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Exam 12: The Design of the Tax System

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Question 131

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Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000. What is the average tax rate when income is $50,000?

A) 20 percent
B) 15 percent
C) 12 percent
D) 10 percent

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

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Question 132

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Suppose Tyler values a basketball at $20. Jacqui values a basketball at $16. The pre-tax price of a basketball $15. The government imposes a tax of $2 on each basketball, and the price rises to $17. The deadweight loss from the tax is

A) $1.
B) $2.
C) $3.
D) $6.

E) None of the above
F) B) and C)

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Question 133

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Table 12-8 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 12-8. For an individual with $200,000 in taxable income, which tax schedule has the highest average tax rate?

The idea that people in equal conditions should pay equal taxes is referred to as

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. How much tax revenue is collected?

Table 12-14 -Refer to Table 12-14. The tax system is

European countries tend to rely on which type of tax more so than the United States does?

Suppose that the government taxes income in the following fashion: 20 percent of the first $50,000, 40 percent of the next $50,000, and 60 percent of all income over $100,000. Marshall earns $200,000, and Lily earns $600,000. Which of the following statements is correct?

Social Security is an income support program, designed primarily to maintain the living standards of the poor.

One advantage of a lump-sum tax over other taxes is that it

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

Table 12-20 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 12-20. Which tax schedules are proportional?

Deadweight losses arise because a tax causes some individuals to change their behavior.

Table 12-11 -Refer to Table 12-11. If Al has taxable income of $165,000, his marginal tax rate is

Table 12-23 The dollar amounts in the last three columns are the taxes owed under the three different tax systems. -Refer to Table 12-23. Which of the three tax systems is proportional?

The income tax requires that taxpayers pay 10percent on the first $40,000 of income and 20 percent on all income over $40,000. Karen paid $6,000 in taxes. What were her marginal and average tax rates?

Table 12-23 The dollar amounts in the last three columns are the taxes owed under the three different tax systems. -Refer to Table 12-23. Which of the three tax systems is progressive?

"Income security" programs comprised 33 percent of the federal government's spending in 2011. Give a few examples of the programs included in this category.

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 2012?

Individual income taxes generate roughly 25% of the tax revenue for the federal government.