Question 1

The benefits principle of taxation can be used to argue that wealthy citizens should pay higher taxes than poorer ones on the basis that

Accepted Answer

A)  police services are more frequently used in poor neighborhoods.
B)  the wealthy benefit more from services provided by government than the poor.
C)  the poor are more active in political processes.
D)  the poor receive welfare payments.E) A) and B)
F) A) and C)

Question 2

Table 12-23
The dollar amounts in the last three columns are the taxes owed under the three different tax systems. 
-Refer to Table 12-23. Which of the three tax systems is proportional?

Accepted Answer

A)  Tax System A
B)  Tax System B
C)  Tax System C
D)  None of the systems are proportional.E) C) and D)
F) B) and C)

Question 3

Suppose a country imposes a lump-sum income tax of $5,000 on each individual in the country. What is the marginal income tax rate for an individual who earns $40,000 during the year?

Accepted Answer

A)  0%
B)  10%
C)  More than 10%
D)  The marginal tax rate cannot be determined without knowing the entire tax schedule.E) A) and B)
F) None of the above

Question 4

Suppose an excise tax is imposed on luxury boats and yachts. Economists argue that such a tax

Accepted Answer

A)  is sure to be vertically equitable, since buyers of luxury boats and yachts are wealthy.
B)  entails no deadweight loss as long as buyers of boats and yachts can easily substitute one luxury good for another.
C)  violates the benefits principle of taxation.
D)  may burden workers in the luxury-boat-and-yacht industry more than it burdens the buyers of luxury boats and yachts.E) B) and C)
F) None of the above

Question 5

Which of the following statements is correct?

Accepted Answer

A)  The average tax rate gauges the sacrifice made by a taxpayer, whereas the marginal tax rate gauges the distortion of taxes on consumer decisions.
B)  The marginal tax rate gauges the sacrifice made by a taxpayer, whereas the average tax rate gauges the distortion of taxes on consumer decisions.
C)  The average tax rate measures how much the tax system discourages people from working.
D)  The marginal tax rate measures total taxes paid divided by total income.E) A) and C)
F) C) and D)

Question 6

Medicare is the

Accepted Answer

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

Question 7

Vertical equity in taxation refers to the idea that people

Accepted Answer

A)  in unequal conditions should be treated differently.
B)  in equal conditions should pay equal taxes.
C)  should pay taxes based on the benefits they receive from the government.
D)  should pay a proportional tax rather than a progressive tax.E) A) and D)
F) A) and C)

Question 8

Part of the administrative burden of a tax is

Accepted Answer

A)  the money people pay to the government in taxes.
B)  reducing the size of the market because of the tax.
C)  the hassle of filling out tax forms that is imposed on taxpayers who comply with the tax.
D)  the cost of administering programs that use tax revenue.E) A) and D)
F) B) and C)

Question 9

Table 12-11 
-Refer to Table 12-11. If Al has taxable income of $165,000, his tax liability is

Accepted Answer

A)  $23,800.
B)  $36,000.
C)  $45,000.
D)  $47,698.E) All of the above
F) B) and D)

Question 10

Scenario 12-1
Ken places a $20 value on a cigar, and Mark places a $17 value on it. The equilibrium price for this brand of cigar is $15.
-Refer to Scenario 12-1. Suppose the government levies a tax of $3 on each cigar, and the equilibrium price of a cigar increases to $18. What is total consumer surplus after the tax is levied?

Accepted Answer

A)  $0
B)  $2
C)  $5
D)  $6E) A) and D)
F) A) and C)

Question 11

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) None of the above
F) A) and C)

Question 12

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 D)
F) None of the above

Question 13

Deadweight losses and administrative burdens are key factors considered when determining the efficiency of the tax system.

Accepted Answer

A) True 
 B)False

Question 14

Table 12-11 
-Refer to Table 12-11. If Bud has taxable income of $78,000, his marginal tax rate is

Accepted Answer

A)  19.3%.
B)  24.0%.
C)  26.8%.
D)  34.0%.E) A) and B)
F) B) and C)

Question 15

An efficient tax system is one that
(i) maximizes tax revenues.
(ii) minimizes deadweight losses from taxes.
(iii) minimizes administrative burdens from taxes.
(iv) promotes equity across taxpayers.

Accepted Answer

A)  (i)  only
B)  (ii)  and (iii)  only
C)  (i) , (ii) , and (iii)  only
D)  (i) , (ii) , (iii) , and (iv) E) C) and D)
F) A) and B)

Question 16

A budget surplus occurs when government receipts exceed government spending.

Accepted Answer

A) True 
 B)False

Question 17

Table 12-20
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 12-20. Which tax schedules are progressive?

Accepted Answer

A)  Tax Schedule A only
B)  Tax Schedule A and Tax Schedule B
C)  Tax Schedule A, Tax Schedule B, and Tax Schedule C
D)  All four Tax Schedules are progressive.E) B) and C)
F) All of the above

Question 18

Table 12-23
The dollar amounts in the last three columns are the taxes owed under the three different tax systems. 
-Refer to Table 12-23. Which of the three tax systems is progressive?

Accepted Answer

A)  Tax System A
B)  Tax System B
C)  Tax System C
D)  None of the systems are progressive.E) A) and B)
F) None of the above

Question 19

A budget deficit occurs when government receipts fall short of government spending.

Accepted Answer

A) True 
 B)False

Question 20

The claim that all citizens should make an "equal sacrifice" to support government programs is usually associated with

Accepted Answer

A)  the ability-to-pay principle.
B)  the benefits principle.
C)  efficiency arguments.
D)  regressive tax arguments.E) A) and B)
F) None of the above

Exam 12: The Design of the Tax System

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

Correct Answer
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Suppose a country imposes a lump-sum income tax of $5,000 on each individual in the country. What is the marginal income tax rate for an individual who earns $40,000 during the year?

Correct Answer
verified

Suppose an excise tax is imposed on luxury boats and yachts. Economists argue that such a tax

Correct Answer
verified

Table 12-23 The dollar amounts in the last three columns are the taxes owed under the three different tax systems. -Refer to Table 12-23. Which of the three tax systems is progressive?

Correct Answer
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Correct Answer
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Table 12-11 -Refer to Table 12-11. If Bud has taxable income of $78,000, his marginal tax rate is

Correct Answer
verified

A budget deficit occurs when government receipts fall short of government spending.

Correct Answer
verified

The claim that all citizens should make an "equal sacrifice" to support government programs is usually associated with

Correct Answer
verified

Medicare is the

Correct Answer
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Table 12-20 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 12-20. Which tax schedules are progressive?

Correct Answer
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Table 12-11 -Refer to Table 12-11. If Al has taxable income of $165,000, his tax liability is

Correct Answer
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Which of the following statements is correct?

Correct Answer
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A budget surplus occurs when government receipts exceed government spending.

Correct Answer
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An efficient tax system is one that (i) maximizes tax revenues. (ii) minimizes deadweight losses from taxes. (iii) minimizes administrative burdens from taxes. (iv) promotes equity across taxpayers.

Correct Answer
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Deadweight losses and administrative burdens are key factors considered when determining the efficiency of the tax system.

Correct Answer
verified

Many economists believe that

Correct Answer
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Table 12-23 The dollar amounts in the last three columns are the taxes owed under the three different tax systems. -Refer to Table 12-23. Which of the three tax systems is proportional?

Correct Answer
verified

The benefits principle of taxation can be used to argue that wealthy citizens should pay higher taxes than poorer ones on the basis that

Correct Answer
verified

Part of the administrative burden of a tax is

Correct Answer
verified

Vertical equity in taxation refers to the idea that people

Correct Answer
verified

Exam 12: The Design of the Tax System

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

Correct AnswerverifiedShow Answer

Suppose a country imposes a lump-sum income tax of $5,000 on each individual in the country. What is the marginal income tax rate for an individual who earns $40,000 during the year?

Correct AnswerverifiedShow Answer

Suppose an excise tax is imposed on luxury boats and yachts. Economists argue that such a tax

Correct AnswerverifiedShow Answer

Table 12-23 The dollar amounts in the last three columns are the taxes owed under the three different tax systems. -Refer to Table 12-23. Which of the three tax systems is progressive?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Table 12-11 -Refer to Table 12-11. If Bud has taxable income of $78,000, his marginal tax rate is

Correct AnswerverifiedShow Answer

A budget deficit occurs when government receipts fall short of government spending.

Correct AnswerverifiedShow Answer

The claim that all citizens should make an "equal sacrifice" to support government programs is usually associated with

Correct AnswerverifiedShow Answer

Medicare is the

Correct AnswerverifiedShow Answer

Table 12-20 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 12-20. Which tax schedules are progressive?

Correct AnswerverifiedShow Answer

Table 12-11 -Refer to Table 12-11. If Al has taxable income of $165,000, his tax liability is

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

A budget surplus occurs when government receipts exceed government spending.

Correct AnswerverifiedShow Answer

An efficient tax system is one that (i) maximizes tax revenues. (ii) minimizes deadweight losses from taxes. (iii) minimizes administrative burdens from taxes. (iv) promotes equity across taxpayers.

Correct AnswerverifiedShow Answer

Deadweight losses and administrative burdens are key factors considered when determining the efficiency of the tax system.

Correct AnswerverifiedShow Answer

Many economists believe that

Correct AnswerverifiedShow Answer

Table 12-23 The dollar amounts in the last three columns are the taxes owed under the three different tax systems. -Refer to Table 12-23. Which of the three tax systems is proportional?

Correct AnswerverifiedShow Answer

The benefits principle of taxation can be used to argue that wealthy citizens should pay higher taxes than poorer ones on the basis that

Correct AnswerverifiedShow Answer

Part of the administrative burden of a tax is

Correct AnswerverifiedShow Answer

Vertical equity in taxation refers to the idea that people

Correct AnswerverifiedShow Answer

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