Question 1

Which tax system requires all taxpayers to pay the same percentage of their income in taxes?

Accepted Answer

A)  a regressive tax
B)  a proportional tax
C)  a progressive tax
D)  a horizontal equity taxE) None of the above
F) B) and C)

Question 2

Scenario 12-2
Suppose that Bob places a value of $10 on a movie ticket and that Lisa places a value of $7 on a movie ticket. In addition, suppose the price of a movie ticket is $5.
-Refer to Scenario 12-2. Suppose the government levies a tax of $1 on each movie ticket and that, as a result, the price of a movie ticket increases to $6.00. If Bob and Lisa both purchase a movie ticket, what is total consumer surplus for Bob and Lisa?

Accepted Answer

A)  $0.00
B)  $0.50
C)  $5.00
D)  $6.00E) B) and D)
F) B) and C)

Question 3

The U.S. tax burden is high compared to many European countries..

Accepted Answer

A) True 
 B)False

Question 4

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) C) and D)
F) A) and B)

Question 5

A lump sum tax can never have horizontal equity.

Accepted Answer

A) True 
 B)False

Question 6

Today the typical American pays approximately what percent of income in taxes, including all federal, state, and local taxes?

Accepted Answer

A)  5 percent
B)  25 percent
C)  35 percent
D)  50 percentE) C) and D)
F) A) and D)

Question 7

Vertical equity in taxation refers to the idea that people

Accepted Answer

A)  in unequal conditions should be treated differently.
B)  in equal conditions should pay equal taxes.
C)  should pay taxes based on the benefits they receive from the government.
D)  should pay a proportional tax rather than a progressive tax.E) B) and C)
F) A) and D)

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) B) and C)
F) A) and D)

Question 9

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. What is Regina's consumer surplus from cheesecake?

Accepted Answer

A)  zero
B)  $2
C)  $3
D)  $6E) A) and B)
F) None of the above

Question 10

The income tax requires that taxpayers pay 10percent on the first $40,000 of income and 20 percent on all income over $40,000. Emily paid $9,000 in taxes. What were her marginal and average tax rates?

Accepted Answer

A)  20 percent and 13.8 percent, respectively
B)  20 percent and 15 percent, respectively
C)  10 percent and 13.8 percent respectively
D)  10 percent and 15 percent respectivelyE) A) and D)
F) B) and C)

Question 11

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

Accepted Answer

A)  8%.
B)  16%.
C)  24%.
D)  34%.E) All of the above
F) B) and C)

Question 12

Suppose Darby values a certain smart phone at $400. Jake values the same smart phone at $300. The pre-tax price of this smart phone is $250. The government imposes a tax of $75 on each smart phone, and the price rises to $325. The deadweight loss from the tax is

Accepted Answer

A)  $150.
B)  $100.
C)  $50.
D)  $0.E) C) and D)
F) None of the above

Question 13

-Refer to Table 12-21. Which of the three tax systems is progressive?

Accepted Answer

A)  Tax System A
B)  Tax System B
C)  Tax System C
D)  All of the tax systems are progressive.E) B) and C)
F) All of the above

Question 14

You are trying to design a tax system that will simultaneously achieve both of the following goals: 1)  a person with no income would pay no taxes, and 2)  a high-income person would pay a higher fraction of income in taxes than a low-income person. Which of the following statements is correct?

Accepted Answer

A)  A lump-sum tax would achieve the second goal but not the first.
B)  A regressive tax would achieve the second goal but not the first.
C)  A progressive tax could achieve both goals.
D)  A proportional tax could achieve the second goal but not the first.E) A) and B)
F) B) and D)

Question 15

​A lump-sum tax does not produce a deadweight loss.

Accepted Answer

A) True 
 B)False

Question 16

Goals of efficiency and equity in tax policy are

Accepted Answer

A)  complementary in most countries.
B)  necessary for application of the ability-to-pay principle.
C)  often in conflict with each other.
D)  easier to achieve when tax codes are complex.E) A) and B)
F) All of the above

Question 17

​Rob's income rises from $50,000 to $60,000 and his income tax increases from $6,000 to $7,500.His marginal tax rate is 12.5%.

Accepted Answer

A) True 
 B)False

Question 18

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) None of the above
F) A) and B)

Question 19

The concept that people should pay taxes based on the benefits they receive from government services is called

Accepted Answer

A)  the ability-to-pay principle.
B)  the benefits principle.
C)  horizontal equity.
D)  vertical equity.E) A) and B)
F) A) and C)

Question 20

When a tax is justified on the basis that the taxpayers who pay the tax receive specific government services from payment of the tax, the tax

Accepted Answer

A)  is considered horizontally equitable.
B)  burden is minimized.
C)  satisfies the benefits principle.
D)  is considered vertically equitable.E) None of the above
F) A) and B)

Exam 12: The Design of the Tax System

A lump sum tax can never have horizontal equity.

Correct Answer
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The income tax requires that taxpayers pay 10percent on the first $40,000 of income and 20 percent on all income over $40,000. Emily paid $9,000 in taxes. What were her marginal and average tax rates?

Correct Answer
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-Refer to Table 12-21. Which of the three tax systems is progressive?

Correct Answer
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Rob's income rises from $50,000 to $60,000 and his income tax increases from $6,000 to $7,500.His marginal tax rate is 12.5%.

Correct Answer
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A lump-sum tax does not produce a deadweight loss.

Correct Answer
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Correct Answer
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Which tax system requires all taxpayers to pay the same percentage of their income in taxes?

Correct Answer
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You are trying to design a tax system that will simultaneously achieve both of the following goals: 1) a person with no income would pay no taxes, and 2) a high-income person would pay a higher fraction of income in taxes than a low-income person. Which of the following statements is correct?

Correct Answer
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Today the typical American pays approximately what percent of income in taxes, including all federal, state, and local taxes?

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

When a tax is justified on the basis that the taxpayers who pay the tax receive specific government services from payment of the tax, the tax

Correct Answer
verified

The notion that similar taxpayers should pay similar amounts of taxes is known as

Correct Answer
verified

Vertical equity in taxation refers to the idea that people

Correct Answer
verified

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

Correct Answer
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Correct Answer
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Correct Answer
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Suppose Darby values a certain smart phone at $400. Jake values the same smart phone at $300. The pre-tax price of this smart phone is $250. The government imposes a tax of $75 on each smart phone, and the price rises to $325. The deadweight loss from the tax is

Correct Answer
verified

The U.S. tax burden is high compared to many European countries..

Correct Answer
verified

The concept that people should pay taxes based on the benefits they receive from government services is called

Correct Answer
verified

Goals of efficiency and equity in tax policy are

Correct Answer
verified

Exam 12: The Design of the Tax System

A lump sum tax can never have horizontal equity.

Correct AnswerverifiedShow Answer

The income tax requires that taxpayers pay 10percent on the first $40,000 of income and 20 percent on all income over $40,000. Emily paid $9,000 in taxes. What were her marginal and average tax rates?

Correct AnswerverifiedShow Answer

-Refer to Table 12-21. Which of the three tax systems is progressive?

Correct AnswerverifiedShow Answer

​Rob's income rises from $50,000 to $60,000 and his income tax increases from $6,000 to $7,500.His marginal tax rate is 12.5%.

Correct AnswerverifiedShow Answer

​A lump-sum tax does not produce a deadweight loss.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which tax system requires all taxpayers to pay the same percentage of their income in taxes?

Correct AnswerverifiedShow Answer

You are trying to design a tax system that will simultaneously achieve both of the following goals: 1) a person with no income would pay no taxes, and 2) a high-income person would pay a higher fraction of income in taxes than a low-income person. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Today the typical American pays approximately what percent of income in taxes, including all federal, state, and local taxes?

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

When a tax is justified on the basis that the taxpayers who pay the tax receive specific government services from payment of the tax, the tax

Correct AnswerverifiedShow Answer

The notion that similar taxpayers should pay similar amounts of taxes is known as

Correct AnswerverifiedShow Answer

Vertical equity in taxation refers to the idea that people

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose Darby values a certain smart phone at $400. Jake values the same smart phone at $300. The pre-tax price of this smart phone is $250. The government imposes a tax of $75 on each smart phone, and the price rises to $325. The deadweight loss from the tax is

Correct AnswerverifiedShow Answer

The U.S. tax burden is high compared to many European countries..

Correct AnswerverifiedShow Answer

The concept that people should pay taxes based on the benefits they receive from government services is called

Correct AnswerverifiedShow Answer

Goals of efficiency and equity in tax policy are

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Rob's income rises from $50,000 to $60,000 and his income tax increases from $6,000 to $7,500.His marginal tax rate is 12.5%.

Correct Answer
verified

A lump-sum tax does not produce a deadweight loss.

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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