Question 1

Which tax system requires higher-income taxpayers to have lower tax rates,even though they pay a larger amount of tax when compared to lower-income taxpayers?

Accepted Answer

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

Question 2

Changing the basis of taxation from income earned to amount spent will

Accepted Answer

A)   necessarily reduce tax revenues.
B)   lower effective interest rates on savings.
C)   distort incentives to earn income.
D)   eliminate disincentives to save.E) A) and D)
F) A) and C)

Question 3

A family's income tax liability is

Accepted Answer

A)   a standard percentage of all income earned.
B)   determined by wage income rather than dividend and interest income.
C)   based on total income.
D)   constant from year to year.E) B) and C)
F) A) and D)

Question 4

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 percentE) A) and C)
F) A) and B)

Question 5

When a state levies a sales tax,the tax

Accepted Answer

A)   is paid only by the state's residents.
B)   occasionally excludes items that are deemed to be necessities.
C)   is commonly levied on labor services.
D)   applies to wholesale purchases but not retail purchases.E) A) and B)
F) All of the above

Question 6

Table 12-4
 
-Refer to Table 12-4.Suppose that the government imposes a $2 tax on delights,causing the price to increase from $4.00 to $6.00.Total consumer surplus

Accepted Answer

A)   falls by less than the tax revenue generated.
B)   falls by more than the tax revenue generated.
C)   falls by the same amount as the tax revenue generated.
D)   will not fall since Jennifer will no longer be in the market.E) A) and C)
F) B) and D)

Question 7

When the government levies a tax on a corporation,

Accepted Answer

A)   all the burden of the tax ultimately falls on the corporation's owners.
B)   the corporation is more like a tax collector than a taxpayer.
C)   output must increase to compensate for reduced profits.
D)   less deadweight loss will occur since corporations are entities and not people who respond to incentives.E) A) and B)
F) A) and C)

Question 8

Rank the following state and local government expenditure categories from largest to smallest.

Accepted Answer

A)   education, public welfare, highways
B)   education, highways, public welfare
C)   highways, education, public welfare
D)   public welfare, education, highwaysE) A) and B)
F) A) and C)

Question 9

Medicare is the

Accepted Answer

A)   government's health plan for the elderly.
B)   government's health plan for the poor.
C)   another name for Social Security.
D)   Both a and c are correct.E) B) and C)
F) A) and B)

Question 10

The U.S.tax burden is

Accepted Answer

A)   about the same as most European countries.
B)   higher than most European countries.
C)   lower than most European countries.
D)   higher than all European countries.E) A) and D)
F) A) and C)

Question 11

For state and local governments,sales taxes and property taxes make up approximately

Accepted Answer

A)   19 percent of all receipts.
B)   22 percent of all receipts.
C)   35 percent of all receipts.
D)   48 percent of all receipts.E) A) and B)
F) B) and C)

Question 12

A payroll tax is also referred to as a social insurance tax.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements is correct?

Accepted Answer

A)   A general sales tax on food is regressive when low-income taxpayers spend a larger proportion of their income on food than high-income taxpayers.
B)   A general sales tax on food is regressive when middle income taxpayers spend a smaller proportion of their income on food than high-income taxpayers.
C)   A general sales tax on food is regressive when high-income taxpayers spend a larger proportion of their income on food than middle income taxpayers.
D)   A general sales tax on food is regressive when high-income taxpayers spend a larger proportion of their income on food than low-income taxpayers.E) B) and D)
F) None of the above

Question 14

With a lump-sum tax,the

Accepted Answer

A)   marginal tax rate is always less than the average tax rate.
B)   average tax rate is always less than the marginal tax rate.
C)   marginal tax rate falls as income rises.
D)   marginal tax rate rises as income rises.E) B) and C)
F) A) and B)

Question 15

Scenario 12-3
Suppose that Bob places a value of $10 on a movie ticket and that Lisa places a value of $7 on a movie ticket. In addition, suppose the price of a movie ticket is $5.
-Refer to Scenario 12-3.What is total consumer surplus for Bob and Lisa?

Accepted Answer

A)   $0
B)   $2
C)   $5
D)   $7E) C) and D)
F) None of the above

Question 16

The deadweight loss of an income tax is determined by the

Accepted Answer

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

Question 17

Table 12-5
 
-Refer to Table 12-5.What is the marginal tax rate for a person who makes $35,000?

Accepted Answer

A)   20%
B)   30%
C)   40%
D)   50%E) None of the above
F) A) and D)

Question 18

Mark,Kerry,Greg,and Carlos each like Chicago Cubs baseball games.The single-game ticket price for an infield box seat is $50.Mark values a ticket at $70,Kerry at $65,Greg at $60,and Carlos at $55.Suppose that if the government taxes tickets at $5 each,the selling price will rise to $55.A consequence of the tax is that

Accepted Answer

A)   consumer surplus shrinks by $50 and tax revenues increase by $20, so there is a deadweight loss of $30.
B)   consumer surplus shrinks by $30 and tax revenues increase by $20, so there is a deadweight loss of $10.
C)   consumer surplus shrinks by $20 and tax revenues increase by $20, so there is no deadweight loss.
D)   consumer surplus shrinks by $50 and tax revenues increase by $20, so there is no deadweight loss.E) C) and D)
F) None of the above

Question 19

In 2009,federal government receipts were approximately

Accepted Answer

A)   $6,800 per person and federal government spending was approximately $11,400 per person, resulting in a budget surplus.
B)   $6,800 per person and federal government spending was approximately $11,400 per person, resulting in a budget deficit.
C)   $11,400 per person and federal government spending was approximately $6,800 per person, resulting in a budget surplus.
D)   $11,400 per person and federal government spending was approximately $6,800 per person, resulting in a budget surplusE) B) and C)
F) B) and D)

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 12: The Design of the Tax System.

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

Correct Answer
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Which of the following statements is correct?

Correct Answer
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Which tax system requires higher-income taxpayers to have lower tax rates,even though they pay a larger amount of tax when compared to lower-income taxpayers?

Correct Answer
verified

When a state levies a sales tax,the tax

Correct Answer
verified

Rank the following state and local government expenditure categories from largest to smallest.

Correct Answer
verified

In 2009,federal government receipts were approximately

Correct Answer
verified

A payroll tax is also referred to as a social insurance tax.

Correct Answer
verified

Scenario 12-3 Suppose that Bob places a value of $10 on a movie ticket and that Lisa places a value of $7 on a movie ticket. In addition, suppose the price of a movie ticket is $5. -Refer to Scenario 12-3.What is total consumer surplus for Bob and Lisa?

Correct Answer
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When the government levies a tax on a corporation,

Correct Answer
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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?

Correct Answer
verified

For state and local governments,sales taxes and property taxes make up approximately

Correct Answer
verified

Table 12-4 -Refer to Table 12-4.Suppose that the government imposes a $2 tax on delights,causing the price to increase from $4.00 to $6.00.Total consumer surplus

Correct Answer
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The U.S.tax burden is

Correct Answer
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Medicare is the

Correct Answer
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With a lump-sum tax,the

Correct Answer
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A family's income tax liability is

Correct Answer
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The deadweight loss of an income tax is determined by the

Correct Answer
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Correct Answer
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Table 12-5 -Refer to Table 12-5.What is the marginal tax rate for a person who makes $35,000?

Correct Answer
verified

Changing the basis of taxation from income earned to amount spent will

Correct Answer
verified

Exam 12: The Design of the Tax System.

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

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Which tax system requires higher-income taxpayers to have lower tax rates,even though they pay a larger amount of tax when compared to lower-income taxpayers?

Correct AnswerverifiedShow Answer

When a state levies a sales tax,the tax

Correct AnswerverifiedShow Answer

Rank the following state and local government expenditure categories from largest to smallest.

Correct AnswerverifiedShow Answer

In 2009,federal government receipts were approximately

Correct AnswerverifiedShow Answer

A payroll tax is also referred to as a social insurance tax.

Correct AnswerverifiedShow Answer

Scenario 12-3 Suppose that Bob places a value of $10 on a movie ticket and that Lisa places a value of $7 on a movie ticket. In addition, suppose the price of a movie ticket is $5. -Refer to Scenario 12-3.What is total consumer surplus for Bob and Lisa?

Correct AnswerverifiedShow Answer

When the government levies a tax on a corporation,

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

For state and local governments,sales taxes and property taxes make up approximately

Correct AnswerverifiedShow Answer

Table 12-4 -Refer to Table 12-4.Suppose that the government imposes a $2 tax on delights,causing the price to increase from $4.00 to $6.00.Total consumer surplus

Correct AnswerverifiedShow Answer

The U.S.tax burden is

Correct AnswerverifiedShow Answer

Medicare is the

Correct AnswerverifiedShow Answer

With a lump-sum tax,the

Correct AnswerverifiedShow Answer

A family's income tax liability is

Correct AnswerverifiedShow Answer

The deadweight loss of an income tax is determined by the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Table 12-5 -Refer to Table 12-5.What is the marginal tax rate for a person who makes $35,000?

Correct AnswerverifiedShow Answer

Changing the basis of taxation from income earned to amount spent will

Correct AnswerverifiedShow Answer

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