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Exam 12: The Design of the Tax System

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Question 71

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Some states do not have a state income tax.

A) True
B) False

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Question 72

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Scenario 12-2 Suppose Regina and Ben receive great satisfaction from their consumption of cheesecake. Regina would be willing to purchase only one slice and would pay up to $13 for it. Ben would be willing to pay $17 for his first slice, $14 for his second slice, and $10 for his third slice. The current market price is $10 per slice. -Refer to Scenario 12-2. How much total consumer surplus do Regina and Ben collectively receive from consuming cheesecake?

A) $3
B) $4
C) $7
D) $14

E) A) and C)
F) A) and B)

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Question 73

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The U.S. income tax

One characteristic of an efficient tax system is that it minimizes the costs associated with revenue collection.

Table 12-1 ​ ​ $\begin{array} { | c | c | } \hline \text { Person } & \begin{array} { c } \text { Value of a White Water Rafting } \\\text { Trip } \\\text { (Dollars) }\end{array} \\\hline \text { Ken } & 150 \\\hline \text { Alex } & 120 \\\hline \text { Brenda } & 90 \\\hline \text { Rob } & 60 \\\hline\end{array}$ -Refer to Table 12-1. Assume that the price of a white water rafting trip pass is $55 and that the price reflects the actual unit cost of the trip. What is the value of the surplus that accrues to all four participants from their trip?

Income taxes and property taxes generate the highest tax revenue for state and local governments.

In 2017, federal government collected $3.6 trillion in taxes. Which of the following correctly rank the sources of federal government tax revenue from large to small?

Horizontal equity refers to a tax system in which individuals with higher incomes pay more in taxes than individuals with lower incomes.

What is the current, annual, approximate amount per person paid to the federal government in individual income taxes, social insurance taxes, corporate income taxes, and other taxes?

Suppose the government taxes 10 percent of the first $30,000 in income, 20 percent of the next $20,000 in income, and 30 percent of all income over $50,000. Calculate the marginal tax rate and the average tax rate for a person who earns $70,000.

Many people consider lump-sum taxes to be unfair to low-income taxpayers.

Table 12-10 -Refer to Table 12-10. Which plan illustrates a proportional tax?

A lump sum tax can never have horizontal equity.

An excise tax is a tax on a specific good, like gasoline.

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

​Sonja paid $15,000 in taxes after having earned $100,000. Amanda paid $22,000 in taxes after having earned an income of $146,667.This is an example of a proportional tax.

Table 12-9 $\begin{array} { | l | l | } \hline \text { Income } & \text { Amount of Tax } \\\hline \$ 50,000 & \$ 5,000 \\\hline \$ 60,000 & \$ 5,500 \\\hline \$ 70,000 & \$ 6,000 \\\hline\end{array}$ -Refer to Table 12-9. The tax system is an example of a __________ tax.

When the government levies a tax on a corporation,

Suppose that the government taxes income in the following fashion: 30 percent of the first $20,000, 50 percent of the next $30,000, and 60 percent of all income over $50,000. Ted earns $40,000, and Robin earns $60,000. Which of the following statements is correct?

State and local governments