Question 1

Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000.What is the average tax rate when income is $50,000?

Accepted Answer

A)  20 percent
B)  15 percent
C)  12 percent
D)  10 percentE) All of the above
F) B) and C)

Question 2

Which of the following statements is not correct?

Accepted Answer

A)  A gasoline tax can be an example of a benefits tax.
B)  A progressive tax attempts to achieve vertical equity.
C)  A progressive tax can be an example of the ability-to-pay principle.
D)  A regressive tax attempts to achieve horizontal equity.E) A) and D)
F) B) and D)

Question 3

Which of the following is true about the percent of total income the U.S.government takes as taxes?

Accepted Answer

A)  In 1902 the government collected 7 percent of total income; in 2004, it collected 30 percent.
B)  In 1902 the government collected 30 percent of total income; in 2004, it collected 7 percent.
C)  In 1902 the government collected 7 percent of total income; in 2004, it collected 7 percent.
D)  In 1902 the government collected 30 percent of total income; in 2004, it collected 30 percent.E) B) and C)
F) B) and D)

Question 4

Table 12-4
 
-Refer to Table 12-4.Suppose that the government imposes a $2 tax on delights,causing the price to increase from $5.00 to $7.00.Total consumer surplus

Accepted Answer

A)  falls by less than the tax revenue generated.
B)  falls by more than the tax revenue generated.
C)  falls by the same amount as the tax revenue generated.
D)  will not fall since Jennifer will no longer be in the market.E) A) and B)
F) A) and C)

Question 5

If a tax takes a smaller fraction of income as income rises,it is

Accepted Answer

A)  proportional.
B)  regressive.
C)  progressive.
D)  based on the ability-to-pay principle.E) A) and D)
F) B) and D)

Question 6

The U.S.federal government collects about one-half of the taxes in our economy.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following countries has the largest tax burden?

Accepted Answer

A)  Mexico
B)  Russia
C)  United States
D)  FranceE) A) and C)
F) None of the above

Question 8

A budget surplus occurs when government receipts exceed government spending.

Accepted Answer

A) True 
 B)False

Question 9

Rank the following state and local government expenditure categories from largest to smallest.

Accepted Answer

A)  education, public welfare, highways
B)  transfer payments to the poor, education, public safety
C)  police, road maintenance, education
D)  public health, public safety, public utilitiesE) C) and D)
F) A) and B)

Question 10

Table 12-6
 
-Refer to Table 12-6.What is the marginal tax rate for a person who makes $50,000?

Accepted Answer

A)  25%
B)  28%
C)  40%
D)  60%E) A) and B)
F) A) and C)

Question 11

If we want to gauge the sacrifice made by a taxpayer,we should use the

Accepted Answer

A)  average tax rate.
B)  marginal tax rate.
C)  lump-sum tax rate.
D)  sales tax rate.E) A) and D)
F) B) and C)

Question 12

State and local governments generate revenue from all of the following sources except

Accepted Answer

A)  sales taxes.
B)  the federal government.
C)  corporate income taxes.
D)  customs duties.E) None of the above
F) A) and B)

Question 13

Table 12-3
 
-Refer to Table 12-3.Assume that the price of a weekend ski pass is $38 and that the price reflects the actual unit cost of providing a weekend of skiing.What is the value of the surplus that accrues to all four skiers from their weekend trip?

Accepted Answer

A)  $265
B)  $113
C)  $140
D)  $105E) B) and C)
F) A) and D)

Question 14

In the 1980s,President Ronald Reagan argued that high tax rates distorted economic incentives to work and save.In the 1990s,President Bill Clinton argued that the rich were not paying their fair share of taxes.Which of the following statements best summarizes the economic theories behind the differing philosophies?

Accepted Answer

A)  President Reagan was concerned about vertical equity, whereas President Clinton was concerned about horizontal equity.
B)  President Reagan was concerned about average tax rates, whereas President Clinton was concerned about horizontal equity.
C)  President Reagan was concerned about marginal tax rates, whereas President Clinton was concerned about vertical equity.
D)  None of the above is correct.E) B) and C)
F) A) and D)

Question 15

The most important revenue-generating taxes for the federal government are individual income taxes and payroll taxes for social insurance.

Accepted Answer

A) True 
 B)False

Question 16

As a nation gets richer,the government typically takes

Accepted Answer

A)  a constant share of income in taxes.
B)  a smaller share of income in taxes.
C)  a larger share of income in taxes.
D)  There is little evidence of a relationship between income and taxes for most countries.E) All of the above
F) B) and C)

Question 17

Vertical equity and horizontal equity are associated with

Accepted Answer

A)  the benefits principle of taxation.
B)  the ability-to-pay principle of taxation.
C)  taxes that have no deadweight losses.
D)  falling marginal tax rates.E) None of the above
F) All of the above

Question 18

In many cases,tax loopholes are designed by Congress to

Accepted Answer

A)  give special treatment to specific types of behavior.
B)  reduce the overall administrative burden of the tax system.
C)  raise revenues for special projects.
D)  All of the above are correct.E) B) and C)
F) A) and D)

Question 19

If the government were to impose a tax that assigned everyone the same tax liability,it would be

Accepted Answer

A)  a lump-sum tax.
B)  an equitable tax.
C)  supported by the poor.
D)  a progressive tax.E) B) and C)
F) A) and B)

Question 20

"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 based on

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) A) and C)

Exam 12: The Design of the Tax System

State and local governments generate revenue from all of the following sources except

Correct Answer
verified

Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000.What is the average tax rate when income is $50,000?

Correct Answer
verified

The most important revenue-generating taxes for the federal government are individual income taxes and payroll taxes for social insurance.

Correct Answer
verified

Table 12-6 -Refer to Table 12-6.What is the marginal tax rate for a person who makes $50,000?

Correct Answer
verified

Correct Answer
verified

As a nation gets richer,the government typically takes

Correct Answer
verified

A budget surplus occurs when government receipts exceed government spending.

Correct Answer
verified

In many cases,tax loopholes are designed by Congress to

Correct Answer
verified

If the government were to impose a tax that assigned everyone the same tax liability,it would be

Correct Answer
verified

If a tax takes a smaller fraction of income as income rises,it is

Correct Answer
verified

The U.S.federal government collects about one-half of the taxes in our economy.

Correct Answer
verified

Vertical equity and horizontal equity are associated with

Correct Answer
verified

Which of the following is true about the percent of total income the U.S.government takes as taxes?

Correct Answer
verified

"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 based on

Correct Answer
verified

Table 12-4 -Refer to Table 12-4.Suppose that the government imposes a $2 tax on delights,causing the price to increase from $5.00 to $7.00.Total consumer surplus

Correct Answer
verified

Rank the following state and local government expenditure categories from largest to smallest.

Correct Answer
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Which of the following countries has the largest tax burden?

Correct Answer
verified

Which of the following statements is not correct?

Correct Answer
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If we want to gauge the sacrifice made by a taxpayer,we should use the

Correct Answer
verified

Table 12-3 -Refer to Table 12-3.Assume that the price of a weekend ski pass is $38 and that the price reflects the actual unit cost of providing a weekend of skiing.What is the value of the surplus that accrues to all four skiers from their weekend trip?

Correct Answer
verified

Exam 12: The Design of the Tax System

State and local governments generate revenue from all of the following sources except

Correct AnswerverifiedShow Answer

Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000.What is the average tax rate when income is $50,000?

Correct AnswerverifiedShow Answer

The most important revenue-generating taxes for the federal government are individual income taxes and payroll taxes for social insurance.

Correct AnswerverifiedShow Answer

Table 12-6 -Refer to Table 12-6.What is the marginal tax rate for a person who makes $50,000?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

As a nation gets richer,the government typically takes

Correct AnswerverifiedShow Answer

A budget surplus occurs when government receipts exceed government spending.

Correct AnswerverifiedShow Answer

In many cases,tax loopholes are designed by Congress to

Correct AnswerverifiedShow Answer

If the government were to impose a tax that assigned everyone the same tax liability,it would be

Correct AnswerverifiedShow Answer

If a tax takes a smaller fraction of income as income rises,it is

Correct AnswerverifiedShow Answer

The U.S.federal government collects about one-half of the taxes in our economy.

Correct AnswerverifiedShow Answer

Vertical equity and horizontal equity are associated with

Correct AnswerverifiedShow Answer

Which of the following is true about the percent of total income the U.S.government takes as taxes?

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 based on

Correct AnswerverifiedShow Answer

Table 12-4 -Refer to Table 12-4.Suppose that the government imposes a $2 tax on delights,causing the price to increase from $5.00 to $7.00.Total consumer surplus

Correct AnswerverifiedShow Answer

Rank the following state and local government expenditure categories from largest to smallest.

Correct AnswerverifiedShow Answer

Which of the following countries has the largest tax burden?

Correct AnswerverifiedShow Answer

Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

If we want to gauge the sacrifice made by a taxpayer,we should use the

Correct AnswerverifiedShow Answer

Table 12-3 -Refer to Table 12-3.Assume that the price of a weekend ski pass is $38 and that the price reflects the actual unit cost of providing a weekend of skiing.What is the value of the surplus that accrues to all four skiers from their weekend trip?

Correct AnswerverifiedShow Answer

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