Question 1

If a poor family has three children in public school and a rich family has two children in private school, the benefits principle would suggest that

Accepted Answer

A) the poor family should pay more in taxes to pay for public education than the rich family. 
B) the rich family should pay more in taxes to pay for public education than the poor family. 
C) the benefits of private school exceed those of public school. 
D) public schools should be financed by property taxes. 
A) the poor family should pay more in taxes to pay for public education than the rich family. 
B) the rich family should pay more in taxes to pay for public education than the poor family. 
C) the benefits of private school exceed those of public school. 
D) public schools should be financed by property taxes. A

Question 2

Table 12-8
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 12-8. 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 D 
A) Tax Schedule A 
B) Tax Schedule B 
C) Tax Schedule C 
D) Tax Schedule D A

Question 3

Table 12-14  
-Refer to Table 12-14. The tax system is

Accepted Answer

A) progressive. 
B) regressive. 
C) proportional. 
D) lump sum. 
A) progressive. 
B) regressive. 
C) proportional. 
D) lump sum. A

Question 4

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

Accepted Answer

A) 18.7%. 
B) 19.3%. 
C) 20.1%. 
D) 34.0%. 
A) 18.7%. 
B) 19.3%. 
C) 20.1%. 
D) 34.0%.

Question 5

In 2011, the U.S. federal government collected approximately what percentage of the taxes in the economy?

Accepted Answer

A) 10% 
B) 40% 
C) 50% 
D) 67% 
A) 10% 
B) 40% 
C) 50% 
D) 67%

Question 6

Tim earns income of $60,000 per year and pays $21,000 per year in taxes. Tim paid 20 percent in taxes on the first $30,000 he earned. What was the marginal tax rate on the second $30,000 he earned?

Accepted Answer

A) 20 percent 
B) 30 percent 
C) 50 percent 
D) 70 percent 
A) 20 percent 
B) 30 percent 
C) 50 percent 
D) 70 percent

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 is the average tax rate when income is $50,000?

Accepted Answer

A) 20 percent 
B) 15 percent 
C) 12 percent 
D) 10 percent 
A) 20 percent 
B) 15 percent 
C) 12 percent 
D) 10 percent

Question 8

Briefly describe why taxes create deadweight loss.

Accepted Answer

When the government imposes a

Question 9

Individual income taxes generate roughly 25% of the tax revenue for the federal government.

Accepted Answer

A) True 
 B)False

Question 10

State and local governments

Accepted Answer

A) are funded entirely by their own tax base. 
B) receive the majority of their tax revenues from corporate income taxes. 
C) are generally not responsible for collecting sales taxes. 
D) receive some of their funds from the federal government. 
A) are funded entirely by their own tax base. 
B) receive the majority of their tax revenues from corporate income taxes. 
C) are generally not responsible for collecting sales taxes. 
D) receive some of their funds from the federal government.

Question 11

Table 12-15  
-Refer to Table 12-15. The tax system is

Accepted Answer

A) proportional. 
B) regressive. 
C) progressive. 
D) lump sum. 
A) proportional. 
B) regressive. 
C) progressive. 
D) lump sum.

Question 12

The largest source of income for the federal government is

Accepted Answer

A) individual income taxes. 
B) corporate taxes. 
C) tariffs. 
D) "sin" taxes on alcohol and cigarettes. 
A) individual income taxes. 
B) corporate taxes. 
C) tariffs. 
D) "sin" taxes on alcohol and cigarettes.

Question 13

An optimal tax is one that minimizes the

Accepted Answer

A) external benefit. 
B) total deadweight loss from the tax. 
C) income taxes. 
D) horizontal equity. 
A) external benefit. 
B) total deadweight loss from the tax. 
C) income taxes. 
D) horizontal equity.

Question 14

A mortgage interest deduction would be considered

Accepted Answer

A) tax evasion. 
B) a subsidy to the poor. 
C) a deduction that benefits all members of society equally. 
D) a tax loophole. 
A) tax evasion. 
B) a subsidy to the poor. 
C) a deduction that benefits all members of society equally. 
D) a tax loophole.

Question 15

In choosing the form of a tax, there is often a tradeoff between

Accepted Answer

A) allocative and productive efficiency. 
B) profits and revenues. 
C) efficiency and fairness. 
D) fairness and profits. 
A) allocative and productive efficiency. 
B) profits and revenues. 
C) efficiency and fairness. 
D) fairness and profits.

Question 16

Which of the following contributes to the projected rise in government spending on Social Security and Medicare as a percentage of GDP?

Accepted Answer

A) increasing life expectancies 
B) increasing healthcare costs 
C) increasing fertility rates 
D) Both a and b are correct. 
A) increasing life expectancies 
B) increasing healthcare costs 
C) increasing fertility rates 
D) Both a and b are correct.

Question 17

Most analysts expect the largest federal spending category to continue to grow in importance for many years into the future. What category of spending is this?

Accepted Answer

A) national defense 
B) education 
C) income security 
D) farm support programs 
A) national defense 
B) education 
C) income security 
D) farm support programs

Question 18

The most common explanation for Social Security payments accounting for a larger share of federal government expenditures is

Accepted Answer

A) increases in life expectancy. 
B) people becoming eligible for Social Security benefits at an earlier age. 
C) increases in birth rates among teenagers and the poor. 
D) falling payroll tax receipts. 
A) increases in life expectancy. 
B) people becoming eligible for Social Security benefits at an earlier age. 
C) increases in birth rates among teenagers and the poor. 
D) falling payroll tax receipts.

Question 19

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

Question 20

Table 12-6
The table below shows the marginal tax rates for an unmarried taxpayer for various levels of taxable income.  
-Refer to Table 12-6. For this tax schedule, what is the marginal tax rate for an individual with taxable income of $49,000?

Accepted Answer

A) 0% 
B) 10% 
C) 25% 
D) 35% 
A) 0% 
B) 10% 
C) 25% 
D) 35%

Exam 12: The Design of the Tax System

If a poor family has three children in public school and a rich family has two children in private school, the benefits principle would suggest that

Table 12-8 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 12-8. For an individual with $200,000 in taxable income, which tax schedule has the highest average tax rate?

Table 12-14 -Refer to Table 12-14. The tax system is

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

In 2011, the U.S. federal government collected approximately what percentage of the taxes in the economy?

Tim earns income of $60,000 per year and pays $21,000 per year in taxes. Tim paid 20 percent in taxes on the first $30,000 he earned. What was the marginal tax rate on the second $30,000 he earned?

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?

Briefly describe why taxes create deadweight loss.

Individual income taxes generate roughly 25% of the tax revenue for the federal government.

State and local governments

Table 12-15 -Refer to Table 12-15. The tax system is

The largest source of income for the federal government is

An optimal tax is one that minimizes the

A mortgage interest deduction would be considered

In choosing the form of a tax, there is often a tradeoff between

Which of the following contributes to the projected rise in government spending on Social Security and Medicare as a percentage of GDP?

Most analysts expect the largest federal spending category to continue to grow in importance for many years into the future. What category of spending is this?

The most common explanation for Social Security payments accounting for a larger share of federal government expenditures is

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?

Table 12-6 The table below shows the marginal tax rates for an unmarried taxpayer for various levels of taxable income. -Refer to Table 12-6. For this tax schedule, what is the marginal tax rate for an individual with taxable income of $49,000?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Applications: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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