Question 1

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

Accepted Answer

A)  A only. 
B)  B or D. 
C)  C only. 
D)  A or D. 
A)  A only. 
B)  B or D. 
C)  C only. 
D)  A or D.

Question 2

The typical state spends the most on

Accepted Answer

A)  education. 
B)  Medicare and Social Security. 
C)  highways. 
D)  defense. 
A)  education. 
B)  Medicare and Social Security. 
C)  highways. 
D)  defense.

Question 3

Which of the following statements is not correct?

Accepted Answer

A)  A gasoline tax can be an example of a tax that uses the benefits principle. 
B)  A progressive tax attempts to achieve vertical equity. 
C)  A progressive tax can be an example of the ability-to-pay principle. 
D)  A regressive tax attempts to achieve vertical equity. 
A)  A gasoline tax can be an example of a tax that uses the benefits principle. 
B)  A progressive tax attempts to achieve vertical equity. 
C)  A progressive tax can be an example of the ability-to-pay principle. 
D)  A regressive tax attempts to achieve vertical equity.

Question 4

Because the marginal tax rate rises as income rises,

Accepted Answer

A)  higher income families, in general, pay a larger percentage of their income in taxes. 
B)  lower income families, in general, pay a larger percentage of their income in taxes. 
C)  a disproportionately large share of the tax burden falls upon the poor. 
D)  higher income families pay the same percentage of their income in taxes as lower-income families. 
A)  higher income families, in general, pay a larger percentage of their income in taxes. 
B)  lower income families, in general, pay a larger percentage of their income in taxes. 
C)  a disproportionately large share of the tax burden falls upon the poor. 
D)  higher income families pay the same percentage of their income in taxes as lower-income families.

Question 5

Antipoverty programs funded by taxes on the wealthy are sometimes advocated on the basis of the benefits principle.

Accepted Answer

A) True 
 B)False

Question 6

The income tax requires that taxpayers pay 10percent on the first $40,000 of income and 20 percent on all income over $40,000. Karen paid $6,000 in taxes. What were her marginal and average tax rates?

Accepted Answer

A)  20 percent and 12 percent, respectively 
B)  20 percent and 15 percent, respectively 
C)  10 percent and 12 percent respectively 
D)  10 percent and 15 percent respectively 
A)  20 percent and 12 percent, respectively 
B)  20 percent and 15 percent, respectively 
C)  10 percent and 12 percent respectively 
D)  10 percent and 15 percent respectively

Question 7

A person's average tax rate equals her

Accepted Answer

A)  tax obligation divided by her marginal tax rate. 
B)  increase in taxes if her income were to rise by $1. 
C)  tax obligation divided by her income. 
D)  increase in taxes if her marginal tax rate were to rise 1percent. 
A)  tax obligation divided by her marginal tax rate. 
B)  increase in taxes if her income were to rise by $1. 
C)  tax obligation divided by her income. 
D)  increase in taxes if her marginal tax rate were to rise 1percent.

Question 8

Income taxes and property taxes generate the highest tax revenue for state and local governments.

Accepted Answer

A) True 
 B)False

Question 9

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. Suppose the government imposes a tax of $12 on skiing, which raises the price of a weekend ski pass to $57. The deadweight loss associated with the tax is

Accepted Answer

A)  $5. 
B)  $12. 
C)  $36. 
D)  $41. 
A)  $5. 
B)  $12. 
C)  $36. 
D)  $41.

Question 10

Suppose that Deon places a $150 value on a new MP-3 player, and Juanita places a $140 value on it. The cost of the MP-3 player is $130. Suppose the government levies a $15 tax on MP-3 players, which raises the price to $145. What is the deadweight loss created by the tax?

Accepted Answer

Before the tax, the total surplus was $3

Question 11

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 happened to her marginal tax rate between 2012 and 2013?

Accepted Answer

A)  It increased. 
B)  It decreased. 
C)  It did not change. 
D)  We do not have enough information to answer this question. 
A)  It increased. 
B)  It decreased. 
C)  It did not change. 
D)  We do not have enough information to answer this question.

Question 12

If your income is $40,000 and your income tax liability is $5,000, your marginal tax rate is

Accepted Answer

A)  8 percent. 
B)  12.5 percent. 
C)  20 percent. 
D)  unknown. We do not have enough information to answer this question. 
A)  8 percent. 
B)  12.5 percent. 
C)  20 percent. 
D)  unknown. We do not have enough information to answer this question.

Question 13

An efficient tax system is one that imposes small deadweight losses and small administrative burdens.

Accepted Answer

A) True 
 B)False

Question 14

Time spent filling out tax forms, time spent keeping tax records, and government resources spent to enforce tax laws are examples of the of the U.S. income tax system.

Accepted Answer

administra

Question 15

A payroll tax is a tax on

Accepted Answer

A)  the wages that a firm pays its workers. 
B)  earned and unearned income. 
C)  specific goods like gasoline and cigarettes. 
D)  corporate profits. 
A)  the wages that a firm pays its workers. 
B)  earned and unearned income. 
C)  specific goods like gasoline and cigarettes. 
D)  corporate profits.

Question 16

A tax system with little deadweight loss and a small administrative burden would be described as

Accepted Answer

A)  equitable. 
B)  communistic. 
C)  capitalistic. 
D)  efficient. 
A)  equitable. 
B)  communistic. 
C)  capitalistic. 
D)  efficient.

Question 17

Which of the following describes a situation where tax laws give preferential treatment to specific types of behavior?

Accepted Answer

A)  tax evasion 
B)  a political payoff 
C)  a tax loophole 
D)  compensation for the benefit of society 
A)  tax evasion 
B)  a political payoff 
C)  a tax loophole 
D)  compensation for the benefit of society

Question 18

Most people agree that the tax system

Accepted Answer

A)  should be both efficient and equitable. 
B)  cannot raise enough revenue to cover government expenditures. 
C)  would raise more revenue if tax rates were lowered. 
D)  should be rewritten to require everyone to pay the same percentage of income in taxes. 
A)  should be both efficient and equitable. 
B)  cannot raise enough revenue to cover government expenditures. 
C)  would raise more revenue if tax rates were lowered. 
D)  should be rewritten to require everyone to pay the same percentage of income in taxes.

Question 19

When the marginal tax rate equals the average tax rate, the tax is

Accepted Answer

A)  proportional. 
B)  progressive. 
C)  regressive. 
D)  egalitarian. 
A)  proportional. 
B)  progressive. 
C)  regressive. 
D)  egalitarian.

Question 20

When a state levies a sales tax, the tax

Accepted Answer

A)  is paid only by the state's residents. 
B)  occasionally excludes items that are deemed to be necessities. 
C)  is commonly levied on labor services. 
D)  applies to wholesale purchases but not retail purchases. 
A)  is paid only by the state's residents. 
B)  occasionally excludes items that are deemed to be necessities. 
C)  is commonly levied on labor services. 
D)  applies to wholesale purchases but not retail purchases.

Exam 12: The Design of the Tax System

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

The typical state spends the most on

Which of the following statements is not correct?

Because the marginal tax rate rises as income rises,

Antipoverty programs funded by taxes on the wealthy are sometimes advocated on the basis of the benefits principle.

The income tax requires that taxpayers pay 10percent on the first $40,000 of income and 20 percent on all income over $40,000. Karen paid $6,000 in taxes. What were her marginal and average tax rates?

A person's average tax rate equals her

Income taxes and property taxes generate the highest tax revenue for state and local governments.

Suppose that Deon places a $150 value on a new MP-3 player, and Juanita places a $140 value on it. The cost of the MP-3 player is $130. Suppose the government levies a $15 tax on MP-3 players, which raises the price to $145. What is the deadweight loss created by the tax?

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 happened to her marginal tax rate between 2012 and 2013?

If your income is $40,000 and your income tax liability is $5,000, your marginal tax rate is

An efficient tax system is one that imposes small deadweight losses and small administrative burdens.

Time spent filling out tax forms, time spent keeping tax records, and government resources spent to enforce tax laws are examples of the of the U.S. income tax system.

A payroll tax is a tax on

A tax system with little deadweight loss and a small administrative burden would be described as

Which of the following describes a situation where tax laws give preferential treatment to specific types of behavior?

Most people agree that the tax system

When the marginal tax rate equals the average tax rate, the tax is

When a state levies a sales tax, the tax

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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