Question 1

One characteristic of an efficient tax system is that it minimizes the costs associated with revenue collection.

Accepted Answer

A) True 
 B)False

Question 2

Suppose Jack values an ice cream sundae at $4.Dianne values an ice cream sundae at $6.The pre-tax price of an ice cream sundae is $2.The government imposes a "fat tax" of $3 on each ice cream sundae,and the price rises to $5.The deadweight loss from the tax is

Accepted Answer

A)   $4,and the deadweight loss comes from both Jack and Dianne.
B)   $4,and the deadweight loss comes only from Jack because he does not buy a sundae after the tax.
C)   $2,and the deadweight loss comes from both Jack and Dianne.
D)   $2,and the deadweight loss comes only from Jack because he does not buy a sundae after the tax.E) None of the above
F) A) and B)

Question 3

The middle quintile of income earners

Accepted Answer

A)   pays 14.2 percent of income as taxes and pays 9.1 percent of all taxes
B)   pays 9.1 percent of income as taxes and pays 14.2 percent of all taxes.
C)   pays 17.6 percent of income as taxes and pays 16.5 percent of all taxes.
D)   pays 16.5 percent of income as taxes and pays 17.6 percent of all taxes.E) All of the above
F) B) and D)

Question 4

The payroll tax differs from the individual income tax because the payroll tax is primarily earmarked to pay for

Accepted Answer

A)   employer-provided pensions.
B)   Social Security and Medicare.
C)   employer-provided health benefits.
D)   job loss and training programs.E) B) and D)
F) All of the above

Question 5

Which of the following in not a reason that a lump-sum tax imposes a minimal administrative burden on taxpayers?

Accepted Answer

A)   Everyone can easily compute the amount of tax owed.
B)   There is no benefit to hiring an accountant to do your taxes.
C)   Everyone owes the same amount of tax,regardless of earnings.
D)   The government can easily forecast tax revenues.E) A) and B)
F) C) and D)

Question 6

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

Question 7

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 are the tax liability and the marginal tax rate for a person whose income is $50,000?

Accepted Answer

A)   12 percent and 20 percent,respectively
B)   12 percent and $50,000,respectively
C)   $6,000 and 12 percent,respectively
D)   $6,000 and 20 percent,respectivelyE) All of the above
F) None of the above

Question 8

Under a regressive tax system,

Accepted Answer

A)   the marginal tax rate for high income taxpayers is higher than the marginal tax rate for low income taxpayers.
B)   the marginal tax rate for high income taxpayers is the same as the marginal tax rate for low income taxpayers.
C)   the marginal tax rate for high income taxpayers is lower than the marginal tax rate for low income taxpayers.
D)   Any of the above could be true under a regressive tax system.E) A) and C)
F) All of the above

Question 9

Briefly describe why taxes create deadweight loss.

Accepted Answer

When the government imposes a ...

Question 10

In 2009,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) C) and D)
F) B) and C)

Question 11

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) None of the above

Question 12

In the absence of taxes,Ashley would prefer to purchase a large sport utility vehicle (SUV) .The government has recently decided to place a $10,000 nuisance tax on SUVs.If Ashley decides to purchase a small economy car as a result of the tax,which of the following statements is correct?

Accepted Answer

A)   Other people who choose to purchase SUVs will incur the cost of the deadweight loss of the tax.
B)   There are no deadweight losses as long as some people still choose to purchase SUVs.
C)   In order to determine the magnitude of the deadweight loss,we must add the revenues from the tax to the loss in Ashley's consumer surplus.
D)   Ashley is worse off,and her loss of welfare is part of the deadweight loss of the tax.E) B) and C)
F) A) and B)

Question 13

Table 12-11
The following table presents the total tax liability for an unmarried taxpayer under four different tax schedules for the income levels shown.
 
-Refer to Table 12-11.For an individual with $200,000 in taxable income,which tax schedule has the highest average tax rate?

Accepted Answer

A)   Tax Schedule A
B)   Tax Schedule B
C)   Tax Schedule C
D)   Tax Schedule DE) A) and B)
F) B) and C)

Question 14

In 1789,the average American paid approximately what percent of income in taxes?

Accepted Answer

A)   5%
B)   15%
C)   33%
D)   50%E) None of the above
F) B) and C)

Question 15

Table 12-14
 
-Refer to Table 12-14.A lump-sum tax is illustrated by tax

Accepted Answer

A)   A.
B)   B.
C)   C.
D)   D.E) B) and D)
F) B) and C)

Question 16

State and local government spending on public welfare includes

Accepted Answer

A)   trash removal.
B)   transfer payments to the poor.
C)   libraries.
D)   road repairs.E) A) and B)
F) A) and C)

Question 17

The idea that people in equal conditions should pay equal taxes is referred to as

Accepted Answer

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

Question 18

Which of the following is not an advantage of a lump-sum tax in comparison to other types of taxes?

Accepted Answer

A)   It would not cause deadweight loss.
B)   It imposes a minimal administrative burden on taxpayers.
C)   It is more equitable.
D)   It is more efficient.E) A) and C)
F) All of the above

Question 19

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 B)
F) B) and C)

Question 20

Table 12-7
 
-Refer to Table 12-7.What is the marginal tax rate for a person who makes $60,000?

Accepted Answer

A)   20%
B)   23%
C)   40%
D)   45%E) B) and C)
F) None of the above

Exam 12: The Design of the Tax System

The payroll tax differs from the individual income tax because the payroll tax is primarily earmarked to pay for

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Table 12-7 -Refer to Table 12-7.What is the marginal tax rate for a person who makes $60,000?

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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 are the tax liability and the marginal tax rate for a person whose income is $50,000?

Correct AnswerverifiedShow Answer

In the absence of taxes,Ashley would prefer to purchase a large sport utility vehicle (SUV) .The government has recently decided to place a $10,000 nuisance tax on SUVs.If Ashley decides to purchase a small economy car as a result of the tax,which of the following statements is correct?

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?

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

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Table 12-11 The following table presents the total tax liability for an unmarried taxpayer under four different tax schedules for the income levels shown. -Refer to Table 12-11.For an individual with $200,000 in taxable income,which tax schedule has the highest average tax rate?

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The idea that people in equal conditions should pay equal taxes is referred to as

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Which of the following in not a reason that a lump-sum tax imposes a minimal administrative burden on taxpayers?

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In 1789,the average American paid approximately what percent of income in taxes?

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Table 12-14 -Refer to Table 12-14.A lump-sum tax is illustrated by tax

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State and local government spending on public welfare includes

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Briefly describe why taxes create deadweight loss.

Correct AnswerverifiedWhen the government imposes a ...View AnswerShow Answer

The middle quintile of income earners

Correct AnswerverifiedShow Answer

In 2009,which category represented the largest source of receipts for the U.S.federal government?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is not an advantage of a lump-sum tax in comparison to other types of taxes?

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Under a regressive tax system,

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Suppose Jack values an ice cream sundae at $4.Dianne values an ice cream sundae at $6.The pre-tax price of an ice cream sundae is $2.The government imposes a "fat tax" of $3 on each ice cream sundae,and the price rises to $5.The deadweight loss from the tax is

Correct AnswerverifiedShow Answer

One characteristic of an efficient tax system is that it minimizes the costs associated with revenue collection.

Correct AnswerverifiedShow Answer

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When the government imposes a ...
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