Question 1

Which of the following describes a situation where tax laws give preferential treatment to specific types of behavior?

Accepted Answer

A)  tax evasion
B)  a political payoff
C)  a tax loophole
D)  compensation for the benefit of societyE) C) and D)
F) B) and D)

Question 2

Table 12-18
United States Income Tax Rates for a Single Individual, 2009 and 2010. 
-Refer to Table 12-18. What type of tax structure did the United States have in 2009 for single individuals?

Accepted Answer

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

Question 3

The benefits principle is used to justify

Accepted Answer

A)  sales taxes.
B)  gasoline taxes.
C)  "sin" taxes on cigarettes and alcoholic beverages.
D)  personal income taxes.E) None of the above
F) A) and C)

Question 4

Scenario 12-2
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 12-2. Suppose the government levies a tax of $3 on a movie ticket and that, as a result, the price of a movie ticket increases to $8. What is total consumer surplus after the tax is imposed?

Accepted Answer

A)  $0
B)  $1
C)  $2
D)  $3E) None of the above
F) A) and D)

Question 5

Scenario 12-1
Ken places a $20 value on a cigar, and Mark places a $17 value on it. The equilibrium price for this brand of cigar is $15.
-Refer to Scenario 12-1. Suppose the government levies a tax of $3 on each cigar, and the equilibrium price of a cigar increases to $18. What is total consumer surplus after the tax is levied?

Accepted Answer

A)  $0
B)  $2
C)  $5
D)  $6E) B) and C)
F) A) and C)

Question 6

Suppose the government taxes 10 percent of the first $20,000 in income, 20 percent of the next $20,000 in income, and 30 percent of all income over $40,000. Calculate the marginal tax rate and the average tax rate for a person who earns $100,000.

Accepted Answer

The marginal tax rate would be 30 percen...

Question 7

Table 12-9
United States Income Tax Rates for a Single Individual, 2012 and 2013. 
-Refer to Table 12-9. Darby is a single person whose taxable income is $320,000 a year. What happened to her average tax rate between 2012 and 2013?

Accepted Answer

A)  It increased.
B)  It decreased.
C)  It did not change.
D)  We do not have enough information to answer this question.E) C) and D)
F) B) and D)

Question 8

Vertical equity states that taxpayers with a greater ability to pay taxes should

Accepted Answer

A)  contribute a decreasing proportion of each increment in income to taxes.
B)  contribute a larger amount than those with a lesser ability to pay.
C)  be less subject to administrative burdens of a tax.
D)  be less subject to tax distortions that lead to deadweight losses.E) B) and D)
F) A) and B)

Question 9

Suppose that Kara values a hot fudge sundae at $6 and Stacia values one at $5. The pretax price of a hot fudge sundae is $3. The government imposes a $1 tax on hot fudge sundaes, which raises the price to $4. What is the deadweight loss from the tax?

Accepted Answer

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

Question 10

Suppose the country of Mankiwland has a new king, King Gregory. For the purpose of efficiency King Gregory's chief economic advisor would encourage him to design his country's tax system to minimize (i) 
Deadweight losses from taxes.
(ii) 
Administrative burdens from taxes.
(iii) 
The tax payments themselves.
(iv) 
Government expenditures to correct for market failures.

Accepted Answer

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

Question 11

Sue earns income of $80,000 per year. Her average tax rate is 40 percent. Sue paid $4,500 in taxes on the first $30,000 she earned. What was the marginal tax rate on the rest of her income?

Accepted Answer

A)  15 percent
B)  32 percent
C)  40 percent
D)  55 percentE) B) and C)
F) A) and D)

Question 12

In which of the following tax systems do taxes increase as income increases?

Accepted Answer

A)  both proportional and progressive
B)  proportional but not progressive
C)  progressive but not proportional
D)  neither proportional nor progressiveE) None of the above
F) B) and C)

Question 13

Table 12-5 
-Refer to Table 12-5. What is the marginal tax rate for a person who makes $120,000?

Accepted Answer

A)  25%
B)  35%
C)  45%
D)  60%E) A) and D)
F) B) and C)

Question 14

Table 12-25 
-Refer to Table 12-25. Which plan represents the best tax?

Accepted Answer

The best tax depends on the criteria. Pl...

Question 15

The resources that a taxpayer devotes to complying with the tax laws are a type of

Accepted Answer

A)  consumption tax.
B)  value-added tax.
C)  deadweight loss.
D)  producer surplus.E) B) and D)
F) B) and C)

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 D)
F) C) and D)

Question 17

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

Question 18

Horizontal equity refers to a tax system in which individuals with higher incomes pay more in taxes than individuals with lower incomes.

Accepted Answer

A) True 
 B)False

Question 19

Income taxes and property taxes generate the highest tax revenue for state and local governments.

Accepted Answer

A) True 
 B)False

Question 20

Table 12-9
United States Income Tax Rates for a Single Individual, 2012 and 2013. 
-Refer to Table 12-9. Ruby Sue is a single person whose taxable income is $100,000 a year. What is her marginal tax rate in 2013?

Accepted Answer

A)  15%
B)  27%
C)  30%
D)  35%E) All of the above
F) C) and D)

Exam 12: The Design of the Tax System

Suppose the government taxes 10 percent of the first $20,000 in income, 20 percent of the next $20,000 in income, and 30 percent of all income over $40,000. Calculate the marginal tax rate and the average tax rate for a person who earns $100,000.

Correct Answer
verified
The marginal tax rate would be 30 percen...
View Answer

Sue earns income of $80,000 per year. Her average tax rate is 40 percent. Sue paid $4,500 in taxes on the first $30,000 she earned. What was the marginal tax rate on the rest of her income?

Correct Answer
verified

The deadweight loss of an income tax is determined by the

Correct Answer
verified

Horizontal equity refers to a tax system in which individuals with higher incomes pay more in taxes than individuals with lower incomes.

Correct Answer
verified

In which of the following tax systems do taxes increase as income increases?

Correct Answer
verified

The resources that a taxpayer devotes to complying with the tax laws are a type of

Correct Answer
verified

Vertical equity states that taxpayers with a greater ability to pay taxes should

Correct Answer
verified

Table 12-25 -Refer to Table 12-25. Which plan represents the best tax?

Correct Answer
verified
The best tax depends on the criteria. Pl...
View Answer

Table 12-18 United States Income Tax Rates for a Single Individual, 2009 and 2010. -Refer to Table 12-18. What type of tax structure did the United States have in 2009 for single individuals?

Correct Answer
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Correct Answer
verified

Which of the following describes a situation where tax laws give preferential treatment to specific types of behavior?

Correct Answer
verified

Table 12-9 United States Income Tax Rates for a Single Individual, 2012 and 2013. -Refer to Table 12-9. Darby is a single person whose taxable income is $320,000 a year. What happened to her average tax rate between 2012 and 2013?

Correct Answer
verified

The benefits principle is used to justify

Correct Answer
verified

Correct Answer
verified

Suppose that Kara values a hot fudge sundae at $6 and Stacia values one at $5. The pretax price of a hot fudge sundae is $3. The government imposes a $1 tax on hot fudge sundaes, which raises the price to $4. What is the deadweight loss from the tax?

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

Table 12-5 -Refer to Table 12-5. What is the marginal tax rate for a person who makes $120,000?

Correct Answer
verified

Table 12-9 United States Income Tax Rates for a Single Individual, 2012 and 2013. -Refer to Table 12-9. Ruby Sue is a single person whose taxable income is $100,000 a year. What is her marginal tax rate in 2013?

Correct Answer
verified

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

Income taxes and property taxes generate the highest tax revenue for state and local governments.

Correct Answer
verified

Exam 12: The Design of the Tax System

Suppose the government taxes 10 percent of the first $20,000 in income, 20 percent of the next $20,000 in income, and 30 percent of all income over $40,000. Calculate the marginal tax rate and the average tax rate for a person who earns $100,000.

Correct AnswerverifiedThe marginal tax rate would be 30 percen...View AnswerShow Answer

Sue earns income of $80,000 per year. Her average tax rate is 40 percent. Sue paid $4,500 in taxes on the first $30,000 she earned. What was the marginal tax rate on the rest of her income?

Correct AnswerverifiedShow Answer

The deadweight loss of an income tax is determined by the

Correct AnswerverifiedShow Answer

Horizontal equity refers to a tax system in which individuals with higher incomes pay more in taxes than individuals with lower incomes.

Correct AnswerverifiedShow Answer

In which of the following tax systems do taxes increase as income increases?

Correct AnswerverifiedShow Answer

The resources that a taxpayer devotes to complying with the tax laws are a type of

Correct AnswerverifiedShow Answer

Vertical equity states that taxpayers with a greater ability to pay taxes should

Correct AnswerverifiedShow Answer

Table 12-25 -Refer to Table 12-25. Which plan represents the best tax?

Correct AnswerverifiedThe best tax depends on the criteria. Pl...View AnswerShow Answer

Table 12-18 United States Income Tax Rates for a Single Individual, 2009 and 2010. -Refer to Table 12-18. What type of tax structure did the United States have in 2009 for single individuals?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following describes a situation where tax laws give preferential treatment to specific types of behavior?

Correct AnswerverifiedShow Answer

Table 12-9 United States Income Tax Rates for a Single Individual, 2012 and 2013. -Refer to Table 12-9. Darby is a single person whose taxable income is $320,000 a year. What happened to her average tax rate between 2012 and 2013?

Correct AnswerverifiedShow Answer

The benefits principle is used to justify

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose that Kara values a hot fudge sundae at $6 and Stacia values one at $5. The pretax price of a hot fudge sundae is $3. The government imposes a $1 tax on hot fudge sundaes, which raises the price to $4. What is the deadweight loss from the tax?

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

Table 12-5 -Refer to Table 12-5. What is the marginal tax rate for a person who makes $120,000?

Correct AnswerverifiedShow Answer

Table 12-9 United States Income Tax Rates for a Single Individual, 2012 and 2013. -Refer to Table 12-9. Ruby Sue is a single person whose taxable income is $100,000 a year. What is her marginal tax rate in 2013?

Correct AnswerverifiedShow Answer

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

Income taxes and property taxes generate the highest tax revenue for state and local governments.

Correct AnswerverifiedShow Answer

Correct Answer
verified
The marginal tax rate would be 30 percen...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified
The best tax depends on the criteria. Pl...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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