Question 1

The single largest expenditure by state and local governments is on

Accepted Answer

A)   highways.
B)   police.
C)   public welfare.
D)   education.E) None of the above
F) A) and B)

Question 2

A tax system based on the ability-to-pay principle claims that all citizens should

Accepted Answer

A)   pay taxes based on the benefits they receive from government services.
B)   pay the same amount in taxes.
C)   pay taxes based on consumption rather than income.
D)   make an equal sacrifice.E) A) and B)
F) A) and C)

Question 3

Suppose that the government taxes income in the following fashion: 30 percent of the first $20,000,50 percent of the next $30,000,and 60 percent of all income over $50,000.Ted earns $40,000,and Robin earns $60,000.Which of the following statements is correct?

Accepted Answer

A)   Ted's marginal tax rate is 60 percent, and his average tax rate is 50 percent.
B)   Ted's marginal tax rate is 50 percent, and his average tax rate is 40 percent.
C)   Robin's marginal tax rate is 50 percent, and her average tax rate is 45 percent.
D)   Robin's marginal tax rate is 60 percent, and her average tax rate is 40 percent.E) A) and D)
F) B) and C)

Question 4

In general,Democrats tend to prefer

Accepted Answer

A)   higher marginal tax rates to promote vertical equity, while Republicans tend to prefer lower marginal tax rates to promote incentives to work and save.
B)   lower marginal tax rates to promote vertical equity, while Republicans tend to prefer higher marginal tax rates to promote incentives to work and save.
C)   higher marginal tax rates to promote incentives to work and save, while Republicans tend to prefer lower marginal tax rates to promote vertical equity.
D)   lower marginal tax rates to promote incentives to work and save, while Republicans tend to prefer higher marginal tax rates to promote vertical equity.E) A) and B)
F) A) and C)

Question 5

Part of the deadweight loss from taxing labor earnings is that people

Accepted Answer

A)   will work more.
B)   will be reluctant to hire accountants to file their tax returns.
C)   with low tax liabilities will universally be worse off than under some other tax policy.
D)   will work less.E) B) and C)
F) A) and D)

Question 6

Scenario 12-4. A taxpayer faces the following tax rates on her income:
 
-Refer to Scenario 12-4.The taxpayer faces

Accepted Answer

A)   a marginal tax rate of 20 percent when her income rises from $40,000 to $40,001.
B)   a marginal tax rate of 20 percent when her income rises from $30,000 to $30,001.
C)   a marginal tax rate of 0 percent when her income rises from $30,000 to $30,001.
D)   a marginal tax rate of 10 percent when her income rises from $40,000 to $40,001.E) A) and B)
F) A) and D)

Question 7

Table 12-12
United States Income Tax Rates for a Single Individual, 2009 and 2010.
 
-Refer to Table 12-12.Mia is a single person whose taxable income is $100,000 a year.What is her marginal tax rate in 2009?

Accepted Answer

A)   15%
B)   28%
C)   31%
D)   36%E) B) and C)
F) A) and C)

Question 8

Tax incidence refers to

Accepted Answer

A)   what product or service the tax is levied on.
B)   who bears the tax burden.
C)   what sector of the economy is most affected by the tax.
D)   the dollar value of the tax revenues.E) B) and C)
F) C) and D)

Question 9

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

Question 10

Antipoverty programs funded by taxes on the wealthy are sometimes advocated on the basis of the benefits principle.

Accepted Answer

A) True 
 B)False

Question 11

Scenario 12-3
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 12-3.Suppose the government levies a tax of $3 on a movie ticket and that,as a result,the price of a movie ticket increases to $8.What is total consumer surplus after the tax is imposed?

Accepted Answer

A)   $0
B)   $1
C)   $2
D)   $3E) None of the above
F) B) and C)

Question 12

A recent increase in federal gasoline taxes was 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

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

Question 14

Scenario 12-2
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 12-2.Assume that the government places a $4 tax on each slice of cheesecake and that the new equilibrium price is $9.How much tax revenue will be generated from sales to Regina and Roger?

Accepted Answer

A)   zero
B)   $4
C)   $8
D)   $12E) A) and B)
F) A) and C)

Question 15

Citizens expect the government to provide various goods and services making taxes

Accepted Answer

A)   inefficient.
B)   equitable.
C)   inevitable.
D)   intolerable.E) C) and D)
F) A) and C)

Question 16

State and local governments

Accepted Answer

A)   are funded entirely by their own tax base.
B)   receive the majority of their tax revenues from corporate income taxes.
C)   are generally not responsible for collecting sales taxes.
D)   receive some of their funds from the federal government.E) B) and C)
F) A) and C)

Question 17

A payroll tax is a tax on

Accepted Answer

A)   the wages that a firm pays its workers.
B)   earned and unearned income.
C)   specific goods like gasoline and cigarettes.
D)   corporate profits.E) A) and C)
F) A) and D)

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

The benefits principle is used to justify

Accepted Answer

A)   sales taxes.
B)   gasoline taxes.
C)   "sin" taxes on cigarettes and alcoholic beverages.
D)   personal income taxes.E) A) and B)
F) B) and C)

Question 20

A lump-sum tax would take different amounts from the poor and the rich.

Accepted Answer

A) True 
 B)False

Exam 12: The Design of the Tax System.

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?

Correct Answer
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Scenario 12-4. A taxpayer faces the following tax rates on her income: -Refer to Scenario 12-4.The taxpayer faces

Correct Answer
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Part of the deadweight loss from taxing labor earnings is that people

Correct Answer
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Suppose that the government taxes income in the following fashion: 30 percent of the first $20,000,50 percent of the next $30,000,and 60 percent of all income over $50,000.Ted earns $40,000,and Robin earns $60,000.Which of the following statements is correct?

Correct Answer
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A lump-sum tax would take different amounts from the poor and the rich.

Correct Answer
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A payroll tax is a tax on

Correct Answer
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State and local governments

Correct Answer
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Antipoverty programs funded by taxes on the wealthy are sometimes advocated on the basis of the benefits principle.

Correct Answer
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Citizens expect the government to provide various goods and services making taxes

Correct Answer
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Tax incidence refers to

Correct Answer
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Correct Answer
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The benefits principle is used to justify

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

Correct Answer
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A tax system based on the ability-to-pay principle claims that all citizens should

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

Correct Answer
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One tax system is less efficient than another if it

Correct Answer
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Table 12-12 United States Income Tax Rates for a Single Individual, 2009 and 2010. -Refer to Table 12-12.Mia is a single person whose taxable income is $100,000 a year.What is her marginal tax rate in 2009?

Correct Answer
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In general,Democrats tend to prefer

Correct Answer
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The single largest expenditure by state and local governments is on

Correct Answer
verified

Exam 12: The Design of the Tax System.

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?

Correct AnswerverifiedShow Answer

Scenario 12-4. A taxpayer faces the following tax rates on her income: -Refer to Scenario 12-4.The taxpayer faces

Correct AnswerverifiedShow Answer

Part of the deadweight loss from taxing labor earnings is that people

Correct AnswerverifiedShow Answer

Suppose that the government taxes income in the following fashion: 30 percent of the first $20,000,50 percent of the next $30,000,and 60 percent of all income over $50,000.Ted earns $40,000,and Robin earns $60,000.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

A lump-sum tax would take different amounts from the poor and the rich.

Correct AnswerverifiedShow Answer

A payroll tax is a tax on

Correct AnswerverifiedShow Answer

State and local governments

Correct AnswerverifiedShow Answer

Antipoverty programs funded by taxes on the wealthy are sometimes advocated on the basis of the benefits principle.

Correct AnswerverifiedShow Answer

Citizens expect the government to provide various goods and services making taxes

Correct AnswerverifiedShow Answer

Tax incidence refers to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The benefits principle is used to justify

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A tax system based on the ability-to-pay principle claims that all citizens should

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

One tax system is less efficient than another if it

Correct AnswerverifiedShow Answer

Table 12-12 United States Income Tax Rates for a Single Individual, 2009 and 2010. -Refer to Table 12-12.Mia is a single person whose taxable income is $100,000 a year.What is her marginal tax rate in 2009?

Correct AnswerverifiedShow Answer

In general,Democrats tend to prefer

Correct AnswerverifiedShow Answer

The single largest expenditure by state and local governments is on

Correct AnswerverifiedShow Answer

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

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