Question 1

Taxes create deadweight losses because they

Accepted Answer

A)   reduce costs for firms.
B)   distort incentives.
C)   cause prices to decrease.
D)   create revenue for the government.E) A) and D)
F) B) and C)

Question 2

A tax levied on the total amount spent in retail stores is called

Accepted Answer

A)   a sales tax.
B)   an excise tax.
C)   a retail tax.
D)   an income tax.E) A) and C)
F) B) and D)

Question 3

The deadweight loss of a tax is

Accepted Answer

A)   the reduction in economic welfare of taxpayers that exceeds the revenue raised by the government.
B)   the improved efficiency created as people reallocate resources according to the tax incentive rather than the true costs and benefits.
C)   the loss in tax revenues.
D)   Both a and b are correct.E) C) and D)
F) A) and B)

Question 4

The amount of income tax owed by a family is

Accepted Answer

A)   not simply proportional to its total income.
B)   unaffected by deductions.
C)   total income minus tax credits.
D)   a constant fraction of income.E) A) and B)
F) A) and C)

Question 5

Suppose that the government taxes income in the following fashion: 30 percent of the first $20,000,50 percent of the next $30,000,and 60 percent of all income over $50,000.Ted earns $40,000,and Robin earns $60,000.Which of the following statements is correct?

Accepted Answer

A)   Ted's marginal tax rate is 60 percent,and his average tax rate is 50 percent.
B)   Ted's marginal tax rate is 50 percent,and his average tax rate is 40 percent.
C)   Robin's marginal tax rate is 50 percent,and her average tax rate is 45 percent.
D)   Robin's marginal tax rate is 60 percent,and her average tax rate is 40 percent.E) B) and C)
F) None of the above

Question 6

The benefits principle of taxation can be used to argue that wealthy citizens should pay higher taxes than poorer ones on the basis that

Accepted Answer

A)   police services are more frequently used in poor neighborhoods.
B)   the wealthy benefit more from services provided by government than the poor.
C)   the poor are more active in political processes.
D)   the poor receive welfare payments.E) B) and C)
F) None of the above

Question 7

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 8

The claim that all citizens should make an "equal sacrifice" to support government programs is usually associated with

Accepted Answer

A)   the ability-to-pay principle.
B)   the benefits principle.
C)   efficiency arguments.
D)   regressive tax arguments.E) C) and D)
F) A) and D)

Question 9

Some colleges charge all students the same fee for access to campus computing services.Suppose that students differ by how many hours of campus computing services they use.For example,some students print all their papers and assignment in the campus computer labs,while others use their own printers in their apartments.The computing services fee is most like a(n)

Accepted Answer

A)   excise tax that conforms to the benefits principle.
B)   excise tax that violates the benefits principle.
C)   lump-sum tax that conforms to the benefits principle.
D)   lump-sum tax that violates the benefits principle.E) C) and D)
F) A) and D)

Question 10

A budget deficit occurs when government receipts exceed government spending.

Accepted Answer

A) True 
 B)False

Question 11

Suppose the government taxes 30 percent of the first $70,000 and 50 percent of all income above $70,000.For a person earning $200,000,the marginal tax rate is

Accepted Answer

A)   30 percent,and the average tax rate is 50 percent.
B)   30 percent,and the average tax rate is 43 percent.
C)   50 percent,and the average tax rate is 40 percent.
D)   50 percent,and the average tax rate is 43 percent.E) A) and B)
F) C) and D)

Question 12

Table 12-3
 
-Refer to Table 12-3.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.What is the value of the surplus that accrues to all four skiers from their weekend trip?

Accepted Answer

A)   $41.
B)   $95.
C)   $144.
D)   $185.E) A) and B)
F) None of the above

Question 13

Which of the following statements is correct?

Accepted Answer

A)   Equity is more important than efficiency as a goal of the tax system.
B)   Efficiency is more important than equity as a goal of the tax system.
C)   Both equity and efficiency are important goals of the tax system.
D)   Neither equity nor efficiency is an important goal of the tax system.E) A) and B)
F) B) and C)

Question 14

Tim earns income of $60,000 per year and pays $21,000 per year in taxes.Tim paid 20 percent in taxes on the first $30,000 he earned.What was the marginal tax rate on the second $30,000 he earned?

Accepted Answer

A)   20 percent
B)   30 percent
C)   50 percent
D)   70 percentE) A) and B)
F) A) and C)

Question 15

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.E) B) and C)
F) A) and B)

Question 16

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.E) All of the above
F) None of the above

Question 17

Horizontal equity can be difficult to assess because it is difficult to compare the similarity of tax payers.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A)   proportional.
B)   regressive.
C)   non-egalitarian.
D)   progressive.E) B) and D)
F) All of the above

Question 19

As government debt increases,

Accepted Answer

A)   Congress will reduce spending by an equal proportion.
B)   the government must spend more revenue on interest payments.
C)   a trade-off with government deficits is inevitable.
D)   tax rates must rise to cover the deficit.E) None of the above
F) B) and C)

Question 20

Table 12-9
The table below shows the marginal tax rates for an unmarried taxpayer for various levels of taxable income.
 
-Refer to Table 12-9.For this tax schedule,what is the total income tax due for an individual with $49,000 in taxable income?

Accepted Answer

A)   $12,650
B)   $14,370
C)   $15,960
D)   $16,220E) All of the above
F) A) and D)

Exam 12: The Design of the Tax System

An estate tax is an example of a(n)

Correct Answer
verified

A tax levied on the total amount spent in retail stores is called

Correct Answer
verified

As government debt increases,

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Suppose the government taxes 30 percent of the first $70,000 and 50 percent of all income above $70,000.For a person earning $200,000,the marginal tax rate is

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Which of the following statements is correct?

Correct Answer
verified

The claim that all citizens should make an "equal sacrifice" to support government programs is usually associated with

Correct Answer
verified

Taxes create deadweight losses because they

Correct Answer
verified

A budget deficit occurs when government receipts exceed government spending.

Correct Answer
verified

Suppose that the government taxes income in the following fashion: 30 percent of the first $20,000,50 percent of the next $30,000,and 60 percent of all income over $50,000.Ted earns $40,000,and Robin earns $60,000.Which of the following statements is correct?

Correct Answer
verified

The benefits principle of taxation can be used to argue that wealthy citizens should pay higher taxes than poorer ones on the basis that

Correct Answer
verified

The amount of income tax owed by a family is

Correct Answer
verified

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

Correct Answer
verified

Horizontal equity can be difficult to assess because it is difficult to compare the similarity of tax payers.

Correct Answer
verified

The deadweight loss of a tax is

Correct Answer
verified

Table 12-9 The table below shows the marginal tax rates for an unmarried taxpayer for various levels of taxable income. -Refer to Table 12-9.For this tax schedule,what is the total income tax due for an individual with $49,000 in taxable income?

Correct Answer
verified

Tim earns income of $60,000 per year and pays $21,000 per year in taxes.Tim paid 20 percent in taxes on the first $30,000 he earned.What was the marginal tax rate on the second $30,000 he earned?

Correct Answer
verified

Exam 12: The Design of the Tax System

An estate tax is an example of a(n)

Correct AnswerverifiedShow Answer

A tax levied on the total amount spent in retail stores is called

Correct AnswerverifiedShow Answer

As government debt increases,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose the government taxes 30 percent of the first $70,000 and 50 percent of all income above $70,000.For a person earning $200,000,the marginal tax rate is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

The claim that all citizens should make an "equal sacrifice" to support government programs is usually associated with

Correct AnswerverifiedShow Answer

Taxes create deadweight losses because they

Correct AnswerverifiedShow Answer

A budget deficit occurs when government receipts exceed government spending.

Correct AnswerverifiedShow Answer

Suppose that the government taxes income in the following fashion: 30 percent of the first $20,000,50 percent of the next $30,000,and 60 percent of all income over $50,000.Ted earns $40,000,and Robin earns $60,000.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

The benefits principle of taxation can be used to argue that wealthy citizens should pay higher taxes than poorer ones on the basis that

Correct AnswerverifiedShow Answer

The amount of income tax owed by a family is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Horizontal equity can be difficult to assess because it is difficult to compare the similarity of tax payers.

Correct AnswerverifiedShow Answer

The deadweight loss of a tax is

Correct AnswerverifiedShow Answer

Table 12-9 The table below shows the marginal tax rates for an unmarried taxpayer for various levels of taxable income. -Refer to Table 12-9.For this tax schedule,what is the total income tax due for an individual with $49,000 in taxable income?

Correct AnswerverifiedShow Answer

Tim earns income of $60,000 per year and pays $21,000 per year in taxes.Tim paid 20 percent in taxes on the first $30,000 he earned.What was the marginal tax rate on the second $30,000 he earned?

Correct AnswerverifiedShow Answer

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