Question 1

Suppose the income tax rate is 0 on the first $20,000,20 percent on the next $20,000,30 percent on the next $20,000,40 percent on the next $20,000,and 50 percent on all income over that.The Arm family has a taxable income of $80,000.The average tax rate for this family is ________%.

Accepted Answer

The answer of Suppose the income tax rate is 0...

Question 2

A consumption tax would

Accepted Answer

A) encourage saving because individuals would only pay taxes on income they spend. 
B) be progressive because everyone would be subject to the same tax system. 
C) be progressive because higher income people spend more than lower income people. 
D) be proportional because everyone would be subject to the same tax system.

Question 3

Which of the following does NOT involve transfers in kind?

Accepted Answer

A) salaries of government employees 
B) public education 
C) Canadian health care 
D) public housing

Question 4

The marginal tax rate applies to

Accepted Answer

A) the income received by people above the national average. 
B) all income earned by a family. 
C) the income in the highest tax bracket reached. 
D) the income of the richest Canadians.

Question 5

A tax system characterized by a constant average tax rate is known as a

Accepted Answer

A) progressive tax system. 
B) proportional tax system. 
C) regressive tax system. 
D) fair tax system.

Question 6

Suppose the tax rate on the first $10,000 of income is zero;10% on the next $20,000;20% on the next $20,000;30% on the next $20,000;and 40% on income over $70,000.Family C has an income of $100,000.What is family C's average tax rate?

Accepted Answer

A) 40% 
B) 22% 
C) 30% 
D) 20%

Question 7

Grants to support needy students are an example of

Accepted Answer

A) transfers in kind. 
B) transfer payments. 
C) public goods. 
D) externalities.

Question 8

A family making $30,000 pays $4,500 in taxes and a family making $40,000 pays $6,500 in taxes.The tax system is

Accepted Answer

A) progressive. 
B) proportional. 
C) regressive. 
D) flat-rate.

Question 9

Public goods are not likely to be provided by the private sector because

Accepted Answer

A) the production of the good creates negative externalities. 
B) the consumption of the good creates negative externalities. 
C) no one can be excluded from the consumption of the good. 
D) the exclusion principle does not apply to public goods.

Question 10

The idea behind a progressive tax system is that it is fair that

Accepted Answer

A) taxpayers with higher incomes pay smaller shares of their incomes in taxes. 
B) taxpayers with higher incomes pay higher taxes. 
C) taxpayers with higher incomes pay greater shares of their incomes in taxes than those with lower incomes. 
D) taxpayers with higher incomes pay the same shares of their incomes in taxes as those with lower incomes.

Question 11

A family making $30,000 pays $4,500 in taxes and a family making $40,000 pays $5,500 in taxes.The tax system is

Accepted Answer

A) progressive. 
B) proportional. 
C) regressive. 
D) flat-rate.

Question 12

Suppose you purchased 100 shares of stock in 1990 for $25 a share,and you sell them today for $50 a share.If the capital gains tax is 28 percent,your tax liability is

Accepted Answer

A) $70. 
B) $2,500. 
C) $700. 
D) indeterminate without the inflation rate.

Question 13

The tax rate in the highest income tax bracket reached by a taxpayer is the

Accepted Answer

A) average tax rate. 
B) marginal tax rate. 
C) effective tax rate. 
D) efficient tax rate.

Question 14

Suppose the tax rate on the first $10,000 of income is zero;it is 10% on the next $20,000;20% on the next $20,000;30% on the next $20,000;and 40% on income over $70,000.Family A has an income of $120,000 and Family B an income of $55,000.What is the tax bill of each?

Accepted Answer

A) $48,000 for A and $16,500 for B. 
B) $32,000 for A and $7,500 for B. 
C) $34,000 for A and $8,500 for B. 
D) $22,000 for A and $6,600 for B.

Question 15

Suppose the income tax rate schedule is 0% on the first $10,000;10% on the next $20,000;20% on the next $20,000;30% on the next $20,000;and 40% on any income over $70,000.Dennis,who has been earning $28,000 a year,receives a ten percent raise.The additional tax he will he have to pay is $________.

Accepted Answer

The answer of Suppose the income tax rate schedule is...

Question 16

The government tries to protect the benefits from a competitive economic system by passing and enforcing

Accepted Answer

A) price controls. 
B) tariff legislation. 
C) anticombines legislation. 
D) building codes and zoning laws.

Question 17

Describe the 3 types of tax systems.Discuss the fairness and the feasibility of Canada's moving to a proportional tax system as is occasionally suggested.

Accepted Answer

The answer of Describe the 3 types of tax systems.Discuss...

Question 18

Transfer payments are payments

Accepted Answer

A) for in-kind services provided to the government. 
B) made to people who are needy. 
C) for which no services or goods are rendered. 
D) made by the government to its current workers.

Question 19

The marginal tax rate shows

Accepted Answer

A) the average rate of taxation in the economy. 
B) the deductions permitted for child care and medical expenses. 
C) the percentage of income a typical family pays in tax. 
D) the extra tax due on an extra dollar of income.

Question 20

Which of the following is a demerit good?

Accepted Answer

A) housing 
B) education 
C) heroin 
D) medical care

Exam 10: The Public Sector