. What are the tax liability and the marginal tax rate for a person whose income is $50,000?

In order to construct a more complete picture of the economic burden of government across income classes, economists usually

A budget surplus occurs when government receipts exceed government spending.

If New York City imposed a 50 cent tax on soft-drink beverages that contain sugar or high-fructose corn syrup, it would

If a poor family has three children in public school and a rich family has two children in private school, the benefits principle would suggest that

If a tax generates a reduction in surplus that is exactly offset by the tax revenue collected by the government, the tax does not have a deadweight loss.

The largest source of revenue for the federal government is the

Table 12-3 -Refer to Table 12-3. What is the marginal tax rate for a person who makes $35,000?

A mortgage interest deduction would be considered

Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000. What are the tax liability and the marginal tax rate for a person whose income is $30,000?

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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