Question 1

Briefly evaluate the advantages and disadvantages of a lump-sum tax.

Accepted Answer

A lump-sum tax is the most efficient tax...

Question 2

The federal taxes owed by a taxpayer depend

Accepted Answer

A)   only upon the marginal tax rate on the taxpayer's first $25,000 of income.
B)   only upon the marginal tax rate on the taxpayer's last $10,000 of income.
C)   upon all the marginal tax rates up to the taxpayer's overall level of income.
D)   upon all the marginal tax rates,including those for income levels that exceed the taxpayer's overall level of income.E) B) and C)
F) B) and D)

Question 3

Horizontal and vertical equity are the two primary measures of efficiency of a tax system.

Accepted Answer

A) True 
 B)False

Question 4

The principle that people should pay taxes based on the benefits they receive from government services is called the

Accepted Answer

A)   pay principle.
B)   tax-benefit principle.
C)   government services principle.
D)   benefits principle.E) None of the above
F) A) and D)

Question 5

An efficient tax system is one that (i) 
Maximizes tax revenues.
(ii) 
Minimizes deadweight losses from taxes.
(iii) 
Minimizes administrative burdens from taxes.
(iv) 
Promotes equity across taxpayers.

Accepted Answer

A)   (i) only
B)   (ii) and (iii) only
C)   (i) , (ii) ,and (iii) only
D)   (i) , (ii) , (iii) ,and (iv) E) A) and B)
F) A) and C)

Question 6

Table 12-1
 
-Refer to Table 12-1.If Damian has $33,000 in taxable income,his marginal tax rate is

Accepted Answer

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

Question 7

Table 12-14
 
-Refer to Table 12-14.A progressive tax is illustrated by tax

Accepted Answer

A)   A.
B)   B.
C)   C.
D)   D.E) A) and D)
F) B) and C)

Question 8

Which of the following statements is correct?

Accepted Answer

A)   Vertical equity is the idea that taxpayers with similar abilities to pay taxes should pay the same amount.
B)   Horizontal equity is the idea that taxes should be levied on a person according to how well that person can shoulder the burden.
C)   A regressive tax would mean that high-income tax payers pay a larger fraction of their income in taxes than would low-income taxpayers.
D)   A proportional tax would mean that high-income and low-income taxpayers pay the same fraction of income in taxes.E) B) and D)
F) A) and C)

Question 9

In many cases,tax loopholes are designed by Congress to

Accepted Answer

A)   give special treatment to specific types of behavior.
B)   reduce the overall administrative burden of the tax system.
C)   raise revenues for special projects.
D)   All of the above are correct.E) A) and D)
F) B) and C)

Question 10

As a share of total spending,state and local government expenditure on education in 2007 was

Accepted Answer

A)   6 percent.
B)   18 percent.
C)   34 percent.
D)   42 percent.E) None of the above
F) A) and C)

Question 11

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

Accepted Answer

A)   a tax on the wages that a firm pays its workers
B)   a "sin" tax on distilled alcohol
C)   a tax on corporate profits
D)   the portion of federal income taxes earmarked to pay for national defenseE) A) and B)
F) B) and D)

Question 12

The deadweight loss associated with a tax on a commodity is generated by

Accepted Answer

A)   the consumers who still choose to consume the commodity but pay a higher price that reflects the tax.
B)   the consumers who choose to not consume the commodity that is taxed.
C)   all citizens who are able to use services provided by government.
D)   the consumers who are unable to avoid paying the tax.E) A) and D)
F) C) and D)

Question 13

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

Question 14

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

Question 15

Specific spending programs that are included under the general category of income security include

Accepted Answer

A)   health programs.
B)   Medicare.
C)   Social Security.
D)   Food Stamps.E) A) and B)
F) A) and C)

Question 16

Table 12-11
The following table presents the total tax liability for an unmarried taxpayer under four different tax schedules for the income levels shown.
 
-Refer to Table 12-11.For an individual with $200,000 in taxable income,which tax schedule has the lowest average marginal tax rate?

Accepted Answer

A)   Tax Schedule A
B)   Tax Schedule B
C)   Tax Schedule C
D)   Tax Schedule DE) A) and C)
F) B) and D)

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

A tax on all forms of income will

Accepted Answer

A)   lower the effective rate of interest on savings.
B)   have no effect on savings.
C)   enhance social welfare because the benefits will outweigh the costs.
D)   enhance the incentives to save.E) A) and D)
F) B) and C)

Question 19

Because taxes distort incentives,they typically result in

Accepted Answer

A)   deadweight losses.
B)   reductions in consumer surplus.
C)   reductions in producer surplus.
D)   All of the above are correct.E) B) and D)
F) A) and C)

Question 20

To fully understand the progressivity of government policies,one should only look at the proportion of total income that individuals pay in taxes each year.

Accepted Answer

A) True 
 B)False

Exam 12: The Design of the Tax System

Because taxes distort incentives,they typically result in

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

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

Correct Answer
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The deadweight loss associated with a tax on a commodity is generated by

Correct Answer
verified

A tax on all forms of income will

Correct Answer
verified

Table 12-1 -Refer to Table 12-1.If Damian has $33,000 in taxable income,his marginal tax rate is

Correct Answer
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Which of the following statements is correct?

Correct Answer
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To fully understand the progressivity of government policies,one should only look at the proportion of total income that individuals pay in taxes each year.

Correct Answer
verified

Table 12-14 -Refer to Table 12-14.A progressive tax is illustrated by tax

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

Specific spending programs that are included under the general category of income security include

Correct Answer
verified

The federal taxes owed by a taxpayer depend

Correct Answer
verified

As a share of total spending,state and local government expenditure on education in 2007 was

Correct Answer
verified

In many cases,tax loopholes are designed by Congress to

Correct Answer
verified

Table 12-11 The following table presents the total tax liability for an unmarried taxpayer under four different tax schedules for the income levels shown. -Refer to Table 12-11.For an individual with $200,000 in taxable income,which tax schedule has the lowest average marginal tax rate?

Correct Answer
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Horizontal and vertical equity are the two primary measures of efficiency of a tax system.

Correct Answer
verified

Briefly evaluate the advantages and disadvantages of a lump-sum tax.

Correct Answer
verified
A lump-sum tax is the most efficient tax...
View Answer

The principle that people should pay taxes based on the benefits they receive from government services is called the

Correct Answer
verified

An efficient tax system is one that (i) Maximizes tax revenues. (ii) Minimizes deadweight losses from taxes. (iii) Minimizes administrative burdens from taxes. (iv) Promotes equity across taxpayers.

Correct Answer
verified

Exam 12: The Design of the Tax System

Because taxes distort incentives,they typically result in

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The deadweight loss associated with a tax on a commodity is generated by

Correct AnswerverifiedShow Answer

A tax on all forms of income will

Correct AnswerverifiedShow Answer

Table 12-1 -Refer to Table 12-1.If Damian has $33,000 in taxable income,his marginal tax rate is

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

To fully understand the progressivity of government policies,one should only look at the proportion of total income that individuals pay in taxes each year.

Correct AnswerverifiedShow Answer

Table 12-14 -Refer to Table 12-14.A progressive tax is illustrated by tax

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

Specific spending programs that are included under the general category of income security include

Correct AnswerverifiedShow Answer

The federal taxes owed by a taxpayer depend

Correct AnswerverifiedShow Answer

As a share of total spending,state and local government expenditure on education in 2007 was

Correct AnswerverifiedShow Answer

In many cases,tax loopholes are designed by Congress to

Correct AnswerverifiedShow Answer

Table 12-11 The following table presents the total tax liability for an unmarried taxpayer under four different tax schedules for the income levels shown. -Refer to Table 12-11.For an individual with $200,000 in taxable income,which tax schedule has the lowest average marginal tax rate?

Correct AnswerverifiedShow Answer

Horizontal and vertical equity are the two primary measures of efficiency of a tax system.

Correct AnswerverifiedShow Answer

Briefly evaluate the advantages and disadvantages of a lump-sum tax.

Correct AnswerverifiedA lump-sum tax is the most efficient tax...View AnswerShow Answer

The principle that people should pay taxes based on the benefits they receive from government services is called the

Correct AnswerverifiedShow Answer

An efficient tax system is one that (i) Maximizes tax revenues. (ii) Minimizes deadweight losses from taxes. (iii) Minimizes administrative burdens from taxes. (iv) Promotes equity across taxpayers.

Correct AnswerverifiedShow Answer

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A lump-sum tax is the most efficient tax...
View Answer

Correct Answer
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Correct Answer
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