Question 1

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 C)
F) A) and B)

Question 2

An efficient tax system is one that imposes small

Accepted Answer

A)   deadweight losses and administrative burdens.
B)   marginal rates and deadweight losses.
C)   administrative burdens and transfers of money.
D)   marginal rates and transfers of money.E) B) and C)
F) C) and D)

Question 3

The average tax rate measures the

Accepted Answer

A)   fraction of spending paid in taxes.
B)   fraction of income paid in taxes.
C)   incremental rate of tax on income.
D)   average deadweight loss from all taxes.E) C) and D)
F) A) and B)

Question 4

The government's health plan for the elderly is called

Accepted Answer

A)   Medicaid.
B)   Medicare.
C)   Social Security.
D)   food stamps.E) A) and B)
F) B) and D)

Question 5

If a government simplified its tax system the likeliest result would be a decrease in

Accepted Answer

A)   consumer surplus.
B)   producer surplus.
C)   in deadweight loss.
D)   tax revenues.E) B) and C)
F) A) and D)

Question 6

A tax on all forms of income will

Accepted Answer

A)   lower the effective rate of interest on savings.
B)   have no effect on savings.
C)   enhance social welfare because the benefits will outweigh the costs.
D)   enhance the incentives to save.E) C) and D)
F) B) and D)

Question 7

Table 12-9
United States Income Tax Rates for a Single Individual, 2012 and 2013. 
-Refer to Table 12-9. Samantha is a single person whose taxable income is $100,000 a year. What happened to her average tax rate between 2012 and 2013?

Accepted Answer

A)   It increased.
B)   It decreased.
C)   It did not change.
D)   We do not have enough information to answer this question.E) None of the above
F) All of the above

Question 8

How can a proportional tax achieve vertical equity?

Accepted Answer

Vertical equity is the idea that taxpaye...

Question 9

Which of the following statements is correct?

Accepted Answer

A)   Both tax avoidance and tax evasion are legal.
B)   Both tax avoidance and tax evasion are illegal.
C)   Tax avoidance is legal, whereas tax evasion is illegal.
D)   Tax avoidance is illegal, whereas tax evasion is legal.E) B) and D)
F) A) and D)

Question 10

Table 12-4 
-Refer to Table 12-4. What is the average tax rate for a person who makes $130,000?

Accepted Answer

A)   30%
B)   40%
C)   50%
D)   60%E) All of the above
F) C) and D)

Question 11

Suppose Tyler values a basketball at $20. Jacqui values a basketball at $16. The pre-tax price of a basketball $15.The government imposes a tax of $2 on each basketball, and the price rises to $17. The deadweight loss from the tax is

Accepted Answer

A)   $1.
B)   $2.
C)   $3.
D)   $6.E) A) and B)
F) All of the above

Question 12

Suppose a recent increase in federal gasoline taxes is estimated to cause a $150 million reduction in the total surplus (consumer plus producer surplus) in the gasoline market. If tax revenues increased by $100 million, what is the deadweight loss associated with the tax? As a result of the tax, 10,000 people sold their cars and started riding their bicycles to work. How much of the burden of the deadweight loss is incurred by the bicycle riders?

Accepted Answer

The direct deadweight loss is $50 millio...

Question 13

Which of the following statements is correct?

Accepted Answer

A)   The average tax rate gauges the sacrifice made by a taxpayer, whereas the marginal tax rate gauges the distortion of taxes on consumer decisions.
B)   The marginal tax rate gauges the sacrifice made by a taxpayer, whereas the average tax rate gauges the distortion of taxes on consumer decisions.
C)   The average tax rate measures how much the tax system discourages people from working.
D)   The marginal tax rate measures total taxes paid divided by total income.E) A) and B)
F) B) and C)

Question 14

The deadweight loss associated with a tax on a commodity is generated by

Accepted Answer

A)   the consumers who still choose to consume the commodity but pay a higher price that reflects the tax.
B)   the consumers who choose to not consume the commodity that is taxed.
C)   all citizens who are able to use services provided by government.
D)   the consumers who are unable to avoid paying the tax.E) B) and D)
F) A) and B)

Question 15

Table 12-17
The following table shows the marginal tax rates for unmarried individuals for two years.
2009 2010 
-Refer to Table 12-17. Suppose one goal of the tax system was to achieve vertical equity. While people may disagree about what is "equitable," based on the marginal tax rates given for the two years, which of the following statements is true?

Accepted Answer

A)   Vertical equity is possible in both years.
B)   Vertical equity is possible in 2009 but not in 2010.
C)   Vertical equity is not possible in 2009 but is possible in 2010.
D)   Vertical equity is not possible in either year.E) All of the above
F) A) and B)

Question 16

The largest category of federal government spending is growing because

Accepted Answer

A)   the U.S. must spend more on national defense due to the war against terror.
B)   the elderly population is increasing due to rising life expectancies.
C)   expenditures on space exploration have increased dramatically.
D)   expenditures on school voucher programs have increased dramatically.E) B) and D)
F) B) and C)

Question 17

Table 12-23
The dollar amounts in the last three columns are the taxes owed under the three different tax systems. 
-Refer to Table 12-23. Which of the three tax systems is proportional?

Accepted Answer

A)   Tax System A
B)   Tax System B
C)   Tax System C
D)   None of the systems are proportional.E) A) and D)
F) A) and C)

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Table 12-18
United States Income Tax Rates for a Single Individual, 2009 and 2010. 
-Refer to Table 12-18. What type of tax structure did the United States have in 2009 for single individuals?

Accepted Answer

A)   a proportional tax structure
B)   a regressive tax structure
C)   a progressive tax structure
D)   a lump-sum tax structureE) None of the above
F) B) and C)

Question 20

Briefly describe why some economists prefer a value-added tax (VAT) to an income tax.

Accepted Answer

Some economists believe that t...

Exam 12: The Design of the Tax System

Suppose Tyler values a basketball at $20. Jacqui values a basketball at $16. The pre-tax price of a basketball $15.The government imposes a tax of $2 on each basketball, and the price rises to $17. The deadweight loss from the tax is

Correct Answer
verified

How can a proportional tax achieve vertical equity?

Correct Answer
verified
Vertical equity is the idea that taxpaye...
View Answer

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

Correct Answer
verified

Table 12-18 United States Income Tax Rates for a Single Individual, 2009 and 2010. -Refer to Table 12-18. What type of tax structure did the United States have in 2009 for single individuals?

Correct Answer
verified

The largest category of federal government spending is growing because

Correct Answer
verified

Table 12-4 -Refer to Table 12-4. What is the average tax rate for a person who makes $130,000?

Correct Answer
verified

The government's health plan for the elderly is called

Correct Answer
verified

An efficient tax system is one that imposes small

Correct Answer
verified

The deadweight loss associated with a tax on a commodity is generated by

Correct Answer
verified

A tax on all forms of income will

Correct Answer
verified

Table 12-9 United States Income Tax Rates for a Single Individual, 2012 and 2013. -Refer to Table 12-9. Samantha is a single person whose taxable income is $100,000 a year. What happened to her average tax rate between 2012 and 2013?

Correct Answer
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Table 12-23 The dollar amounts in the last three columns are the taxes owed under the three different tax systems. -Refer to Table 12-23. Which of the three tax systems is proportional?

Correct Answer
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Which of the following statements is correct?

Correct Answer
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Correct Answer
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Correct Answer
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The direct deadweight loss is $50 millio...
View Answer

The average tax rate measures the

Correct Answer
verified

If a government simplified its tax system the likeliest result would be a decrease in

Correct Answer
verified

High marginal income tax rates

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

Briefly describe why some economists prefer a value-added tax (VAT) to an income tax.

Correct Answer
verified
Some economists believe that t...
View Answer

Exam 12: The Design of the Tax System

Suppose Tyler values a basketball at $20. Jacqui values a basketball at $16. The pre-tax price of a basketball $15.The government imposes a tax of $2 on each basketball, and the price rises to $17. The deadweight loss from the tax is

Correct AnswerverifiedShow Answer

How can a proportional tax achieve vertical equity?

Correct AnswerverifiedVertical equity is the idea that taxpaye...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Table 12-18 United States Income Tax Rates for a Single Individual, 2009 and 2010. -Refer to Table 12-18. What type of tax structure did the United States have in 2009 for single individuals?

Correct AnswerverifiedShow Answer

The largest category of federal government spending is growing because

Correct AnswerverifiedShow Answer

Table 12-4 -Refer to Table 12-4. What is the average tax rate for a person who makes $130,000?

Correct AnswerverifiedShow Answer

The government's health plan for the elderly is called

Correct AnswerverifiedShow Answer

An efficient tax system is one that imposes small

Correct AnswerverifiedShow Answer

The deadweight loss associated with a tax on a commodity is generated by

Correct AnswerverifiedShow Answer

A tax on all forms of income will

Correct AnswerverifiedShow Answer

Table 12-9 United States Income Tax Rates for a Single Individual, 2012 and 2013. -Refer to Table 12-9. Samantha is a single person whose taxable income is $100,000 a year. What happened to her average tax rate between 2012 and 2013?

Correct AnswerverifiedShow Answer

Table 12-23 The dollar amounts in the last three columns are the taxes owed under the three different tax systems. -Refer to Table 12-23. Which of the three tax systems is proportional?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe direct deadweight loss is $50 millio...View AnswerShow Answer

The average tax rate measures the

Correct AnswerverifiedShow Answer

If a government simplified its tax system the likeliest result would be a decrease in

Correct AnswerverifiedShow Answer

High marginal income tax rates

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Briefly describe why some economists prefer a value-added tax (VAT) to an income tax.

Correct AnswerverifiedSome economists believe that t...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified
Vertical equity is the idea that taxpaye...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The direct deadweight loss is $50 millio...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
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Some economists believe that t...
View Answer