Question 1

Which of the following describes a situation where tax laws give preferential treatment to specific types of behavior?

Accepted Answer

A) tax evasion 
B) a political payoff 
C) a tax loophole 
D) compensation for the benefit of society 
A) tax evasion 
B) a political payoff 
C) a tax loophole 
D) compensation for the benefit of society

Question 2

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

Accepted Answer

A) marginal tax rate is 8 percent. 
B) average tax rate is 8 percent. 
C) marginal tax rate is 12.5 percent. 
D) average tax rate is 12.5 percent. 
A) marginal tax rate is 8 percent. 
B) average tax rate is 8 percent. 
C) marginal tax rate is 12.5 percent. 
D) average tax rate is 12.5 percent.

Question 3

The government's health plan for the elderly is called

Accepted Answer

A) Medicaid. 
B) Medicare. 
C) Social Security. 
D) TANF. 
A) Medicaid. 
B) Medicare. 
C) Social Security. 
D) TANF.

Question 4

Who pays a corporate income tax?

Accepted Answer

A) owners of the corporation 
B) customers of the corporation 
C) workers of the corporation 
D) All of the above are correct. 
A) owners of the corporation 
B) customers of the corporation 
C) workers of the corporation 
D) All of the above are correct.

Question 5

If a tax takes a constant fraction of income as income rises,it is

Accepted Answer

A) regressive. 
B) proportional. 
C) progressive. 
D) based on the ability-to-pay principle. 
A) regressive. 
B) proportional. 
C) progressive. 
D) based on the ability-to-pay principle.

Question 6

State and local governments receive the largest portion of their tax revenues from

Accepted Answer

A) sales taxes and income taxes. 
B) income taxes and property taxes. 
C) payroll taxes and income taxes. 
D) property taxes and sales taxes. 
A) sales taxes and income taxes. 
B) income taxes and property taxes. 
C) payroll taxes and income taxes. 
D) property taxes and sales taxes.

Question 7

Temporary Assistance for Needy Families (TANF)falls into which spending category?

Accepted Answer

A) Medicare 
B) income security 
C) guaranteed social eligibility 
D) Social Security 
A) Medicare 
B) income security 
C) guaranteed social eligibility 
D) Social Security

Question 8

A transfer payment is a government payment

Accepted Answer

A) to companies that provide goods or services to government agencies. 
B) designed to transfer funds from one government agency to another. 
C) which transfers revenue from the federal government to state government. 
D) not made in exchange for a good or service. 
A) to companies that provide goods or services to government agencies. 
B) designed to transfer funds from one government agency to another. 
C) which transfers revenue from the federal government to state government. 
D) not made in exchange for a good or service.

Question 9

Vertical equity is not consistent with a regressive tax structure.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements is correct?

Accepted Answer

A) The U.S.federal government collected a higher percentage of income in taxes in the early 1900s than in the early 2000s. 
B) The U.S.federal government collects a higher percentage of income in taxes than many European countries, including France and Germany. 
C) The U.S.federal government collects a lower percentage of income in taxes than many developing countries, including Mexico and India. 
D) The U.S.federal government collects a similar percentage of income in taxes as Brazil and Canada. 
A) The U.S.federal government collected a higher percentage of income in taxes in the early 1900s than in the early 2000s. 
B) The U.S.federal government collects a higher percentage of income in taxes than many European countries, including France and Germany. 
C) The U.S.federal government collects a lower percentage of income in taxes than many developing countries, including Mexico and India. 
D) The U.S.federal government collects a similar percentage of income in taxes as Brazil and Canada.

Question 11

Kyle places a $10 value on a glass of red wine,and Keith places an $8 value on it.If there is no tax on glasses of red wine,the price of a glass of red wine reflects the cost of making it.The equilibrium price for a glass of red wine is $6.Suppose the government levies a tax of $2 on each glass of red wine,and the equilibrium price of a glass of red wine increases to $8.Because total consumer surplus has

Accepted Answer

A) fallen by more than the tax revenue, the tax has a deadweight loss 
B) fallen by less than the tax revenue, the tax has no dead weight loss. 
C) fallen by exactly the amount of the tax revenue, the tax has no deadweight loss. 
D) increased by less than the tax revenue, the tax has a deadweight loss. 
A) fallen by more than the tax revenue, the tax has a deadweight loss 
B) fallen by less than the tax revenue, the tax has no dead weight loss. 
C) fallen by exactly the amount of the tax revenue, the tax has no deadweight loss. 
D) increased by less than the tax revenue, the tax has a deadweight loss.

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

A consumption tax is a tax on only

Accepted Answer

A) goods and not services. 
B) the amount of income that people spend. 
C) the amount of income that people earn. 
D) the amount of income that people save. 
A) goods and not services. 
B) the amount of income that people spend. 
C) the amount of income that people earn. 
D) the amount of income that people save.

Question 14

In the absence of taxes,Janet would prefer to purchase a large sport utility vehicle (SUV).The government has recently decided to place a $10,000 nuisance tax on SUVs.If Janet decides to purchase a small economy car as a result of the tax,which of the following statements is correct?

Accepted Answer

A) Other people who choose to purchase SUVs will incur the cost of the deadweight loss of the tax. 
B) There are no deadweight losses as long as some people still choose to purchase SUVs. 
C) In order to determine the magnitude of the deadweight loss, we must add the revenues from the tax to the loss in Janet's consumer surplus. 
D) Janet is worse off, and her loss of welfare is part of the deadweight loss of the tax. 
A) Other people who choose to purchase SUVs will incur the cost of the deadweight loss of the tax. 
B) There are no deadweight losses as long as some people still choose to purchase SUVs. 
C) In order to determine the magnitude of the deadweight loss, we must add the revenues from the tax to the loss in Janet's consumer surplus. 
D) Janet is worse off, and her loss of welfare is part of the deadweight loss of the tax.

Question 15

Resources devoted to complying with the tax laws are a type of deadweight loss.

Accepted Answer

A) True 
 B)False

Question 16

Table 12-9
  
-Refer to Table 12-9.A regressive tax is illustrated by tax

Accepted Answer

A) A only. 
B) B or D. 
C) C only. 
D) A or D. 
A) A only. 
B) B or D. 
C) C only. 
D) A or D.

Question 17

One of the most difficult issues associated with trying to structure a tax policy to satisfy horizontal equity is determining

Accepted Answer

A) whether or not a taxpayer falls within the highest income quintile. 
B) the level of transfer payments made to low-income groups. 
C) the source of income for taxpayers. 
D) what differences are relevant to a family's ability to pay. 
A) whether or not a taxpayer falls within the highest income quintile. 
B) the level of transfer payments made to low-income groups. 
C) the source of income for taxpayers. 
D) what differences are relevant to a family's ability to pay.

Question 18

Sue earns income of $80,000 per year.Her average tax rate is 30 percent.Sue paid 20 percent in taxes on the first $30,000 she earned.What was the marginal tax rate on the rest of her income?

Accepted Answer

A) 20 percent 
B) 24 percent 
C) 30 percent 
D) 36 percent 
A) 20 percent 
B) 24 percent 
C) 30 percent 
D) 36 percent

Question 19

Table 12-9
  
-Refer to Table 12-9.A progressive tax is illustrated by tax

Accepted Answer

A) a. 
B) B. 
C) C. 
D) D. 
A) a. 
B) B. 
C) C. 
D) D.

Question 20

Suppose that the government taxes income as follows: each taxpayer pays $2,000 in taxes,regardless of income.In addition,people who earn over $20,000 pay 40 percent of their total income in taxes.Which of the following statements is not correct?

Accepted Answer

A) The $2,000 is a lump-sum tax. 
B) For people earning less than $20,000, the marginal tax rate is zero. 
C) For people earning $50,000, the average tax rate is 40 percent. 
D) For people earning over $50,000, the marginal tax rate is 40 percent. 
A) The $2,000 is a lump-sum tax. 
B) For people earning less than $20,000, the marginal tax rate is zero. 
C) For people earning $50,000, the average tax rate is 40 percent. 
D) For people earning over $50,000, the marginal tax rate is 40 percent.

Exam 12: The Design of the Tax System

Which of the following describes a situation where tax laws give preferential treatment to specific types of behavior?

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

The government's health plan for the elderly is called

Who pays a corporate income tax?

If a tax takes a constant fraction of income as income rises,it is

State and local governments receive the largest portion of their tax revenues from

Temporary Assistance for Needy Families (TANF)falls into which spending category?

A transfer payment is a government payment

Vertical equity is not consistent with a regressive tax structure.

Which of the following statements is correct?

The largest source of income for the federal government is

A consumption tax is a tax on only

In the absence of taxes,Janet would prefer to purchase a large sport utility vehicle (SUV).The government has recently decided to place a $10,000 nuisance tax on SUVs.If Janet decides to purchase a small economy car as a result of the tax,which of the following statements is correct?

Resources devoted to complying with the tax laws are a type of deadweight loss.

Table 12-9 -Refer to Table 12-9.A regressive tax is illustrated by tax

One of the most difficult issues associated with trying to structure a tax policy to satisfy horizontal equity is determining

Sue earns income of $80,000 per year.Her average tax rate is 30 percent.Sue paid 20 percent in taxes on the first $30,000 she earned.What was the marginal tax rate on the rest of her income?

Table 12-9 -Refer to Table 12-9.A progressive tax is illustrated by tax

Suppose that the government taxes income as follows: each taxpayer pays $2,000 in taxes,regardless of income.In addition,people who earn over $20,000 pay 40 percent of their total income in taxes.Which of the following statements is not correct?

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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