Question 1

If you pay $14 000 in taxes on an income of $125 000,and $17 400 in taxes on an income of  $144000,what is your marginal tax rate? Show your work.

Accepted Answer

The answer of If you pay $14 000 in taxes...

Question 2

Consider a public good such as fire protection services.Rich people may benefit more than the poor from such a service because rich people stand to lose more from a fire that destroys property.In this case

Accepted Answer

A) the ability-to-pay principle may support the rich paying more taxes than the poor,but not the benefits-received principle. 
B) the benefits-received principle may support the rich paying more taxes than the poor,but not the ability-to-pay principle. 
C) both the benefits-received and the ability-to-pay principles may support the rich paying more taxes than the poor. 
D) neither the benefits-received nor the ability-to-pay principles may support the rich paying more taxes than the poor.

Question 3

There is a difference between who is legally required to send a tax payment to the government and who bears the burden of the tax.Which of the following would have the most impact on who bears the burden of an excise tax?

Accepted Answer

A) whether the tax is imposed by the federal government or a state government 
B) whether the tax is based on the ability-to-pay principle or the benefits-received principle 
C) The motive for the tax.If the tax is designed to raise revenue,more of the burden will fall on firms.If the tax is designed to achieve a social objective (for example,to discourage smoking)more of the burden will fall on consumers. 
D) the elasticity of demand for the item that is taxed

Question 4

If you pay $2000 in taxes on an income of $20 000,and a tax of $3000 on an income of $30 000,then over this range of income the tax is

Accepted Answer

A) regressive. 
B) proportional. 
C) progressive. 
D) There is insufficient information to answer the question.

Question 5

The federal government and some state governments levy taxes on specific goods such as petrol,cigarettes and beer.These are known as

Accepted Answer

A) sales taxes. 
B) sin taxes. 
C) specific taxes. 
D) excise taxes.

Question 6

Figure 16-3 -Refer to Figure 16-3.The figure above shows a demand curve and two supply curves,one more elastic than the other.Use Figure 16-3 to answer the following questions. a.Suppose the government imposes an excise tax of $1.00 on every unit sold.Use the graph to illustrate the impact of this tax. b.If the government imposes an excise tax of $1.00 on every unit sold,will the consumer pay more of the tax if the supply curve is S₁ or S₂? Refer to the graphs in your answer. c.If an excise tax of $1.00 on every unit sold is imposed,will the revenue collected by the government be greater if the supply curve is S₁ or S₂? d.If the government imposes an excise tax of $1.00 on every unit sold,will the deadweight loss be greater if the supply curve is S₁ or S₂?

Accepted Answer

The answer of Figure 16-3 
-Refer to Figure 16-3.The figure...

Question 7

Consider the following methods of taxing a corporation's income:
A.A flat tax,as opposed to a progressive tax,is levied on corporate profits.
B.A system whereby a corporation calculates its annual profit and notifies each shareholder of her portion of the profits.The shareholder would then be required to include this amount as taxable income for her personal income tax.The corporation does not pay a tax.
C.A system where the federal government continues to tax corporate income through the corporate income tax but allows individual taxpayers to receive,tax free,corporate dividends and capital gains.
Which of the methods above would avoid double taxation?

Accepted Answer

A) a,b,and c 
B) a and b only 
C) a and c only 
D) b and c only

Question 8

As a group,people with high incomes are likely to have

Accepted Answer

A) greater-than-average family inheritances and greater-than-average SAT scores. 
B) greater-than-average holdings of stocks and bonds and lower-than-average productivity. 
C) greater-than-average productivity and greater-than-average amounts of capital. 
D) a stable marriage and no children.

Question 9

Figure 16-6  Figure 16-6 shows the Lorenz curves for Islandia and Syldavia.
-Refer to Figure 16-6.Which country has the more unequal distribution of income?

Accepted Answer

A) Islandia 
B) Syldavia 
C) They may have the same absolute income distribution although their relative income distribution is different. 
D) There is insufficient information to answer the question.

Question 10

If you pay $2000 in taxes on an income of $20 000,and a tax of $3500 on an income of $30 000,then over this range of income the tax is

Accepted Answer

A) regressive. 
B) proportional. 
C) progressive. 
D) There is insufficient information to answer the question.

Question 11

Which of the following is a transfer payment?

Accepted Answer

A) the subsidy program 
B) a tax deduction 
C) Social Security payments 
D) an income tax credit

Question 12

The term 'payroll taxes' is often used to refer to

Accepted Answer

A) individual income taxes that are withheld from paychecks. 
B) corporate income taxes. 
C) Social Security and Medicare taxes. 
D) sales taxes.

Question 13

'For a given supply curve,the excess burden of a tax will be greater when the demand for a product is less elastic than when the demand is more elastic.' This statement is

Accepted Answer

A) correct. 
B) incorrect because the incidence of the tax,not the burden of the tax,is affected by the elasticity of demand. 
C) incorrect.When demand is less elastic,the burden of the tax is smaller than when the demand is more elastic. 
D) incorrect.The statement confuses demand with quantity demanded.

Question 14

Figure 16-2  Figure 16-2 shows a demand curve and two sets of supply curves,one set more elastic than the other.
-Refer to Figure 16-2.If the government imposes an excise tax of $1.00 on every unit sold,what is the size of the deadweight loss,if there is any?

Accepted Answer

A) the area adc if the supply curve is S0 and the area bec if the supply curve is S1 
B) the area afcd if the supply curve is S0 and the area bfce if the supply curve is S1 
C) the area becf under either supply curve 
D) There is no deadweight loss;revenue raised is used to fund government projects.

Question 15

The idea that individuals should be taxed in proportion to the marginal benefits that they receive from public goods is called

Accepted Answer

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

Question 16

For a given supply curve,how does the elasticity of demand affect the burden of a tax imposed on a product?

Accepted Answer

A) The excess burden of the tax will be minimised when the demand is unit-elastic. 
B) The excess burden of the tax will be greater when the elasticity of supply is greater than the elasticity of demand. 
C) The excess burden of the tax will be greater when the demand is less elastic than when it is more elastic. 
D) The excess burden of the tax will be greater when the demand is more elastic than when it is less elastic.

Question 17

Figure 16-2  Figure 16-2 shows a demand curve and two sets of supply curves,one set more elastic than the other.
-Refer to Figure 16-2.If the government imposes an excise tax of $1.00 on every unit sold,the government's revenue from the tax is represented by the area

Accepted Answer

A) (PaPc × Qa)if the supply curve is S0 and (PbPc × Qb)if the supply curve is S1. 
B) (PaPd × Qa)if the supply curve is S0 and (PbPe × Qb)if the supply curve is S1. 
C) (PaPe × Qa)under either supply curve. 
D) (PbPe × Qb)under either supply curve.

Question 18

Holding all other factors constant,income earned from capital is more unequally distributed than income earned from labour.

Accepted Answer

A) True 
 B)False

Question 19

The excess burden of a tax

Accepted Answer

A) measures the efficiency loss to the economy that results from a tax,causing a reduction in the quantity of goods and services produced. 
B) is measured by the administrative costs required to implement a tax system. 
C) is a measure of the hardship imposed on low-income individuals in a society. 
D) is a measure of the foregone consumption as a result of having to pay taxes.

Question 20

Most economists agree that some of the burden of the corporate income tax

Accepted Answer

A) is reduced because the tax is progressive. 
B) is shared by the federal government. 
C) is reduced because the tax is used to attain a social objective. 
D) is passed on to consumers in the form of higher prices.

Exam 16: The Distribution of Income and Social Policy

If you pay $14 000 in taxes on an income of $125 000,and $17 400 in taxes on an income of $144000,what is your marginal tax rate? Show your work.