Question 1

Many people consider lump-sum taxes to be unfair to low-income taxpayers.

Accepted Answer

A) True 
 B)False

Question 2

In 2010, the co­chairmen of President Obama's deficit reduction commission proposed curtailing or eliminating the mortgage interest deduction that millions of homeowner taxpayers receive every year. Economists who favor the proposal would argue that (i)  too much of the economy's capital stock is tied up in residential housing.
(ii)  too little of the economy's capital stock is invested in corporate capital.
(iii)  the misallocation of resources results in lower productivity and reduced real wages.

Accepted Answer

A)   (i)  only
B)   (ii)  only
C)   (i)  and (ii)  only
D)   (i) , (ii) , and (iii) E) A) and C)
F) B) and D)

Question 3

Leonard, Sheldon, Raj, and Penny each like to attend comic-book conventions. The price of a ticket to a convention is $50. Leonard values a ticket at $70, Sheldon at $65, Raj at $60, and Penny at $55. Suppose that if the government taxes tickets at $5 each, the price will rise to $55. A consequence of the tax is that consumer surplus shrinks by

Accepted Answer

A)   $50 and tax revenues increase by $20, so there is a deadweight loss of $30.
B)   $30 and tax revenues increase by $20, so there is a deadweight loss of $10.
C)   $20 and tax revenues increase by $20, so there is no deadweight loss.
D)   $50 and tax revenues increase by $20, so there is no deadweight loss.E) A) and B)
F) None of the above

Question 4

In designing a tax system, policymakers have two objectives that are often conflicting. They are

Accepted Answer

A)   maximizing revenue and minimizing costs to taxpayers.
B)   efficiency and minimizing costs to taxpayers.
C)   efficiency and equity.
D)   maximizing revenue and reducing the national debt.E) B) and C)
F) B) and D)

Question 5

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

Accepted Answer

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

Question 6

Table 12-7
The following table shows the marginal tax rates for unmarried individuals for two years.
 
-Refer to Table 12-7. For an individual who earned $35,000 in taxable income in both years, which of the following describes the change in the individual's average tax rate between the two years?

Accepted Answer

A)   The average tax rate increased from 2009 to 2010.
B)   The average tax rate decreased from 2009 to 2010.
C)   The average tax rate remained constant from 2009 to 2010.
D)   The change in the average tax rate cannot be determined for the two tax schedules shown.E) A) and C)
F) All of the above

Question 7

What is the current, annual, approximate amount per person paid to the federal government in individual income taxes, social insurance taxes, corporate income taxes, and other taxes?

Accepted Answer

a little m...

Question 8

Table 12-11
 
-Refer to Table 12-11. If Peggy has taxable income of $43,000, her tax liability is

Accepted Answer

A)   $1,920.
B)   $4,400.
C)   $6,320.
D)   $8,175.E) A) and B)
F) None of the above

Question 9

Which of the following tax systems is the most fair?

Accepted Answer

A)   proportional taxes
B)   regressive taxes
C)   progressive taxes
D)   There is no objective way to assess fairness among the three systems.E) None of the above
F) A) and B)

Question 10

In the United States, all families pay the same proportion of their income in taxes.

Accepted Answer

A) True 
 B)False

Question 11

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 will fall from

Accepted Answer

A)   $6 to $3.
B)   $7 to $4.
C)   $6 to $2.
D)   $5 to $3.E) A) and B)
F) None of the above

Question 12

If government spending exceeds government receipts, the government has a

Accepted Answer

A)   budget surplus. Other things the same, the surplus rises if taxes rise.
B)   budget surplus. Other things the same the surplus rises if taxes fall.
C)   budget deficit. Other things the same, the deficit rises if taxes rise.
D)   budget deficit. Other things the same, the deficit rises if taxes fall.E) A) and D)
F) A) and B)

Question 13

A value-added tax or VAT is a tax on

Accepted Answer

A)   retail purchases only.
B)   wholesale purchases only.
C)   pollution.
D)   all stages of production of a good.E) B) and C)
F) A) and D)

Question 14

Because taxes distort incentives, they typically result in

Accepted Answer

A)   deadweight losses.
B)   reductions in consumer surplus.
C)   reductions in producer surplus.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 15

Define the average tax rate.

Accepted Answer

The average tax rate...

Question 16

High marginal income tax rates

Accepted Answer

A)   distort incentives to work.
B)   are used to encourage saving behavior.
C)   will invariably lead to lower average tax rates.
D)   are not associated with deadweight losses.E) A) and D)
F) A) and C)

Question 17

Which of the following is not an administrative burden of our tax system?

Accepted Answer

A)   government resources used to enforce tax laws
B)   keeping tax records throughout the year
C)   paying the taxes owed
D)   time spent in April filling out formsE) A) and D)
F) A) and C)

Question 18

In the absence of taxes, Carlos would prefer to purchase a large fishing boat with a 75 hp motor. The government has recently decided to place a tax on boats with 75 hp motors or higher. If Carlos decides to purchase a smaller boat with a 50 hp motor as a result of the tax, which of the following statements is correct?

Accepted Answer

A)   Other people who choose to purchase large boats will incur the cost of the deadweight loss of the tax.
B)   There are no deadweight losses as long as some people still choose to purchase large boats.
C)   In order to determine the size of the deadweight loss, we must add the revenues from the tax to the loss in Carlos's consumer surplus.
D)   Carlos is worse off, and his loss of welfare is part of the deadweight loss of the tax.E) B) and D)
F) A) and B)

Question 19

The government taxes corporate income on the basis of

Accepted Answer

A)   profit.
B)   the amount the firm receives for the goods or services it sells.
C)   the number of employees.
D)   All of the above are correct.E) C) and D)
F) None of the above

Question 20

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) C) and D)

Exam 12: The Design of the Tax System

Define the average tax rate.

Correct Answer
verified
The average tax rate...
View Answer

Table 12-7 The following table shows the marginal tax rates for unmarried individuals for two years. -Refer to Table 12-7. For an individual who earned $35,000 in taxable income in both years, which of the following describes the change in the individual's average tax rate between the two years?

Correct Answer
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In the United States, all families pay the same proportion of their income in taxes.

Correct Answer
verified

A value-added tax or VAT is a tax on

Correct Answer
verified

Which of the following is not an administrative burden of our tax system?

Correct Answer
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High marginal income tax rates

Correct Answer
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Table 12-22 -Refer to Table 12-22. A proportional tax is illustrated by tax

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

Correct Answer
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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 will fall from

Correct Answer
verified

In designing a tax system, policymakers have two objectives that are often conflicting. They are

Correct Answer
verified

Correct Answer
verified

What is the current, annual, approximate amount per person paid to the federal government in individual income taxes, social insurance taxes, corporate income taxes, and other taxes?

Correct Answer
verified
a little m...
View Answer

Many people consider lump-sum taxes to be unfair to low-income taxpayers.

Correct Answer
verified

Table 12-11 -Refer to Table 12-11. If Peggy has taxable income of $43,000, her tax liability is

Correct Answer
verified

The government taxes corporate income on the basis of

Correct Answer
verified

Which of the following tax systems is the most fair?

Correct Answer
verified

Correct Answer
verified

Because taxes distort incentives, they typically result in

Correct Answer
verified

If government spending exceeds government receipts, the government has a

Correct Answer
verified

Correct Answer
verified

Exam 12: The Design of the Tax System

Define the average tax rate.

Correct AnswerverifiedThe average tax rate...View AnswerShow Answer

Table 12-7 The following table shows the marginal tax rates for unmarried individuals for two years. -Refer to Table 12-7. For an individual who earned $35,000 in taxable income in both years, which of the following describes the change in the individual's average tax rate between the two years?

Correct AnswerverifiedShow Answer

In the United States, all families pay the same proportion of their income in taxes.

Correct AnswerverifiedShow Answer

A value-added tax or VAT is a tax on

Correct AnswerverifiedShow Answer

Which of the following is not an administrative burden of our tax system?

Correct AnswerverifiedShow Answer

High marginal income tax rates

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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 will fall from

Correct AnswerverifiedShow Answer

In designing a tax system, policymakers have two objectives that are often conflicting. They are

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What is the current, annual, approximate amount per person paid to the federal government in individual income taxes, social insurance taxes, corporate income taxes, and other taxes?

Correct Answerverifieda little m...View AnswerShow Answer

Many people consider lump-sum taxes to be unfair to low-income taxpayers.

Correct AnswerverifiedShow Answer

Table 12-11 -Refer to Table 12-11. If Peggy has taxable income of $43,000, her tax liability is

Correct AnswerverifiedShow Answer

The government taxes corporate income on the basis of

Correct AnswerverifiedShow Answer

Which of the following tax systems is the most fair?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Because taxes distort incentives, they typically result in

Correct AnswerverifiedShow Answer

If government spending exceeds government receipts, the government has a

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified
The average tax rate...
View Answer

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a little m...
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