Question 1

Deadweight losses represent the

Accepted Answer

A)   inefficiency that taxes create.
B)   shift in benefit from producers to consumers.
C)   part of consumer and producer surplus that is now revenue to the government.
D)   increase in revenue to the government.E) A) and B)
F) C) and D)

Question 2

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) B) and D)
F) All of the above

Question 3

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

Accepted Answer

A)   education, health, highways
B)   education, highways, health
C)   highways, health, education
D)   health, education, highways.E) A) and B)
F) A) and C)

Question 4

Table 12-1 
-Refer to Table 12-1. Assume that the price of a weekend ski pass is $45 and that the price reflects the actual unit cost of providing a weekend of skiing. Suppose the government imposes a tax of $12 on skiing, which raises the price of a weekend ski pass to $57. How much tax revenue is collected from these four skiers?

Accepted Answer

A)   $0.
B)   $12.
C)   $36.
D)   $48.E) B) and D)
F) A) and C)

Question 5

Table 12-15 
-Refer to Table 12-15. The tax system is

Accepted Answer

A)   proportional.
B)   regressive.
C)   progressive.
D)   lump sum.E) A) and D)
F) A) and C)

Question 6

Give an example of a tax system where the marginal tax rate would equal the average tax rate.

Accepted Answer

The marginal tax rate would equal the av...

Question 7

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

Accepted Answer

A)   education, health, highways
B)   education, highways, income security
C)   highways, education, public order and safety
D)   public order and safety, highways, healthE) A) and B)
F) A) and D)

Question 8

Suppose New York City passes a local "big gulp" tax that taxes carbonated beverages larger than 20 ounces if they contain sugar or high fructose corn syrup. If the revenue from the "big gulp" tax is earmarked for diabetes research, the "big gulp" tax may be justified

Accepted Answer

A)   on the basis of the ability-to-pay principle.
B)   because it is an example of a lump-sum tax and thus is the most efficient tax.
C)   on the basis of the benefits principle.
D)   because it is an example of a progressive tax and thus is the most equitable tax.E) C) and D)
F) A) and D)

Question 9

Which of the following programs is not included in the federal income security spending?

Accepted Answer

A)   Social Security
B)   welfare
C)   education
D)   unemployment compensationE) A) and B)
F) B) and C)

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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) C) and D)
F) B) and D)

Question 12

If a government sells debt to help meet its expenditures, then the government has a

Accepted Answer

A)   budget surplus. Other things the same, the surplus rises if government expenditures rise.
B)   budget surplus. Other things the same, the surplus rises if government expenditures fall.
C)   budget deficit. Other things the same, the deficit rises if government expenditures rise.
D)   budget deficit. Other things the same the deficit rises if government expenditures fallE) B) and D)
F) B) and C)

Question 13

Tax evasion is illegal, but tax avoidance is legal.

Accepted Answer

A) True 
 B)False

Question 14

Special tax treatment given to specific types of behavior are called

Accepted Answer

A)   tax avoidance.
B)   tax evasion.
C)   tax loopholes.
D)   tax burden.E) A) and B)
F) B) and D)

Question 15

According to the ability-to-pay principle, it is fair for people to pay taxes based on the amount of government services that they receive.

Accepted Answer

A) True 
 B)False

Question 16

Scenario 12-3
Suppose Roger and Regina receive great satisfaction from their consumption of cheesecake. Regina would be willing to purchase only one slice and would pay up to $8 for it. Roger would be willing to pay $11 for his first slice,$9 for his second slice, and $5 for his third slice. The current market price is $5 per slice.
-Refer to Scenario 12-3. Assume that the government places a $4 tax on each slice of cheesecake and that the new equilibrium price is $9. Which of the following statements is correct?

Accepted Answer

A)   Roger will bear the full burden of the deadweight loss.
B)   Regina will bear the full burden of the deadweight loss.
C)   Both Regina and Roger will share the burden of the deadweight loss.
D)   There will be no deadweight loss.E) B) and D)
F) B) and C)

Question 17

Table 12-10 
-Refer to Table 12-10. If Jace has $33,000 in taxable income, his marginal tax rate is

Accepted Answer

A)   10%.
B)   15%.
C)   25%.
D)   28%.E) A) and B)
F) A) and C)

Question 18

The amount of income tax owed by a family is

Accepted Answer

A)   not simply proportional to its total income.
B)   unaffected by deductions.
C)   total income minus tax credits.
D)   a constant fraction of income.E) All of the above
F) B) and D)

Question 19

Like spending on Social Security, the share of federal government spending on Medicare has risen substantially over time. This is most likely a result of

Accepted Answer

A)   a rising population of poor in the economy.
B)   a rising population of the elderly in the economy.
C)   an immigration policy that promotes an influx of migrant farm workers.
D)   All of the above are important factors.E) A) and C)
F) A) and D)

Question 20

The ability-to-pay principle claims that a person should pay taxes according to

Accepted Answer

A)   the level of public education that the person has received throughout his lifetime.
B)   how many government services that person will receive.
C)   how well that person can shoulder the tax burden.
D)   the level of debt that the person has.E) All of the above
F) A) and B)

Exam 12: The Design of the Tax System

Correct Answer
verified

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

Correct Answer
verified

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

Special tax treatment given to specific types of behavior are called

Correct Answer
verified

Table 12-10 -Refer to Table 12-10. If Jace has $33,000 in taxable income, his marginal tax rate is

Correct Answer
verified

Give an example of a tax system where the marginal tax rate would equal the average tax rate.

Correct Answer
verified
The marginal tax rate would equal the av...
View Answer

The ability-to-pay principle claims that a person should pay taxes according to

Correct Answer
verified

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

Correct Answer
verified

If a government sells debt to help meet its expenditures, then the government has a

Correct Answer
verified

Suppose New York City passes a local "big gulp" tax that taxes carbonated beverages larger than 20 ounces if they contain sugar or high fructose corn syrup. If the revenue from the "big gulp" tax is earmarked for diabetes research, the "big gulp" tax may be justified

Correct Answer
verified

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

Correct Answer
verified

Like spending on Social Security, the share of federal government spending on Medicare has risen substantially over time. This is most likely a result of

Correct Answer
verified

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

Correct Answer
verified

Tax evasion is illegal, but tax avoidance is legal.

Correct Answer
verified

According to the ability-to-pay principle, it is fair for people to pay taxes based on the amount of government services that they receive.

Correct Answer
verified

Correct Answer
verified

Which of the following programs is not included in the federal income security spending?

Correct Answer
verified

The amount of income tax owed by a family is

Correct Answer
verified

Table 12-15 -Refer to Table 12-15. The tax system is

Correct Answer
verified

Deadweight losses represent the

Correct Answer
verified

Exam 12: The Design of the Tax System

Correct AnswerverifiedShow Answer

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

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

Special tax treatment given to specific types of behavior are called

Correct AnswerverifiedShow Answer

Table 12-10 -Refer to Table 12-10. If Jace has $33,000 in taxable income, his marginal tax rate is

Correct AnswerverifiedShow Answer

Give an example of a tax system where the marginal tax rate would equal the average tax rate.

Correct AnswerverifiedThe marginal tax rate would equal the av...View AnswerShow Answer

The ability-to-pay principle claims that a person should pay taxes according to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If a government sells debt to help meet its expenditures, then the government has a

Correct AnswerverifiedShow Answer

Suppose New York City passes a local "big gulp" tax that taxes carbonated beverages larger than 20 ounces if they contain sugar or high fructose corn syrup. If the revenue from the "big gulp" tax is earmarked for diabetes research, the "big gulp" tax may be justified

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Like spending on Social Security, the share of federal government spending on Medicare has risen substantially over time. This is most likely a result of

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Tax evasion is illegal, but tax avoidance is legal.

Correct AnswerverifiedShow Answer

According to the ability-to-pay principle, it is fair for people to pay taxes based on the amount of government services that they receive.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following programs is not included in the federal income security spending?

Correct AnswerverifiedShow Answer

The amount of income tax owed by a family is

Correct AnswerverifiedShow Answer

Table 12-15 -Refer to Table 12-15. The tax system is

Correct AnswerverifiedShow Answer

Deadweight losses represent the

Correct AnswerverifiedShow Answer

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The marginal tax rate would equal the av...
View Answer

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