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Exam 12: The Design of the Tax System

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Question 261

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Table 12-2 -Refer to Table 12-2. Suppose that the government imposes a $2 tax on delights, causing the price to increase from $4.00 to $6.00. Total consumer surplus

A) falls by less than the tax revenue generated.
B) falls by more than the tax revenue generated.
C) falls by the same amount as the tax revenue generated.
D) will not fall since Jennifer will no longer be in the market.

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

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Question 262

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Scenario 12-1 Ken places a $20 value on a cigar, and Mark places a $17 value on it. The equilibrium price for this brand of cigar is $15. -Refer to Scenario 12-1. How much total consumer surplus do Ken and Mark get when each purchases one cigar?

A) $1
B) $2
C) $5
D) $7

E) B) and D)
F) B) and C)

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Question 263

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If the government were to impose a tax that assigned everyone the same tax liability, it would be

Table 12-5 -Refer to Table 12-5. What is the marginal tax rate for a person who makes $37,000?

Scenario 12-5 Senator Filch argues that a tax must be paid by people who benefit from government services. Senator Fudge argues that a tax must be paid in accordance with a person's ability to bear the tax burden. Senator Malfoy argues that people with a greater ability to pay a tax should pay a larger amount. Senator Moody argues that taxpayers with similar abilities to pay should contribute the same amount. -Refer to Scenario 12-5. Which Senator is advocating taxes based on a person's ability to pay?

​A city finances a performing arts center by adding a $2.75 tax to each ticket sold.This is an example of taxation via the benefits principle.

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

Most economists believe that a corporate income tax affects the stockholders of a corporation but not its employees or customers.

Tax systems that impose recordkeeping requirements on taxpayers are said to have a(n)

In practice, the U.S. income tax system is filled with special provisions that alter a family's tax based on its specific circumstances.

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.

Special tax treatment given to specific types of behavior are called

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. How much tax revenue will be generated from sales to Regina and Roger?

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

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

Scenario 12-5 Senator Filch argues that a tax must be paid by people who benefit from government services. Senator Fudge argues that a tax must be paid in accordance with a person's ability to bear the tax burden. Senator Malfoy argues that people with a greater ability to pay a tax should pay a larger amount. Senator Moody argues that taxpayers with similar abilities to pay should contribute the same amount. -Refer to Scenario 12-5. Which Senator is advocating taxes based on the benefits principle?

According to the ability-to-pay principle, it is fair for people to pay taxes based on the amount of government services that they receive.

Suppose that Christine values a baseball hat at $20, and Mark values one at $18. The pretax price of a baseball hat is $14. The government imposes a $5 tax on baseball hats, which raises the price to $19. What is the deadweight loss from the tax?

Which of the following statements is not correct?

Briefly evaluate the advantages and disadvantages of a lump-sum tax.