Question 1

Taxes create deadweight losses because they

Accepted Answer

A)  reduce costs for firms.
B)  distort incentives.
C)  cause prices to decrease.
D)  create revenue for the government.E) A) and B)
F) A) and C)

Question 2

The largest budgetary expense for a typical state or local government is

Accepted Answer

A)  education.
B)  Medicare.
C)  highways.
D)  income security.E) B) and C)
F) All of the above

Question 3

Suppose the government imposes a tax of 20 percent on the first $50,000 of income and 30 percent on all income above $50,000. What is the marginal tax rate when income is $60,000?

Accepted Answer

A)  10 percent
B)  20 percent
C)  30 percent
D)  50 percentE) A) and C)
F) A) and B)

Question 4

The deadweight loss of a tax is

Accepted Answer

A)  the reduction in economic welfare of taxpayers that exceeds the revenue raised by the government.
B)  the improved efficiency created as people reallocate resources according to the tax incentive rather than the true costs and benefits.
C)  the loss in tax revenues.
D)  Both a and b are correct.E) C) and D)
F) A) and D)

Question 5

If we want to gauge how much the income tax system distorts incentives, we should use the

Accepted Answer

A)  average tax rate.
B)  ability-to-pay principle.
C)  total tax revenue collected.
D)  marginal tax rate.E) All of the above
F) B) and D)

Question 6

Which of the following types of taxes achieves vertical equity: a proportional tax, regressive tax, and/or progressive tax?

Accepted Answer

proportion...

Question 7

Tax systems that impose recordkeeping requirements on taxpayers are said to have a(n)

Accepted Answer

A)  auditing burden.
B)  lower incidence of compliance.
C)  administrative burden.
D)  certification requirement.E) A) and B)
F) B) and D)

Question 8

Suppose that in 2020 the average citizen's federal tax bill is $12,466, and total federal spending is $10,824 per person. In 2020, the federal government will have

Accepted Answer

A)  a budget surplus.
B)  a budget deficit.
C)  horizontal equity.
D)  vertical equity.E) A) and C)
F) All of the above

Question 9

Which of the following statements about state income taxes is correct?

Accepted Answer

A)  Some states do not tax income at all.
B)  If states tax income, they must follow federal guidelines for designing the tax structure.
C)  States are not allowed to have a higher marginal tax rate than the federal marginal tax rate.
D)  All of the above are correct.E) A) and B)
F) A) and C)

Question 10

Table 12-10 
-Refer to Table 12-10. If Jace has $33,000 in taxable income, his tax liability will be

Accepted Answer

A)  $4,531.
B)  $4,678.
C)  $4,950.
D)  $8,269.E) A) and D)
F) None of the above

Question 11

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) B) and D)
F) A) and D)

Question 12

Which tax system requires higher-income taxpayers to pay a higher percentage of their income in taxes?

Accepted Answer

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

Question 13

Suppose Luke values a scoop of Italian gelato at $4. Leia values a scoop of Italian gelato at $6. The pre-tax price of a scoop of Italian gelato is $2. The government imposes a "fat tax" of $3 on each scoop of Italian gelato, and the price rises to $5. The deadweight loss from the tax is

Accepted Answer

A)  $1.
B)  $2.
C)  $3.
D)  $4.E) A) and B)
F) C) and D)

Question 14

Table 12-9
United States Income Tax Rates for a Single Individual, 2012 and 2013. 
-Refer to Table 12-9. Samantha is a single person whose taxable income is $100,000 a year. What happened to her average tax rate between 2012 and 2013?

Accepted Answer

A)  It increased.
B)  It decreased.
C)  It did not change.
D)  We do not have enough information to answer this question.E) B) and D)
F) None of the above

Question 15

​The largest source of federal revenue in the United States is:

Accepted Answer

A)  ​Social insurance tax
B)  the corporate income tax
C)  ​the individual income tax
D)  Foreign aid to the U.S.E) None of the above
F) A) and B)

Question 16

Which of the following is an example of an excise tax?

Accepted Answer

A)  a tax on the wages that a firm pays its workers
B)  a tax on tobacco
C)  a tax on corporate profits
D)  the portion of federal income taxes earmarked to pay for Social Security and MedicareE) B) and C)
F) None of the above

Question 17

Taxes on specific goods such as gasoline and alcoholic beverages are called

Accepted Answer

A)  excise taxes.
B)  payroll taxes.
C)  sales taxes.
D)  social insurance taxes.E) A) and B)
F) A) and C)

Question 18

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.E) C) and D)
F) A) and B)

Question 19

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.E) A) and D)
F) A) and C)

Question 20

Scenario 12-4
A taxpayer faces the following tax rates on her income:
20 percent of the first $40,000 of her income;
30 percent of all her income above $40,000.
-Refer to Scenario 12-4. The taxpayer faces

Accepted Answer

A)  an average tax rate of 22.5 percent when her income is $30,000.
B)  an average tax rate of 22.0 percent when her income is $50,000.
C)  a marginal tax rate of 10 percent when her income rises from $40,000 to $40,001.
D)  a marginal tax rate of 50 percent when her income rises from $60,000 to $60,001.E) None of the above
F) B) and C)

Exam 12: The Design of the Tax System

Which of the following statements about state income taxes is correct?

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Suppose that in 2020 the average citizen's federal tax bill is $12,466, and total federal spending is $10,824 per person. In 2020, the federal government will have

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Scenario 12-4 A taxpayer faces the following tax rates on her income: 20 percent of the first $40,000 of her income; 30 percent of all her income above $40,000. -Refer to Scenario 12-4. The taxpayer faces

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Which of the following is an example of an excise tax?

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Which of the following types of taxes achieves vertical equity: a proportional tax, regressive tax, and/or progressive tax?

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Suppose Luke values a scoop of Italian gelato at $4. Leia values a scoop of Italian gelato at $6. The pre-tax price of a scoop of Italian gelato is $2. The government imposes a "fat tax" of $3 on each scoop of Italian gelato, and the price rises to $5. The deadweight loss from the tax is

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Which tax system requires higher-income taxpayers to pay a higher percentage of their income in taxes?

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Table 12-10 -Refer to Table 12-10. If Jace has $33,000 in taxable income, his tax liability will be

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Table 12-9 United States Income Tax Rates for a Single Individual, 2012 and 2013. -Refer to Table 12-9. Samantha is a single person whose taxable income is $100,000 a year. What happened to her average tax rate between 2012 and 2013?

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Taxes create deadweight losses because they

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The deadweight loss of a tax is

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The largest budgetary expense for a typical state or local government is

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

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

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​The largest source of federal revenue in the United States is:

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Suppose the government imposes a tax of 20 percent on the first $50,000 of income and 30 percent on all income above $50,000. What is the marginal tax rate when income is $60,000?

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Taxes on specific goods such as gasoline and alcoholic beverages are called

Correct AnswerverifiedShow Answer

If we want to gauge how much the income tax system distorts incentives, we should use the

Correct AnswerverifiedShow Answer

Vertical equity in taxation refers to the idea that people

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Tax systems that impose recordkeeping requirements on taxpayers are said to have a(n)

Correct AnswerverifiedShow Answer

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The largest source of federal revenue in the United States is:

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