Question 1

According to the ability-to-pay principle, it is fair for people to pay taxes based on their ability to handle the financial burden.

Accepted Answer

A) True 
 B)False

Question 2

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 schedule could be considered a lump-sum tax?

Accepted Answer

A)  Tax Schedule B only 
B)  Tax Schedule B and Tax Schedule C 
C)  Tax Schedule D only 
D)  None of the tax schedules could be considered a lump-sum tax. 
A)  Tax Schedule B only 
B)  Tax Schedule B and Tax Schedule C 
C)  Tax Schedule D only 
D)  None of the tax schedules could be considered a lump-sum tax.

Question 3

The federal taxes owed by a taxpayer depend

Accepted Answer

A)  only upon the marginal tax rate on the taxpayer's first $25,000 of income. 
B)  only upon the marginal tax rate on the taxpayer's last $10,000 of income. 
C)  upon all the marginal tax rates up to the taxpayer's overall level of income. 
D)  upon all the marginal tax rates, including those for income levels that exceed the taxpayer's overall level of income. 
A)  only upon the marginal tax rate on the taxpayer's first $25,000 of income. 
B)  only upon the marginal tax rate on the taxpayer's last $10,000 of income. 
C)  upon all the marginal tax rates up to the taxpayer's overall level of income. 
D)  upon all the marginal tax rates, including those for income levels that exceed the taxpayer's overall level of income.

Question 4

A country is using a proportional tax when

Accepted Answer

A)  its marginal tax rate equals its average tax rate. 
B)  its marginal tax rate is less than its average tax rate. 
C)  its marginal tax rate is greater than its average tax rate. 
D)  it uses a lump-sum tax. 
A)  its marginal tax rate equals its average tax rate. 
B)  its marginal tax rate is less than its average tax rate. 
C)  its marginal tax rate is greater than its average tax rate. 
D)  it uses a lump-sum tax.

Question 5

The deadweight loss of an income tax is determined by the

Accepted Answer

A)  amount of total tax revenue to the government. 
B)  marginal tax rate. 
C)  average tax rate. 
D)  ability-to-pay principle. 
A)  amount of total tax revenue to the government. 
B)  marginal tax rate. 
C)  average tax rate. 
D)  ability-to-pay principle.

Question 6

Table 12-10  
-Refer to Table 12-10. If Jace has $33,000 in taxable income, his average tax rate is

Accepted Answer

A)  13.7%. 
B)  14.6%. 
C)  15.0%. 
D)  15.2%. 
A)  13.7%. 
B)  14.6%. 
C)  15.0%. 
D)  15.2%.

Question 7

Athos, Porthos,and Aramis each like to take fencing lessons. The price of a fencing lesson is $10. Athos values a fencing lesson at $15, Porthos at $13, and Aramis at $11. Suppose that if the government taxes fencing lessons at 50 cents each, the price rises to $10.50. A consequence of the tax is that consumer surplus shrinks by

Accepted Answer

A)  $1.50 and tax revenues increase by $1.50, so there is no deadweight loss. 
B)  $9.00 and tax revenues increase by $1.50, so there is a deadweight loss of $7.50. 
C)  $7.50 and tax revenues increase by $7.50, so there is no deadweight loss. 
D)  $7.50 and tax revenues increase by $1.50, so there is a deadweight loss of $6. 
A)  $1.50 and tax revenues increase by $1.50, so there is no deadweight loss. 
B)  $9.00 and tax revenues increase by $1.50, so there is a deadweight loss of $7.50. 
C)  $7.50 and tax revenues increase by $7.50, so there is no deadweight loss. 
D)  $7.50 and tax revenues increase by $1.50, so there is a deadweight loss of $6.

Question 8

Vertical equity refers to a tax system in which individuals with similar incomes pay similar taxes.

Accepted Answer

A) True 
 B)False

Question 9

Table 12-8
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 12-8. For an individual with $200,000 in taxable income, which tax schedule has the highest average tax rate?

Accepted Answer

A)  Tax Schedule A 
B)  Tax Schedule B 
C)  Tax Schedule C 
D)  Tax Schedule D 
A)  Tax Schedule A 
B)  Tax Schedule B 
C)  Tax Schedule C 
D)  Tax Schedule D

Question 10

In the 1980s, President Ronald Reagan argued that high tax rates distorted economic incentives to work and save. In the 1990s, President Bill Clinton argued that the rich were not paying their fair share of taxes. Which of the following statements best summarizes the economic theories behind the differing philosophies?

Accepted Answer

A)  President Reagan was concerned about vertical equity, whereas President Clinton was concerned about horizontal equity. 
B)  President Reagan was concerned about average tax rates, whereas President Clinton was concerned about horizontal equity. 
C)  President Reagan was concerned about marginal tax rates, whereas President Clinton was concerned about vertical equity. 
D)  None of the above is correct. 
A)  President Reagan was concerned about vertical equity, whereas President Clinton was concerned about horizontal equity. 
B)  President Reagan was concerned about average tax rates, whereas President Clinton was concerned about horizontal equity. 
C)  President Reagan was concerned about marginal tax rates, whereas President Clinton was concerned about vertical equity. 
D)  None of the above is correct.

Question 11

Which of the following tax systems is the most fair?

Accepted Answer

A)  proportional taxes 
B)  regressive taxes 
C)  progressive taxes 
D)  There is no objective way to assess fairness among the three systems. 
A)  proportional taxes 
B)  regressive taxes 
C)  progressive taxes 
D)  There is no objective way to assess fairness among the three systems.

Question 12

Table 12-7
The following table shows the marginal tax rates for unmarried individuals for two years.  
-Refer to Table 12-7. For an individual who earned $35,000 in taxable income in both years, which of the following describes the change in the individual's average tax rate between the two years?

Accepted Answer

A)  The average tax rate increased from 2009 to 2010. 
B)  The average tax rate decreased from 2009 to 2010. 
C)  The average tax rate remained constant from 2009 to 2010. 
D)  The change in the average tax rate cannot be determined for the two tax schedules shown. 
A)  The average tax rate increased from 2009 to 2010. 
B)  The average tax rate decreased from 2009 to 2010. 
C)  The average tax rate remained constant from 2009 to 2010. 
D)  The change in the average tax rate cannot be determined for the two tax schedules shown.

Question 13

European countries tend to rely on which type of tax more so than the United States does?

Accepted Answer

A)  an income tax 
B)  a lump-sum tax 
C)  a value-added tax 
D)  a corrective tax 
A)  an income tax 
B)  a lump-sum tax 
C)  a value-added tax 
D)  a corrective tax

Question 14

Changing the basis of taxation from income earned to amount spent will

Accepted Answer

A)  necessarily reduce tax revenues. 
B)  lower effective interest rates on savings. 
C)  distort incentives to earn income. 
D)  eliminate disincentives to save. 
A)  necessarily reduce tax revenues. 
B)  lower effective interest rates on savings. 
C)  distort incentives to earn income. 
D)  eliminate disincentives to save.

Question 15

Calculate the marginal tax rate and the average tax rate of a lump-sum tax of $5,000.

Accepted Answer

The marginal tax rate would be $0 becaus

Question 16

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 the deadweight loss of the tax?

Accepted Answer

A)  $3 
B)  $6 
C)  $8 
D)  $9 
A)  $3 
B)  $6 
C)  $8 
D)  $9

Question 17

What are the three categories of the costs of taxes to taxpayers?

Accepted Answer

the tax payment itse

Question 18

If tax revenues from a tax on wine, beer, and hard liquor are used to pay for healthcare expenses related to liver damage, the alcohol tax could be justified using the .

Accepted Answer

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

Question 19

Table 12-9
United States Income Tax Rates for a Single Individual, 2012 and 2013.  
-Refer to Table 12-9. Harry is a single person whose taxable income is $35,000 a year. What is his marginal tax rate in 2013?

Accepted Answer

A)  10% 
B)  15% 
C)  27% 
D)  30% 
A)  10% 
B)  15% 
C)  27% 
D)  30%

Question 20

Table 12-9
United States Income Tax Rates for a Single Individual, 2012 and 2013.  
-Refer to Table 12-9. Jake is a single person whose taxable income is $20,000 a year. What is his average tax rate in 2012?

Accepted Answer

A)  10% 
B)  15% 
C)  12.5% 
D)  28% 
A)  10% 
B)  15% 
C)  12.5% 
D)  28%

Exam 12: The Design of the Tax System

According to the ability-to-pay principle, it is fair for people to pay taxes based on their ability to handle the financial burden.

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 schedule could be considered a lump-sum tax?

The federal taxes owed by a taxpayer depend

A country is using a proportional tax when

The deadweight loss of an income tax is determined by the

Table 12-10 -Refer to Table 12-10. If Jace has $33,000 in taxable income, his average tax rate is

Vertical equity refers to a tax system in which individuals with similar incomes pay similar taxes.

Table 12-8 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 12-8. For an individual with $200,000 in taxable income, which tax schedule has the highest average tax rate?

Which of the following tax systems is the most fair?

Table 12-7 The following table shows the marginal tax rates for unmarried individuals for two years. -Refer to Table 12-7. For an individual who earned $35,000 in taxable income in both years, which of the following describes the change in the individual's average tax rate between the two years?

European countries tend to rely on which type of tax more so than the United States does?

Changing the basis of taxation from income earned to amount spent will

Calculate the marginal tax rate and the average tax rate of a lump-sum tax of $5,000.

What are the three categories of the costs of taxes to taxpayers?

If tax revenues from a tax on wine, beer, and hard liquor are used to pay for healthcare expenses related to liver damage, the alcohol tax could be justified using the .

Table 12-9 United States Income Tax Rates for a Single Individual, 2012 and 2013. -Refer to Table 12-9. Harry is a single person whose taxable income is $35,000 a year. What is his marginal tax rate in 2013?

Table 12-9 United States Income Tax Rates for a Single Individual, 2012 and 2013. -Refer to Table 12-9. Jake is a single person whose taxable income is $20,000 a year. What is his average tax rate in 2012?

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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