Question 1

Suppose Max values a concert ticket at $45. Charles values the same concert ticket at $40. The pre-tax price of a concert ticket is $30. The government imposes a tax of $5 on each concert ticket, and the price rises to $35. The deadweight loss from the tax is

Accepted Answer

A)  $15.
B)  $10.
C)  $5.
D)  $0.E) B) and D)
F) B) and C)

Question 2

Suppose that the government taxes income in the following fashion: 20 percent of the first $50,000, 40 percent of the next $50,000, and 60 percent of all income over $100,000. Marshall earns $200,000, and Lily earns $600,000. Which of the following statements is correct?

Accepted Answer

A)  Marshall's marginal tax rate is higher than Lily's marginal tax rate.
B)  Marshall's average tax rate is higher than his marginal tax rate.
C)  Lily's average tax rate is higher than her marginal tax rate.
D)  Lily's average tax rate is higher than Marshall's average tax rate.E) A) and D)
F) A) and C)

Question 3

An excise tax is a tax on a specific good, like gasoline.

Accepted Answer

A) True 
 B)False

Question 4

The theory that the wealthy should contribute more to police protection than the poor because they have more to protect is based on

Accepted Answer

A)  the ability-to-pay principle.
B)  a consumption tax plan.
C)  the benefits principle.
D)  property tax assessments.E) B) and D)
F) None of the above

Question 5

Which of the following statements is correct?

Accepted Answer

A)  Vertical equity is the idea that taxpayers with similar abilities to pay taxes should pay the same amount.
B)  Horizontal equity is the idea that taxes should be levied on a person according to how well that person can shoulder the burden.
C)  A regressive tax would mean that high-income tax payers pay a larger fraction of their income in taxes than would low-income taxpayers.
D)  A proportional tax would mean that high-income and low-income taxpayers pay the same fraction of income in taxes.E) A) and C)
F) A) and B)

Question 6

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

Accepted Answer

A)  15%
B)  27%
C)  30%
D)  35%E) All of the above
F) None of the above

Question 7

"A $1,000 tax paid by a poor person may be a larger sacrifice than a $10,000 tax paid by a wealthy person" is an argument in favor of

Accepted Answer

A)  the horizontal equity principle.
B)  the benefits principle.
C)  a regressive tax argument.
D)  the ability-to-pay principle.E) A) and B)
F) All of the above

Question 8

If all taxpayers pay the same percentage of income in taxes, the tax system is progressive.

Accepted Answer

A) True 
 B)False

Question 9

A tax system exhibits vertical equity when taxpayers with similar abilities to pay contribute the same amount.

Accepted Answer

A) True 
 B)False

Question 10

Nancy paid a tax of $0.50 on the last dollar she earned in 1999. Nancy's marginal tax rate in 1999 was

Accepted Answer

A)  more than 50 percent.
B)  exactly 50 percent.
C)  higher than her average tax rate.
D)  lower than her average tax rate.E) None of the above
F) B) and C)

Question 11

Which of the following programs is not included in the federal income security spending?

Accepted Answer

A)  Social Security
B)  welfare
C)  education
D)  unemployment compensationE) A) and B)
F) None of the above

Question 12

List several examples of the administrative burden of the U.S. income tax system.

Accepted Answer

time spent filling out tax for...

Question 13

Which tax system requires higher-income taxpayers to have lower tax rates, even though they pay a larger amount of tax when compared to lower-income taxpayers?

Accepted Answer

A)  a proportional tax
B)  a progressive tax
C)  a regressive tax
D)  a lump-sum taxE) B) and C)
F) B) and D)

Question 14

Because the marginal tax rate rises as income rises,

Accepted Answer

A)  higher income families, in general, pay a larger percentage of their income in taxes.
B)  lower income families, in general, pay a larger percentage of their income in taxes.
C)  a disproportionately large share of the tax burden falls upon the poor.
D)  higher income families pay the same percentage of their income in taxes as lower-income families.E) B) and C)
F) A) and B)

Question 15

If Christopher earns $80,000 in taxable income and pays $20,000 in taxes, his average tax rate is 20 percent.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements is correct?

Accepted Answer

A)  A general sales tax on food is regressive when low-income taxpayers spend a larger proportion of their income on food than high-income taxpayers.
B)  A general sales tax on food is regressive when middle income taxpayers spend a smaller proportion of their income on food than high-income taxpayers.
C)  A general sales tax on food is regressive when high-income taxpayers spend a larger proportion of their income on food than middle income taxpayers.
D)  A general sales tax on food is regressive when high-income taxpayers spend a larger proportion of their income on food than low-income taxpayers.E) B) and D)
F) B) and C)

Question 17

Which of the following countries has the largest tax burden?

Accepted Answer

A)  Mexico
B)  Canada
C)  United States
D)  DenmarkE) A) and C)
F) C) and D)

Question 18

In 2011, which category represented the largest source of receipts for the U.S. federal government?

Accepted Answer

A)  Medicare
B)  Social Security
C)  corporate income taxes
D)  individual income taxesE) A) and C)
F) A) and B)

Question 19

Table 12-1 
-Refer to Table 12-1. Assume that the price of a weekend ski pass is $45 and that the price reflects the actual unit cost of providing a weekend of skiing. How much consumer surplus accrues to Anna and Clem individually?

Accepted Answer

A)  $125 and $20 respectively
B)  $105 and $30 respectively
C)  $85 and $40 respectively
D)  $65 and $50 respectivelyE) B) and C)
F) A) and B)

Question 20

Deadweight losses arise because a tax causes some individuals to change their behavior.

Accepted Answer

A) True 
 B)False

Exam 12: The Design of the Tax System

Which of the following statements is correct?

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Table 12-1 -Refer to Table 12-1. Assume that the price of a weekend ski pass is $45 and that the price reflects the actual unit cost of providing a weekend of skiing. How much consumer surplus accrues to Anna and Clem individually?

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

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List several examples of the administrative burden of the U.S. income tax system.

Correct Answerverifiedtime spent filling out tax for...View AnswerShow Answer

If Christopher earns $80,000 in taxable income and pays $20,000 in taxes, his average tax rate is 20 percent.

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Which tax system requires higher-income taxpayers to have lower tax rates, even though they pay a larger amount of tax when compared to lower-income taxpayers?

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Suppose Max values a concert ticket at $45. Charles values the same concert ticket at $40. The pre-tax price of a concert ticket is $30. The government imposes a tax of $5 on each concert ticket, and the price rises to $35. The deadweight loss from the tax is

Correct AnswerverifiedShow Answer

The theory that the wealthy should contribute more to police protection than the poor because they have more to protect is based on

Correct AnswerverifiedShow Answer

Nancy paid a tax of $0.50 on the last dollar she earned in 1999. Nancy's marginal tax rate in 1999 was

Correct AnswerverifiedShow Answer

Suppose that the government taxes income in the following fashion: 20 percent of the first $50,000, 40 percent of the next $50,000, and 60 percent of all income over $100,000. Marshall earns $200,000, and Lily earns $600,000. Which of the following statements is correct?

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If all taxpayers pay the same percentage of income in taxes, the tax system is progressive.

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In 2011, which category represented the largest source of receipts for the U.S. federal government?

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Which of the following countries has the largest tax burden?

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Which of the following programs is not included in the federal income security spending?

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Which of the following statements is correct?

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An excise tax is a tax on a specific good, like gasoline.

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A tax system exhibits vertical equity when taxpayers with similar abilities to pay contribute the same amount.

Correct AnswerverifiedShow Answer

"A $1,000 tax paid by a poor person may be a larger sacrifice than a $10,000 tax paid by a wealthy person" is an argument in favor of

Correct AnswerverifiedShow Answer

Deadweight losses arise because a tax causes some individuals to change their behavior.

Correct AnswerverifiedShow Answer

Because the marginal tax rate rises as income rises,

Correct AnswerverifiedShow Answer

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