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Exam 12: The Design of the Tax System

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Question 91

Multiple Choice

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A tax system with little deadweight loss and a small administrative burden would be described as

A) efficient.
B) equitable.
C) communistic.
D) capitalistic.

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

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Question 92

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A tax system exhibits vertical equity when taxpayers with similar abilities to pay contribute the same amount.

A) True
B) False

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Question 93

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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 weekend ski pass is $55 and that the price reflects the actual unit cost of the trip. Suppose the government imposes a tax of $12 on white water rafting, which raises the price to $67. How much tax revenue is collected from these four participants?

Government spending is projected to rise over the next few decades. Three of the most important reasons are spending on Social Security, Medicare, and healthcare.

If your income is $50,000, your income tax liability is $10,000, and you paid $0.25 in taxes on the last dollar you earned, your

Why do some policymakers support a consumption tax rather than an income tax?

The government raises revenue through taxation to pay for the services it provides.

Table 12-6 The table below provides information on the four households that make up a small economy and how much they would pay in taxes under three types of taxes. ​ ​ -Refer to Table 12-6. In this economy Tax A exhibits

An efficient tax system is one that imposes small deadweight losses and small administrative burdens.

One reason that deadweight losses are so difficult to avoid is that

The largest category of expenditures for state and local governments is __________.

Individual income taxes and social insurance taxes generate the highest tax revenue for the federal government.

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

One reason for the projected increase, over the next several decades, in government spending as a percentage of GDP is the projected increase in the size of the elderly population.

If James earns $80,000 in taxable income and pays $20,000 in taxes, his average tax rate is 25 percent.

Athos, Porthos, and Aramis each like to take fencing lessons. The price of a fencing lesson is $10. Athos values a lesson at $17, Porthos at $15, and Aramis at $12. Suppose that if the government taxes fencing lessons at $3 each, the price will rise to $13. A consequence of the tax is that consumer surplus shrinks by

The revenue that the federal government collects from payroll taxes is mostly earmarked to pay for

Which of the following is an example of a payroll tax?

​Rob's income rises from $50,000 to $60,000 and his income tax increases from $6,000 to $7,500.His marginal tax rate is 12.5%.

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 consumer surplus does Regina receive from consuming her slice of cheesecake?