Question 1

An efficient tax system is one that imposes small

Accepted Answer

A)  deadweight losses and administrative burdens.
B)  marginal rates and deadweight losses.
C)  administrative burdens and transfers of money.
D)  marginal rates and transfers of money.E) A) and B)
F) A) and D)

Question 2

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) B) and D)
F) A) and D)

Question 3

Table 12-5
 
-Refer to Table 12-5.What is the marginal tax rate for a person who makes $35,000?

Accepted Answer

A)  20%
B)  30%
C)  40%
D)  50%E) None of the above
F) All of the above

Question 4

Table 12-8
 
-Refer to Table 12-8.If the government imposes a $3,000 lump-sum tax,the marginal tax rate for Charles would be

Accepted Answer

A)  0 percent.
B)  5 percent.
C)  6.7 percent.
D)  10 percent.E) B) and D)
F) B) and C)

Question 5

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 C)
F) C) and D)

Question 6

According to the ability-to-pay principle,it is fair for people to pay taxes based on the amount of government services that they receive.

Accepted Answer

A) True 
 B)False

Question 7

If your income is $40,000 and your income tax liability is $5,000,your marginal tax rate is

Accepted Answer

A)  8 percent.
B)  12.5 percent.
C)  20 percent.
D)  unknown.We do not have enough information to answer this question.E) A) and C)
F) A) and B)

Question 8

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) A) and D)
F) A) and B)

Question 9

Tax systems that impose record keeping requirements on taxpayers are said to have

Accepted Answer

A)  an auditing burden.
B)  a lower incidence of compliance.
C)  an administrative burden.
D)  a certification requirement.E) B) and D)
F) B) and C)

Question 10

When the marginal tax rate equals the average tax rate,the tax is

Accepted Answer

A)  proportional.
B)  progressive.
C)  regressive.
D)  egalitarian.E) A) and D)
F) B) and D)

Question 11

High marginal income tax rates

Accepted Answer

A)  distort incentives to work.
B)  are used to encourage saving behavior.
C)  will invariably lead to lower average tax rates.
D)  are not associated with deadweight losses.E) B) and C)
F) A) and B)

Question 12

Table 12-2
United States Income Tax Rates for a Single Individual, 2002 and 2003.
 
-Refer to Table 12-2.Surbhi is a single person whose taxable income is $150,000 a year.What happened to her marginal tax rate between 2002 and 2003?

Accepted Answer

A)  It increased.
B)  It decreased.
C)  It did not change.
D)  We do not have enough information to answer this question.E) B) and C)
F) All of the above

Question 13

The public welfare spending category for state and local governments includes

Accepted Answer

A)  many programs that are initiated by private foundations.
B)  contributions in support of public universities.
C)  some federal programs that are administered by state and local governments.
D)  All of the above are correct.E) A) and C)
F) B) and C)

Question 14

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.John earns $200,000,and Theresa earns $600,000.Which of the following statements is correct?

Accepted Answer

A)  John's marginal tax rate is higher than Theresa's marginal tax rate.
B)  John's average tax rate is higher than his marginal tax rate.
C)  Theresa's average tax rate is higher than her marginal tax rate.
D)  Theresa's average tax rate is higher than John's average tax rate.E) B) and D)
F) All of the above

Question 15

Marcus 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.Marcus earns $60,000 per year in salary and another $10,000 per year in non-labor income.What is his average tax rate?

Accepted Answer

A)  17.19 percent
B)  46.69 percent
C)  48.87 percent
D)  56.01 percentE) A) and D)
F) B) and C)

Question 16

Medicare has been the focus of many proposed reforms over the last several years because

Accepted Answer

A)  health care costs have risen more rapidly than the cost of other goods and services produced in the economy.
B)  nationalized health care systems are more efficient than private health care systems.
C)  cures for many major diseases are likely to be found in the next few years.
D)  government health care research has found that limiting access to doctors will increase the general health of the population.E) B) and C)
F) A) and D)

Question 17

Scenario 12-1
Suppose Jim and Joan receive great satisfaction from their consumption of cheesecake. Joan would be willing to purchase only one slice and would pay up to $6 for it. Jim would be willing to pay $9 for his first slice, $7 for his second slice, and $3 for his third slice. The current market price is $3 per slice.
-Refer to Scenario 12-1.Assume that the government places a $4 tax on each slice of cheesecake and that the new equilibrium price is $7.What is the deadweight loss of the tax?

Accepted Answer

A)  $3
B)  $6
C)  $8
D)  $9E) A) and B)
F) All of the above

Question 18

Taxes can create deadweight losses because they

Accepted Answer

A)  allow the government to fund private goods.
B)  create administrative burdens as people comply with tax laws.
C)  allow the government to fund public goods.
D)  Both b and c are correct.E) All of the above
F) A) and B)

Question 19

The most important revenue-generating taxes for state and local governments are income taxes and property taxes.

Accepted Answer

A) True 
 B)False

Question 20

The amount of income tax owed by a family is

Accepted Answer

A)  not simply proportional to its total income.
B)  unaffected by deductions.
C)  total income minus tax credits.
D)  a constant fraction of income.E) B) and D)
F) A) and D)

Exam 12: The Design of the Tax System

The public welfare spending category for state and local governments includes

Correct Answer
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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.John earns $200,000,and Theresa earns $600,000.Which of the following statements is correct?

Correct Answer
verified

The most important revenue-generating taxes for state and local governments are income taxes and property taxes.

Correct Answer
verified

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

Correct Answer
verified

High marginal income tax rates

Correct Answer
verified

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

Correct Answer
verified

When the marginal tax rate equals the average tax rate,the tax is

Correct Answer
verified

An efficient tax system is one that imposes small

Correct Answer
verified

Correct Answer
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Tax systems that impose record keeping requirements on taxpayers are said to have

Correct Answer
verified

Table 12-5 -Refer to Table 12-5.What is the marginal tax rate for a person who makes $35,000?

Correct Answer
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Taxes can create deadweight losses because they

Correct Answer
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Table 12-2 United States Income Tax Rates for a Single Individual, 2002 and 2003. -Refer to Table 12-2.Surbhi is a single person whose taxable income is $150,000 a year.What happened to her marginal tax rate between 2002 and 2003?

Correct Answer
verified

If your income is $40,000 and your income tax liability is $5,000,your marginal tax rate is

Correct Answer
verified

Table 12-8 -Refer to Table 12-8.If the government imposes a $3,000 lump-sum tax,the marginal tax rate for Charles would be

Correct Answer
verified

According to the ability-to-pay principle,it is fair for people to pay taxes based on the amount of government services that they receive.

Correct Answer
verified

Medicare has been the focus of many proposed reforms over the last several years because

Correct Answer
verified

One tax system is less efficient than another if it

Correct Answer
verified

The amount of income tax owed by a family is

Correct Answer
verified

Correct Answer
verified

Exam 12: The Design of the Tax System

The public welfare spending category for state and local governments includes

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.John earns $200,000,and Theresa earns $600,000.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

The most important revenue-generating taxes for state and local governments are income taxes and property taxes.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

High marginal income tax rates

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

When the marginal tax rate equals the average tax rate,the tax is

Correct AnswerverifiedShow Answer

An efficient tax system is one that imposes small

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Tax systems that impose record keeping requirements on taxpayers are said to have

Correct AnswerverifiedShow Answer

Table 12-5 -Refer to Table 12-5.What is the marginal tax rate for a person who makes $35,000?

Correct AnswerverifiedShow Answer

Taxes can create deadweight losses because they

Correct AnswerverifiedShow Answer

Table 12-2 United States Income Tax Rates for a Single Individual, 2002 and 2003. -Refer to Table 12-2.Surbhi is a single person whose taxable income is $150,000 a year.What happened to her marginal tax rate between 2002 and 2003?

Correct AnswerverifiedShow Answer

If your income is $40,000 and your income tax liability is $5,000,your marginal tax rate is

Correct AnswerverifiedShow Answer

Table 12-8 -Refer to Table 12-8.If the government imposes a $3,000 lump-sum tax,the marginal tax rate for Charles would be

Correct AnswerverifiedShow Answer

According to the ability-to-pay principle,it is fair for people to pay taxes based on the amount of government services that they receive.

Correct AnswerverifiedShow Answer

Medicare has been the focus of many proposed reforms over the last several years because

Correct AnswerverifiedShow Answer

One tax system is less efficient than another if it

Correct AnswerverifiedShow Answer

The amount of income tax owed by a family is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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