Question 1

Suppose that in 2020 the average citizen's federal tax bill is $9,372, 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 2

In which of the following tax systems do taxes increase as income increases?

Accepted Answer

A)  both proportional and progressive 
B)  proportional but not progressive 
C)  progressive but not proportional 
D)  neither proportional nor progressive 
A)  both proportional and progressive 
B)  proportional but not progressive 
C)  progressive but not proportional 
D)  neither proportional nor progressive

Question 3

In choosing the form of a tax, there is often a tradeoff between

Accepted Answer

A)  allocative and productive efficiency. 
B)  profits and revenues. 
C)  efficiency and fairness. 
D)  fairness and profits. 
A)  allocative and productive efficiency. 
B)  profits and revenues. 
C)  efficiency and fairness. 
D)  fairness and profits.

Question 4

Medicare is the

Accepted Answer

A)  government's health plan for the elderly. 
B)  government's health plan for the poor. 
C)  another name for Social Security. 
D)  Both a and c are correct. 
A)  government's health plan for the elderly. 
B)  government's health plan for the poor. 
C)  another name for Social Security. 
D)  Both a and c are correct.

Question 5

Most Americans agree that our tax system should

Accepted Answer

A)  (ii) only 
B)  (ii) and (iii) only 
C)  (i), (ii), and (iii) only 
D)  (i), (ii), (iii), and (iv) 
A)  (ii) only 
B)  (ii) and (iii) only 
C)  (i), (ii), and (iii) only 
D)  (i), (ii), (iii), and (iv)

Question 6

In 2011, approximately how much of federal government spending went to income security?

Accepted Answer

A)  10% 
B)  25% 
C)  33% 
D)  50% 
A)  10% 
B)  25% 
C)  33% 
D)  50%

Question 7

The payroll tax differs from the individual income tax because the payroll tax is primarily earmarked to pay for

Accepted Answer

A)  employer-provided pensions. 
B)  Social Security and Medicare. 
C)  employer-provided health benefits. 
D)  job loss and training programs. 
A)  employer-provided pensions. 
B)  Social Security and Medicare. 
C)  employer-provided health benefits. 
D)  job loss and training programs.

Question 8

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 marginal tax rate for an individual with $212,000 in taxable income?

Accepted Answer

A)  0% 
B)  1% 
C)  2% 
D)  45% 
A)  0% 
B)  1% 
C)  2% 
D)  45%

Question 9

The notion that similar taxpayers should pay similar amounts of taxes is known as

Accepted Answer

A)  vertical equity. 
B)  the benefits principle. 
C)  horizontal equity. 
D)  taxpayer efficiency. 
A)  vertical equity. 
B)  the benefits principle. 
C)  horizontal equity. 
D)  taxpayer efficiency.

Question 10

Economics alone cannot determine the best way to balance the goals of efficiency and equity.

Accepted Answer

A) True 
 B)False

Question 11

An estate tax is an example of a(n)

Accepted Answer

A)  individual income tax. 
B)  social insurance tax. 
C)  corporate income tax. 
D)  None of the above is correct. 
A)  individual income tax. 
B)  social insurance tax. 
C)  corporate income tax. 
D)  None of the above is correct.

Question 12

Table 12-12  
-Refer to Table 12-12. If the government imposes a $3,000 lump-sum tax, the marginal tax rate for Charles would be

Accepted Answer

A)  0 percent. 
B)  5 percent. 
C)  6.7 percent. 
D)  10 percent. 
A)  0 percent. 
B)  5 percent. 
C)  6.7 percent. 
D)  10 percent.

Question 13

Incentives to work and save are reduced when

Accepted Answer

A)  income taxes are higher. 
B)  consumption taxes replace income taxes. 
C)  corrective taxes are implemented. 
D)  All of the above are correct. 
A)  income taxes are higher. 
B)  consumption taxes replace income taxes. 
C)  corrective taxes are implemented. 
D)  All of the above are correct.

Question 14

Which of the following tax systems could not be structured to satisfy conditions of vertical equity?

Accepted Answer

A)  a proportional tax 
B)  a regressive tax 
C)  a progressive tax 
D)  a lump-sum tax 
A)  a proportional tax 
B)  a regressive tax 
C)  a progressive tax 
D)  a lump-sum tax

Question 15

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 is the average tax rate when income is $50,000?

Accepted Answer

A)  20 percent 
B)  15 percent 
C)  12 percent 
D)  10 percent 
A)  20 percent 
B)  15 percent 
C)  12 percent 
D)  10 percent

Question 16

The marginal tax rate serves as a measure of the extent to which the tax system discourages people from working.

Accepted Answer

A) True 
 B)False

Question 17

Many economists believe that

Accepted Answer

A)  the corporate income tax satisfies the goal of horizontal equity. 
B)  the corporate income tax does not distort the incentives of customers. 
C)  the corporate income tax is more efficient than the personal income tax. 
D)  workers and customers bear much of the burden of the corporate income tax. 
A)  the corporate income tax satisfies the goal of horizontal equity. 
B)  the corporate income tax does not distort the incentives of customers. 
C)  the corporate income tax is more efficient than the personal income tax. 
D)  workers and customers bear much of the burden of the corporate income tax.

Question 18

Pat calculates that for every extra dollar she earns, she owes the government 33 cents. Her total income now is $35,000, on which she pays taxes of $7,000. Determine her average tax rate and her marginal tax rate.

Accepted Answer

A)  Her average tax rate is 33 percent and her marginal tax rate is 20 percent. 
B)  Her average tax rate is 20 percent and her marginal tax rate is 33 percent. 
C)  Her average tax rate is 20 percent and her marginal tax rate is 20 percent. 
D)  Her average tax rate is 33 percent and her marginal tax rate is 33 percent. 
A)  Her average tax rate is 33 percent and her marginal tax rate is 20 percent. 
B)  Her average tax rate is 20 percent and her marginal tax rate is 33 percent. 
C)  Her average tax rate is 20 percent and her marginal tax rate is 20 percent. 
D)  Her average tax rate is 33 percent and her marginal tax rate is 33 percent.

Question 19

In 1789, the average American paid approximately what percent of income in taxes?

Accepted Answer

A)  5% 
B)  15% 
C)  33% 
D)  50% 
A)  5% 
B)  15% 
C)  33% 
D)  50%

Question 20

In designing a tax system, policymakers have two objectives that are often conflicting. They are

Accepted Answer

A)  maximizing revenue and minimizing costs to taxpayers. 
B)  efficiency and minimizing costs to taxpayers. 
C)  efficiency and equity. 
D)  maximizing revenue and reducing the national debt. 
A)  maximizing revenue and minimizing costs to taxpayers. 
B)  efficiency and minimizing costs to taxpayers. 
C)  efficiency and equity. 
D)  maximizing revenue and reducing the national debt.

Exam 12: The Design of the Tax System

Suppose that in 2020 the average citizen's federal tax bill is $9,372, and total federal spending is $10,824 per person. In 2020, the federal government will have

In which of the following tax systems do taxes increase as income increases?

In choosing the form of a tax, there is often a tradeoff between

Medicare is the

Most Americans agree that our tax system should

In 2011, approximately how much of federal government spending went to income security?

The payroll tax differs from the individual income tax because the payroll tax is primarily earmarked to pay for

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 marginal tax rate for an individual with $212,000 in taxable income?

The notion that similar taxpayers should pay similar amounts of taxes is known as

Economics alone cannot determine the best way to balance the goals of efficiency and equity.

An estate tax is an example of a(n)

Table 12-12 -Refer to Table 12-12. If the government imposes a $3,000 lump-sum tax, the marginal tax rate for Charles would be

Incentives to work and save are reduced when

Which of the following tax systems could not be structured to satisfy conditions of vertical equity?

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 is the average tax rate when income is $50,000?

The marginal tax rate serves as a measure of the extent to which the tax system discourages people from working.

Many economists believe that

Pat calculates that for every extra dollar she earns, she owes the government 33 cents. Her total income now is $35,000, on which she pays taxes of $7,000. Determine her average tax rate and her marginal tax rate.

In 1789, the average American paid approximately what percent of income in taxes?

In designing a tax system, policymakers have two objectives that are often conflicting. They are

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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