Question 1

If Christopher earns $80,000 in taxable income and pays $20,000 in taxes,his average tax rate is 20 percent.

Accepted Answer

A) True 
 B)False  False

Question 2

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

Accepted Answer

A) proportional. 
B) regressive. 
C) non-egalitarian. 
D) progressive. 
A) proportional. 
B) regressive. 
C) non-egalitarian. 
D) progressive. D

Question 3

When a tax is justified on the basis that taxpayers receive specific government services,the tax

Accepted Answer

A) is considered horizontally equitable. 
B) burden is minimized. 
C) satisfies the benefits principle. 
D) is considered vertically equitable. 
A) is considered horizontally equitable. 
B) burden is minimized. 
C) satisfies the benefits principle. 
D) is considered vertically equitable. C

Question 4

A person's tax liability refers to

Accepted Answer

A) the percentage of income that a person much pay in taxes. 
B) the amount of tax a person owes to the government. 
C) the amount of tax the government is required to refund each person. 
D) deductions that can be legally subtracted from a person's income each year. 
A) the percentage of income that a person much pay in taxes. 
B) the amount of tax a person owes to the government. 
C) the amount of tax the government is required to refund each person. 
D) deductions that can be legally subtracted from a person's income each year.

Question 5

A person's tax obligation divided by her income is called her

Accepted Answer

A) marginal social tax rate. 
B) marginal private tax rate. 
C) marginal tax rate. 
D) average tax rate. 
A) marginal social tax rate. 
B) marginal private tax rate. 
C) marginal tax rate. 
D) average tax rate.

Question 6

Social Security is an income support program,designed primarily to maintain the living standards of the poor.

Accepted Answer

A) True 
 B)False

Question 7

Antipoverty programs funded by taxes on the wealthy are sometimes advocated on the basis of the benefits principle.

Accepted Answer

A) True 
 B)False

Question 8

The government finances the budget deficit by

Accepted Answer

A) borrowing from the public. 
B) borrowing solely from the Federal Reserve Bank. 
C) printing currency in the amount of the budget deficit. 
D) requiring that budget surpluses occur every other year to pay off the deficits. 
A) borrowing from the public. 
B) borrowing solely from the Federal Reserve Bank. 
C) printing currency in the amount of the budget deficit. 
D) requiring that budget surpluses occur every other year to pay off the deficits.

Question 9

In 2004,social insurance taxes represented what percentage of total receipts for the federal government?

Accepted Answer

A) 50 
B) 39 
C) 20 
D) 8 
A) 50 
B) 39 
C) 20 
D) 8

Question 10

Table 12-2
United States Income Tax Rates for a Single Individual, 2002 and 2003.
  
-Refer to Table 12-2.Costa is a single person whose taxable income is $50,000 a year.What is his total tax due in 2002?

Accepted Answer

A) $4,057.50 
B) $6,426 
C) $10,483.50 
D) $14,000 
A) $4,057.50 
B) $6,426 
C) $10,483.50 
D) $14,000

Question 11

You are trying to design a tax system that will simultaneously achieve both of the following goals: 1)two people with the same total income would pay taxes of the same amount,and 2)a high-income person would pay a higher fraction of income in taxes than a low-income person.Which of the following tax systems could achieve both goals?

Accepted Answer

A) a lump-sum tax 
B) a regressive tax 
C) a progressive tax 
D) a proportional tax 
A) a lump-sum tax 
B) a regressive tax 
C) a progressive tax 
D) a proportional tax

Question 12

An income tax in which the average tax rate is the same for all taxpayers would be considered a

Accepted Answer

A) progressive tax. 
B) regressive tax. 
C) distortion-free tax. 
D) proportional tax. 
A) progressive tax. 
B) regressive tax. 
C) distortion-free tax. 
D) proportional tax.

Question 13

The tax that generates the most revenue for state and local government is the

Accepted Answer

A) corporate income tax. 
B) individual income tax. 
C) property tax. 
D) sales tax. 
A) corporate income tax. 
B) individual income tax. 
C) property tax. 
D) sales tax.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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.Which of the following statements is correct?

Accepted Answer

A) Jim will bear the full burden of the deadweight loss. 
B) Joan will bear the full burden of the deadweight loss. 
C) Both Joan and Jim will share the burden of the deadweight loss. 
D) There will be no deadweight loss. 
A) Jim will bear the full burden of the deadweight loss. 
B) Joan will bear the full burden of the deadweight loss. 
C) Both Joan and Jim will share the burden of the deadweight loss. 
D) There will be no deadweight loss.

Question 16

If revenue from a gasoline tax is used to build and maintain public roads,the gasoline tax may be justified on the basis of

Accepted Answer

A) the benefits principle. 
B) the ability-to-pay principle. 
C) vertical equity. 
D) horizontal equity. 
A) the benefits principle. 
B) the ability-to-pay principle. 
C) vertical equity. 
D) horizontal equity.

Question 17

Table 12-2
United States Income Tax Rates for a Single Individual, 2002 and 2003.
  
-Refer to Table 12-2.Costa is a single person whose taxable income is $50,000 a year.What is his marginal tax rate in 2002?

Accepted Answer

A) 15% 
B) 28% 
C) 31% 
D) 36% 
A) 15% 
B) 28% 
C) 31% 
D) 36%

Question 18

Corporate profits are

Accepted Answer

A) included in payroll taxes. 
B) exempt from taxes. 
C) taxed twice, once as profit and once as dividends. 
D) taxed to pay for Medicare. 
A) included in payroll taxes. 
B) exempt from taxes. 
C) taxed twice, once as profit and once as dividends. 
D) taxed to pay for Medicare.

Question 19

One advantage of a lump-sum tax over other taxes is that it

Accepted Answer

A) is both equitable and efficient. 
B) doesn't cause deadweight loss. 
C) would place a larger tax burden on the rich. 
D) would raise more revenues. 
A) is both equitable and efficient. 
B) doesn't cause deadweight loss. 
C) would place a larger tax burden on the rich. 
D) would raise more revenues.

Question 20

If all taxpayers pay the same percentage of income in taxes,the tax system is progressive.

Accepted Answer

A) True 
 B)False

Exam 12: The Design of the Tax System

If Christopher earns $80,000 in taxable income and pays $20,000 in taxes,his average tax rate is 20 percent.

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

When a tax is justified on the basis that taxpayers receive specific government services,the tax

A person's tax liability refers to

A person's tax obligation divided by her income is called her

Social Security is an income support program,designed primarily to maintain the living standards of the poor.

Antipoverty programs funded by taxes on the wealthy are sometimes advocated on the basis of the benefits principle.

The government finances the budget deficit by

In 2004,social insurance taxes represented what percentage of total receipts for the federal government?

Table 12-2 United States Income Tax Rates for a Single Individual, 2002 and 2003. -Refer to Table 12-2.Costa is a single person whose taxable income is $50,000 a year.What is his total tax due in 2002?

An income tax in which the average tax rate is the same for all taxpayers would be considered a

The tax that generates the most revenue for state and local government is the

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

If revenue from a gasoline tax is used to build and maintain public roads,the gasoline tax may be justified on the basis of

Table 12-2 United States Income Tax Rates for a Single Individual, 2002 and 2003. -Refer to Table 12-2.Costa is a single person whose taxable income is $50,000 a year.What is his marginal tax rate in 2002?

Corporate profits are

One advantage of a lump-sum tax over other taxes is that it

If all taxpayers pay the same percentage of income in taxes,the tax system is progressive.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Applications

Supply, demand, and Government Policies

Consumers, producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Costs of Production

Firms in Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

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 Trade Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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