Question 1

State and local governments receive the largest portion of their tax revenues from

Accepted Answer

A)   sales taxes and income taxes.
B)   income taxes and property taxes.
C)   payroll taxes and income taxes.
D)   property taxes and sales taxes.E) A) and D)
F) None of the above

Question 2

The largest budgetary expense for the federal government in 2011 was

Accepted Answer

A)   interest on the national debt.
B)   health.
C)   highways.
D)   income security.E) A) and D)
F) A) and C)

Question 3

Table 12-2 
-Refer to Table 12-2. Suppose that the government imposes a $2 tax on delights, causing the price to increase from $4.00 to $6.00. Deadweight loss arises because

Accepted Answer

A)   Lucy will pay more tax as a percentage of her value of delights than Ricky.
B)   Ricky must pay the $2.00 tax from his consumer surplus.
C)   Ricky will have to pay a higher price for delights.
D)   Lucy will leave the market.E) B) and D)
F) A) and D)

Question 4

Scenario 12-5
Senator Filch argues that a tax must be paid by people who benefit from government services. Senator Fudge argues that a tax must be paid in accordance with a person's ability to bear the tax burden. Senator Malfoy argues that people with a greater ability to pay a tax should pay a larger amount. Senator Moody argues that taxpayers with similar abilities to pay should contribute the same amount.
-Refer to Scenario 12-5. Which Senator is advocating taxes based on the benefits principle?

Accepted Answer

A)   Senator Filch
B)   Senator Fudge
C)   Senator Malfoy
D)   Senator MoodyE) A) and B)
F) B) and C)

Question 5

For state and local governments, in 2011, sales taxes and property taxes made up approximately

Accepted Answer

A)   10 percent of all receipts.
B)   22 percent of all receipts.
C)   33 percent of all receipts.
D)   43 percent of all receipts.E) A) and C)
F) None of the above

Question 6

You are trying to design a tax system that will simultaneously achieve both of the following goals: 1)  a person with no income would pay no taxes, and 2)  a high-income person would pay a higher fraction of income in taxes than a low-income person. Which of the following statements is correct?

Accepted Answer

A)   A lump-sum tax would achieve the second goal but not the first.
B)   A regressive tax would achieve the second goal but not the first.
C)   A progressive tax could achieve both goals.
D)   A proportional tax could achieve the second goal but not the first.E) None of the above
F) C) and D)

Question 7

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 a marginal tax rate of

Accepted Answer

A)   20 percent when her income rises from $40,000 to $40,001.
B)   20 percent when her income rises from $30,000 to $30,001.
C)   0 percent when her income rises from $30,000 to $30,001.
D)   10 percent when her income rises from $40,000 to $40,001.E) None of the above
F) A) and C)

Question 8

Of the following countries, which country's government collects the largest amount of tax revenue as a percentage of that country's total income?

Accepted Answer

A)   Denmark
B)   United States
C)   Canada
D)   GreeceE) A) and C)
F) B) and C)

Question 9

Suppose that Christine values a baseball hat at $20, and Mark values one at $18. The pretax price of a baseball hat is $14. The government imposes a $5 tax on baseball hats, which raises the price to $19. What is the deadweight loss from the tax?

Accepted Answer

Prior to the tax, consumer surplus was $...

Question 10

When government receipts exceed total government spending during a fiscal year, the difference is

Accepted Answer

A)   a budget surplus.
B)   a budget deficit.
C)   the national debt.
D)   automatically refunded.E) B) and C)
F) C) and D)

Question 11

In 2009, the lowest quintile of income earners paid about

Accepted Answer

A)   1 percent of income as taxes and paid less than 1 percent of all taxes.
B)   5 percent of income as taxes and paid less than 1 percent of all taxes.
C)   1 percent of income as taxes and paid about 5 percent of all taxes.
D)   5 percent of income as taxes and paid about 5 percent of all taxes.E) None of the above
F) A) and B)

Question 12

Suppose a country imposes a lump-sum income tax of $5,000 on each individual in the country. What is the marginal income tax rate for an individual who earns $40,000 during the year?

Accepted Answer

A)   0%
B)   10%
C)   More than 10%
D)   The marginal tax rate cannot be determined without knowing the entire tax schedule.E) B) and C)
F) C) and D)

Question 13

Corporate profits distributed as dividends are

Accepted Answer

A)   tax free.
B)   taxed once.
C)   taxed twice.
D)   taxed three times.E) All of the above
F) A) and D)

Question 14

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) C) and D)

Question 15

In 2011, which category represented the largest source of receipts for the U.S. federal government?

Accepted Answer

A)   Medicare
B)   Social Security
C)   corporate income taxes
D)   individual income taxesE) B) and C)
F) C) and D)

Question 16

Table 12-9
United States Income Tax Rates for a Single Individual, 2012 and 2013. 
-Refer to Table 12-9. Jake is a single person whose taxable income is $20,000 a year. What is his average tax rate in 2013?

Accepted Answer

A)   10%
B)   15%
C)   12.5%
D)   28%E) B) and C)
F) A) and B)

Question 17

Most economists believe that a corporate income tax affects the stockholders of a corporation but not its employees or customers.

Accepted Answer

A) True 
 B)False

Question 18

A budget surplus occurs when government receipts fall short of government spending.

Accepted Answer

A) True 
 B)False

Question 19

Table 12-4 
-Refer to Table 12-4. What is the marginal tax rate for a person who makes $35,000?

Accepted Answer

A)   25%
B)   30%
C)   40%
D)   60%E) A) and D)
F) C) and D)

Question 20

Under a regressive tax system, the marginal tax rate for high income taxpayers is

Accepted Answer

A)   higher than the marginal tax rate for low income taxpayers.
B)   the same as the marginal tax rate for low income taxpayers.
C)   lower than the marginal tax rate for low income taxpayers.
D)   Any of the above could be true under a regressive tax system.E) A) and B)
F) A) and C)

Exam 12: The Design of the Tax System

Correct Answer
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Most economists believe that a corporate income tax affects the stockholders of a corporation but not its employees or customers.

Correct Answer
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Table 12-9 United States Income Tax Rates for a Single Individual, 2012 and 2013. -Refer to Table 12-9. Jake is a single person whose taxable income is $20,000 a year. What is his average tax rate in 2013?

Correct Answer
verified

Suppose a country imposes a lump-sum income tax of $5,000 on each individual in the country. What is the marginal income tax rate for an individual who earns $40,000 during the year?

Correct Answer
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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 a marginal tax rate of

Correct Answer
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Table 12-4 -Refer to Table 12-4. What is the marginal tax rate for a person who makes $35,000?

Correct Answer
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In 2009, the lowest quintile of income earners paid about

Correct Answer
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A budget surplus occurs when government receipts fall short of government spending.

Correct Answer
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State and local governments receive the largest portion of their tax revenues from

Correct Answer
verified

Suppose that Christine values a baseball hat at $20, and Mark values one at $18. The pretax price of a baseball hat is $14. The government imposes a $5 tax on baseball hats, which raises the price to $19. What is the deadweight loss from the tax?

Correct Answer
verified
Prior to the tax, consumer surplus was $...
View Answer

Of the following countries, which country's government collects the largest amount of tax revenue as a percentage of that country's total income?

Correct Answer
verified

When the government levies a tax on a corporation,

Correct Answer
verified

Corporate profits distributed as dividends are

Correct Answer
verified

For state and local governments, in 2011, sales taxes and property taxes made up approximately

Correct Answer
verified

You are trying to design a tax system that will simultaneously achieve both of the following goals: 1) a person with no income would pay no taxes, and 2) a high-income person would pay a higher fraction of income in taxes than a low-income person. Which of the following statements is correct?

Correct Answer
verified

The largest budgetary expense for the federal government in 2011 was

Correct Answer
verified

Table 12-2 -Refer to Table 12-2. Suppose that the government imposes a $2 tax on delights, causing the price to increase from $4.00 to $6.00. Deadweight loss arises because

Correct Answer
verified

When government receipts exceed total government spending during a fiscal year, the difference is

Correct Answer
verified

Under a regressive tax system, the marginal tax rate for high income taxpayers is

Correct Answer
verified

In 2011, which category represented the largest source of receipts for the U.S. federal government?

Correct Answer
verified

Exam 12: The Design of the Tax System

Correct AnswerverifiedShow Answer

Most economists believe that a corporate income tax affects the stockholders of a corporation but not its employees or customers.

Correct AnswerverifiedShow Answer

Table 12-9 United States Income Tax Rates for a Single Individual, 2012 and 2013. -Refer to Table 12-9. Jake is a single person whose taxable income is $20,000 a year. What is his average tax rate in 2013?

Correct AnswerverifiedShow Answer

Suppose a country imposes a lump-sum income tax of $5,000 on each individual in the country. What is the marginal income tax rate for an individual who earns $40,000 during the year?

Correct AnswerverifiedShow Answer

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 a marginal tax rate of

Correct AnswerverifiedShow Answer

Table 12-4 -Refer to Table 12-4. What is the marginal tax rate for a person who makes $35,000?

Correct AnswerverifiedShow Answer

In 2009, the lowest quintile of income earners paid about

Correct AnswerverifiedShow Answer

A budget surplus occurs when government receipts fall short of government spending.

Correct AnswerverifiedShow Answer

State and local governments receive the largest portion of their tax revenues from

Correct AnswerverifiedShow Answer

Suppose that Christine values a baseball hat at $20, and Mark values one at $18. The pretax price of a baseball hat is $14. The government imposes a $5 tax on baseball hats, which raises the price to $19. What is the deadweight loss from the tax?

Correct AnswerverifiedPrior to the tax, consumer surplus was $...View AnswerShow Answer

Of the following countries, which country's government collects the largest amount of tax revenue as a percentage of that country's total income?

Correct AnswerverifiedShow Answer

When the government levies a tax on a corporation,

Correct AnswerverifiedShow Answer

Corporate profits distributed as dividends are

Correct AnswerverifiedShow Answer

For state and local governments, in 2011, sales taxes and property taxes made up approximately

Correct AnswerverifiedShow Answer

You are trying to design a tax system that will simultaneously achieve both of the following goals: 1) a person with no income would pay no taxes, and 2) a high-income person would pay a higher fraction of income in taxes than a low-income person. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

The largest budgetary expense for the federal government in 2011 was

Correct AnswerverifiedShow Answer

Table 12-2 -Refer to Table 12-2. Suppose that the government imposes a $2 tax on delights, causing the price to increase from $4.00 to $6.00. Deadweight loss arises because

Correct AnswerverifiedShow Answer

When government receipts exceed total government spending during a fiscal year, the difference is

Correct AnswerverifiedShow Answer

Under a regressive tax system, the marginal tax rate for high income taxpayers is

Correct AnswerverifiedShow Answer

In 2011, which category represented the largest source of receipts for the U.S. federal government?

Correct AnswerverifiedShow Answer

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Prior to the tax, consumer surplus was $...
View Answer

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