Question 1

One reason for the projected increase,over the next several decades,in government spending as a percentage of GDP is the projected increase in the size of the elderly population.

Accepted Answer

A) True 
 B)False

Question 2

Scenario 12-1
Suppose Jim and Joan receive great satisfaction from their consumption of cheesecake.Joan would be willing to purchase only one slice and would pay up to $6 for it.Jim would be willing to pay $9 for his first slice,$7 for his second slice,and $3 for his third slice.The current market price is $3 per slice.
-Refer to Scenario 12-1.Assume that the government places a $2 tax on each slice of cheesecake and that the new equilibrium price is $5.What is the deadweight loss of the tax?

Accepted Answer

A)   zero
B)   $3
C)   $6
D)   $8E) B) and C)
F) All of the above

Question 3

Under a regressive tax system,

Accepted Answer

A)   the marginal tax rate for high income taxpayers is higher than the marginal tax rate for low income taxpayers.
B)   the marginal tax rate for high income taxpayers is the same as the marginal tax rate for low income taxpayers.
C)   the marginal tax rate for high income taxpayers is lower than the marginal tax rate for low income taxpayers.
D)   Any of the above could be true under a regressive tax system.E) A) and D)
F) A) and C)

Question 4

Adam,Barb,and Carli each like to read novels.The current bestseller costs $10.Adam values it at $15,Barb at $13,and Carli at $11.Suppose that if the government taxes books at $2 each,the selling price will rise to $12.A consequence of the tax is that

Accepted Answer

A)   consumer surplus shrinks by $4 and tax revenues increase by $6,so there is a deadweight loss of $2.
B)   consumer surplus shrinks by $6 and tax revenues increase by $6,so there is no deadweight loss.
C)   consumer surplus shrinks by $5 and tax revenues increase by $6,so there is no deadweight loss.
D)   consumer surplus shrinks by $5 and tax revenues increase by $4,so there is a deadweight loss of $1.E) B) and D)
F) A) and B)

Question 5

Table 12-13
The following table shows the marginal tax rates for unmarried individuals for two years.
 
-Refer to Table 12-13.Which of the following best describes the tax schedule in 2005?

Accepted Answer

A)   Proportional tax
B)   Progressive tax
C)   Regressive tax
D)   Vertical taxE) None of the above
F) A) and B)

Question 6

Table 12-14
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 12-14.Which tax schedules are progressive?

Accepted Answer

A)   Tax Schedule A only
B)   Tax Schedule A and Tax Schedule B
C)   Tax Schedule A,Tax Schedule B,and Tax Schedule C
D)   All four Tax Schedules are progressive.E) B) and C)
F) A) and D)

Question 7

One reason that deadweight losses are so difficult to avoid is that

Accepted Answer

A)   taxes affect the decisions that people make.
B)   income taxes are not paid by everyone.
C)   consumption taxes must be universally applied to all commodities.
D)   the administrative burden is hard to calculate.E) B) and D)
F) None of the above

Question 8

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) A) and B)
F) All of the above

Question 9

In 2007,which category represented the largest category of spending for the U.S.federal government?

Accepted Answer

A)   Medicare
B)   Social Security
C)   National defense
D)   Net interestE) A) and B)
F) A) and C)

Question 10

Table 12-5
 
-Refer to Table 12-5.What is the marginal tax rate for a person who makes $35,000?

Accepted Answer

A)   20%
B)   30%
C)   40%
D)   50%E) B) and C)
F) C) and D)

Question 11

Tax evasion is illegal,but tax avoidance is legal.

Accepted Answer

A) True 
 B)False

Question 12

The payroll tax differs from the individual income tax because the payroll tax is primarily earmarked to pay for

Accepted Answer

A)   employer-provided pensions.
B)   Social Security and Medicare.
C)   employer-provided health benefits.
D)   job loss and training programs.E) A) and D)
F) A) and C)

Question 13

One tax system is less efficient than another if it

Accepted Answer

A)   places a lower tax burden on lower-income families than on higher-income families.
B)   places a higher tax burden on lower-income families than on higher-income families.
C)   raises the same amount of revenue at a higher cost to taxpayers.
D)   raises less revenue at a lower cost to taxpayers.E) None of the above
F) B) and D)

Question 14

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 taxE) A) and B)
F) A) and C)

Question 15

Table 12-14
The following table presents the total tax liability for an unmarried taxpayer under four different tax schedules for the income levels shown.
 
-The notion that similar taxpayers should pay similar amounts of taxes is known as

Accepted Answer

A)   vertical equity.
B)   the benefits principle.
C)   horizontal equity.
D)   taxpayer efficiency.E) All of the above
F) A) and B)

Question 16

As a nation gets richer,the government typically takes

Accepted Answer

A)   a constant share of income in taxes.
B)   a smaller share of income in taxes.
C)   a larger share of income in taxes.
D)   There is little evidence of a relationship between income and taxes for most countries.E) B) and C)
F) All of the above

Question 17

In choosing the form of a tax,there is often a tradeoff between

Accepted Answer

A)   allocative and productive efficiency.
B)   profits and revenues.
C)   efficiency and fairness.
D)   fairness and profits.E) C) and D)
F) A) and C)

Question 18

An income tax in which the average tax rate is the same for all taxpayers would be considered a

Accepted Answer

A)   progressive tax.
B)   regressive tax.
C)   distortion-free tax.
D)   proportional tax.E) All of the above
F) None of the above

Question 19

A transfer payment is a government payment

Accepted Answer

A)   to companies that provide goods or services to government agencies.
B)   designed to transfer funds from one government agency to another.
C)   which transfers revenue from the federal government to state government.
D)   not made in exchange for a good or service.E) A) and D)
F) None of the above

Question 20

Which of the following statements is not correct?

Accepted Answer

A)   A gasoline tax can be an example of a benefits tax.
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 horizontal equity.E) C) and D)
F) All of the above

Exam 12: The Design of the Tax System

One reason for the projected increase,over the next several decades,in government spending as a percentage of GDP is the projected increase in the size of the elderly population.

Correct Answer
verified

Table 12-5 -Refer to Table 12-5.What is the marginal tax rate for a person who makes $35,000?

Correct Answer
verified

Tax evasion is illegal,but tax avoidance is legal.

Correct Answer
verified

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

Correct Answer
verified

One reason that deadweight losses are so difficult to avoid is that

Correct Answer
verified

In choosing the form of a tax,there is often a tradeoff between

Correct Answer
verified

Correct Answer
verified

Adam,Barb,and Carli each like to read novels.The current bestseller costs $10.Adam values it at $15,Barb at $13,and Carli at $11.Suppose that if the government taxes books at $2 each,the selling price will rise to $12.A consequence of the tax is that

Correct Answer
verified

As a nation gets richer,the government typically takes

Correct Answer
verified

The payroll tax differs from the individual income tax because the payroll tax is primarily earmarked to pay for

Correct Answer
verified

In 2007,which category represented the largest category of spending for the U.S.federal government?

Correct Answer
verified

Table 12-14 The following table presents the total tax liability for an unmarried taxpayer under four different tax schedules for the income levels shown. -The notion that similar taxpayers should pay similar amounts of taxes is known as

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

A transfer payment is a government payment

Correct Answer
verified

One tax system is less efficient than another if it

Correct Answer
verified

Table 12-14 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 12-14.Which tax schedules are progressive?

Correct Answer
verified

An income tax in which the average tax rate is the same for all taxpayers would be considered a

Correct Answer
verified

Which of the following statements is not correct?

Correct Answer
verified

Under a regressive tax system,

Correct Answer
verified

Table 12-13 The following table shows the marginal tax rates for unmarried individuals for two years. -Refer to Table 12-13.Which of the following best describes the tax schedule in 2005?

Correct Answer
verified

Exam 12: The Design of the Tax System

One reason for the projected increase,over the next several decades,in government spending as a percentage of GDP is the projected increase in the size of the elderly population.

Correct AnswerverifiedShow Answer

Table 12-5 -Refer to Table 12-5.What is the marginal tax rate for a person who makes $35,000?

Correct AnswerverifiedShow Answer

Tax evasion is illegal,but tax avoidance is legal.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

One reason that deadweight losses are so difficult to avoid is that

Correct AnswerverifiedShow Answer

In choosing the form of a tax,there is often a tradeoff between

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Adam,Barb,and Carli each like to read novels.The current bestseller costs $10.Adam values it at $15,Barb at $13,and Carli at $11.Suppose that if the government taxes books at $2 each,the selling price will rise to $12.A consequence of the tax is that

Correct AnswerverifiedShow Answer

As a nation gets richer,the government typically takes

Correct AnswerverifiedShow Answer

The payroll tax differs from the individual income tax because the payroll tax is primarily earmarked to pay for

Correct AnswerverifiedShow Answer

In 2007,which category represented the largest category of spending for the U.S.federal government?

Correct AnswerverifiedShow Answer

Table 12-14 The following table presents the total tax liability for an unmarried taxpayer under four different tax schedules for the income levels shown. -The notion that similar taxpayers should pay similar amounts of taxes is known as

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

A transfer payment is a government payment

Correct AnswerverifiedShow Answer

One tax system is less efficient than another if it

Correct AnswerverifiedShow Answer

Table 12-14 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 12-14.Which tax schedules are progressive?

Correct AnswerverifiedShow Answer

An income tax in which the average tax rate is the same for all taxpayers would be considered a

Correct AnswerverifiedShow Answer

Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

Under a regressive tax system,

Correct AnswerverifiedShow Answer

Table 12-13 The following table shows the marginal tax rates for unmarried individuals for two years. -Refer to Table 12-13.Which of the following best describes the tax schedule in 2005?

Correct AnswerverifiedShow Answer

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