Question 1

Lump-sum taxes are rarely used in the real world because

Accepted Answer

A)   while lump-sum taxes have low administrative burdens, they have high deadweight losses.
B)   while lump-sum taxes have low deadweight losses, they have high administrative burdens.
C)   lump-sum taxes are often viewed as unfair because they take the same amount of money from both poor and rich.
D)   lump-sum taxes are very inefficient.E) B) and C)
F) A) and B)

Question 2

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 3

The U.S.federal government finances budget deficits by

Accepted Answer

A)   selling stock, much like a corporation.
B)   printing additional currency.
C)   borrowing from the public.
D)   raising property taxes.E) B) and D)
F) All of the above

Question 4

Costas faces a progressive federal income tax structure that has the following marginal tax rates: 0 percent on the first $10,000,10 percent on the next $10,000,15 percent on the next $10,000,25 percent on the next $10,000,and 50 percent on all additional income.In addition,he must pay 5 percent of his income in state income tax and 15.3 percent of his labor income in federal payroll taxes.Costas earns $70,000 per year in salary and another $20,000 per year in non-labor income.What is his average tax rate,and what is his marginal tax rate on his salary?

Accepted Answer

A)   His average tax rate is 17.19 percent, and the marginal tax rate on his salary is 55 percent.
B)   His average tax rate is 50.23 percent, and the marginal tax rate on his salary is 70.3 percent.
C)   His average tax rate is 53.63 percent, and the marginal tax rate on his salary is 70.3 percent.
D)   His average tax rate is 55.79 percent, and the marginal tax rate on his salary is 70.3 percent.E) B) and C)
F) All of the above

Question 5

Table 12-10
The following table shows the marginal tax rates for unmarried individuals for two years.
 
-Refer to Table 12-10.Suppose one goal of the tax system was to achieve vertical equity.While people may disagree about what is "equitable," based on the marginal tax rates given for the two years,which of the following statements is true?

Accepted Answer

A)   Vertical equity is possible in both years.
B)   Vertical equity is possible in 2009 but not in 2010.
C)   Vertical equity is not possible in 2009 but is possible in 2010.
D)   Vertical equity is not possible in either year.E) A) and D)
F) All of the above

Question 6

Mark,Kerry,Greg,and Carlos each like Boston Red Sox baseball games.The single-game ticket price for an infield box seat is $50.Mark values a ticket at $70,Kerry at $65,Greg at $60,and Carlos at $55.Suppose that if the government taxes tickets at $10 each the selling price rises to $60.A consequence of the tax is that

Accepted Answer

A)   consumer surplus shrinks by $50 and tax revenues increase by $30, so there is a deadweight loss of $20.
B)   consumer surplus shrinks by $35 and tax revenues increase by $30, so there is a deadweight loss of $5.
C)   consumer surplus shrinks by $20 and tax revenues increase by $20, so there is no deadweight loss.
D)   consumer surplus shrinks by $15 and tax revenues increase by $20, so there is no deadweight loss.E) None of the above
F) All of the above

Question 7

Most economists believe that a corporate income tax affects the stockholders of a corporation but not its employees or customers.

Accepted Answer

A) True 
 B)False

Question 8

Zoe,Chloe,and Brody each like to read novels.The current mystery thriller costs $10.Zoe values it at $15,Chloe at $13,and Brody at $11.Suppose that if the government taxes books at 50 cents each the selling price rises to $10.50.A consequence of the tax is that

Accepted Answer

A)   consumer surplus shrinks by $1.50 and tax revenues increase by $1.50, so there is no deadweight loss.
B)   consumer surplus shrinks by $9.00 and tax revenues increase by $1.50, so there is a deadweight loss of $7.50.
C)   consumer surplus shrinks by $7.50 and tax revenues increase by $7.50, so there is no deadweight loss.
D)   consumer surplus shrinks by $7.50 and tax revenues increase by $1.50, so there is a deadweight loss of $6.E) A) and B)
F) None of the above

Question 9

Table 12-4
 
-Refer to Table 12-4.Suppose that the government imposes a $2 tax on delights,causing the price to increase from $4.00 to $6.00.Total consumer surplus will fall from

Accepted Answer

A)   $6 to $3.
B)   $7 to $4.
C)   $6 to $2.
D)   $5 to $3.E) None of the above
F) C) and D)

Question 10

Income taxes and property taxes generate the highest tax revenue for state and local governments.

Accepted Answer

A) True 
 B)False

Question 11

By law,all states must have a state income tax.

Accepted Answer

A) True 
 B)False

Question 12

If the government imposes a tax of $3,000 on everyone,the tax would be

Accepted Answer

A)   an income tax.
B)   a consumption tax.
C)   a lump-sum tax.
D)   a marginal tax.E) B) and D)
F) B) and C)

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Table 12-12
United States Income Tax Rates for a Single Individual, 2009 and 2010.
 
-Refer to Table 12-12.Kurt is a single person whose taxable income is $35,000 a year.What is his average tax rate in 2010?

Accepted Answer

A)   15.3%
B)   17.6%
C)   21.3%
D)   24.8%E) B) and D)
F) All of the above

Question 15

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

Question 16

Medicaid is

Accepted Answer

A)   the government's health plan for the elderly.
B)   the government's health plan for the poor.
C)   another name for Social Security.
D)   Both a and c are correct.E) B) and D)
F) A) and D)

Question 17

Table 12-17
The dollar amounts in the last three columns are the taxes owed under the three different tax systems.
 
-Refer to Table 12-17.Which of the three tax systems exhibits vertical equity?

Accepted Answer

A)   Tax System A
B)   Tax System B
C)   Tax System C
D)   All of the systems exhibit vertical equity.E) A) and C)
F) B) and D)

Question 18

Table 12-6
 
-Refer to Table 12-6.What is the marginal tax rate for a person who makes $130,000?

Accepted Answer

A)   30%
B)   40%
C)   50%
D)   60%E) All of the above
F) None of the above

Question 19

Many economists believe that

Accepted Answer

A)   the corporate income tax satisfies the goal of horizontal equity.
B)   the corporate income tax does not distort the incentives of customers.
C)   the corporate income tax is more efficient than the personal income tax.
D)   workers and customers bear much of the burden of the corporate income tax.E) C) and D)
F) B) and C)

Question 20

Suppose that in 2020 the average citizen's federal tax bill is $9,372,and total federal spending is $10,824 per person.In 2020,the federal government will have

Accepted Answer

A)   a budget surplus.
B)   a budget deficit.
C)   horizontal equity.
D)   vertical equity.E) All of the above
F) A) and C)

Exam 12: The Design of the Tax System.

Correct Answer
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Zoe,Chloe,and Brody each like to read novels.The current mystery thriller costs $10.Zoe values it at $15,Chloe at $13,and Brody at $11.Suppose that if the government taxes books at 50 cents each the selling price rises to $10.50.A consequence of the tax is that

Correct Answer
verified

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

Correct Answer
verified

Many economists believe that

Correct Answer
verified

Table 12-12 United States Income Tax Rates for a Single Individual, 2009 and 2010. -Refer to Table 12-12.Kurt is a single person whose taxable income is $35,000 a year.What is his average tax rate in 2010?

Correct Answer
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Suppose that in 2020 the average citizen's federal tax bill is $9,372,and total federal spending is $10,824 per person.In 2020,the federal government will have

Correct Answer
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Correct Answer
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Income taxes and property taxes generate the highest tax revenue for state and local governments.

Correct Answer
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Medicaid is

Correct Answer
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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?

Correct Answer
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If the government imposes a tax of $3,000 on everyone,the tax would be

Correct Answer
verified

By law,all states must have a state income tax.

Correct Answer
verified

Lump-sum taxes are rarely used in the real world because

Correct Answer
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Table 12-6 -Refer to Table 12-6.What is the marginal tax rate for a person who makes $130,000?

Correct Answer
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The U.S.federal government finances budget deficits by

Correct Answer
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Table 12-4 -Refer to Table 12-4.Suppose that the government imposes a $2 tax on delights,causing the price to increase from $4.00 to $6.00.Total consumer surplus will fall from

Correct Answer
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Table 12-17 The dollar amounts in the last three columns are the taxes owed under the three different tax systems. -Refer to Table 12-17.Which of the three tax systems exhibits vertical equity?

Correct Answer
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Correct Answer
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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

Most economists believe that a corporate income tax affects the stockholders of a corporation but not its employees or customers.

Correct Answer
verified

Exam 12: The Design of the Tax System.

Correct AnswerverifiedShow Answer

Zoe,Chloe,and Brody each like to read novels.The current mystery thriller costs $10.Zoe values it at $15,Chloe at $13,and Brody at $11.Suppose that if the government taxes books at 50 cents each the selling price rises to $10.50.A consequence of the tax is that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Many economists believe that

Correct AnswerverifiedShow Answer

Table 12-12 United States Income Tax Rates for a Single Individual, 2009 and 2010. -Refer to Table 12-12.Kurt is a single person whose taxable income is $35,000 a year.What is his average tax rate in 2010?

Correct AnswerverifiedShow Answer

Suppose that in 2020 the average citizen's federal tax bill is $9,372,and total federal spending is $10,824 per person.In 2020,the federal government will have

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Income taxes and property taxes generate the highest tax revenue for state and local governments.

Correct AnswerverifiedShow Answer

Medicaid is

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

If the government imposes a tax of $3,000 on everyone,the tax would be

Correct AnswerverifiedShow Answer

By law,all states must have a state income tax.

Correct AnswerverifiedShow Answer

Lump-sum taxes are rarely used in the real world because

Correct AnswerverifiedShow Answer

Table 12-6 -Refer to Table 12-6.What is the marginal tax rate for a person who makes $130,000?

Correct AnswerverifiedShow Answer

The U.S.federal government finances budget deficits by

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 $4.00 to $6.00.Total consumer surplus will fall from

Correct AnswerverifiedShow Answer

Table 12-17 The dollar amounts in the last three columns are the taxes owed under the three different tax systems. -Refer to Table 12-17.Which of the three tax systems exhibits vertical equity?

Correct AnswerverifiedShow Answer

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

Most economists believe that a corporate income tax affects the stockholders of a corporation but not its employees or customers.

Correct AnswerverifiedShow Answer

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