Question 1

James earns income of $90,000 per year.His average tax rate is 40%.James paid $5,500 in taxes on the first $40,000 he earned.What was the marginal tax rate on the rest of his income?

Accepted Answer

A)   6.1 percent
B)   44 percent
C)   55 percent
D)   61 percentE) None of the above
F) A) and C)

Question 2

Which of the following statements about a value added tax is not correct?

Accepted Answer

A)   A value added tax is essentially the same as a retail sales tax.
B)   A value added tax is a progressive tax.
C)   A value added tax would provide a source of revenue to fund a large government.
D)   A value added tax is a tax on consumption rather than income.E) All of the above
F) C) and D)

Question 3

Table 12-15
 
-Refer to Table 12-15.In this tax system which of the following is possible?

Accepted Answer

A)   vertical and horizontal equity
B)   vertical but not horizontal equity
C)   horizontal but not vertical equity
D)   neither horizontal nor vertical equityE) A) and B)
F) A) and C)

Question 4

Table 12-10
The following table shows the marginal tax rates for unmarried individuals for two years.
 
-Refer to Table 12-10.For an individual who earned $35,000 in taxable income in both years,which of the following describes the change in the individual's average tax rate between the two years?

Accepted Answer

A)   The average tax rate increased from 2009 to 2010.
B)   The average tax rate decreased from 2009 to 2010.
C)   The average tax rate remained constant from 2009 to 2010.
D)   The change in the average tax rate cannot be determined for the two tax schedules shown.E) A) and B)
F) All of the above

Question 5

A lump-sum tax would take different amounts from the poor and the rich.

Accepted Answer

A) True 
 B)False

Question 6

Table 12-2
Consider the tax rates shown in the table below.
 
-Refer to Table 12-2.If Noah has taxable income of $43,000,his tax liability is

Accepted Answer

A)   $1,920.
B)   $4,400.
C)   $6,320.
D)   $8,175.E) A) and D)
F) All of the above

Question 7

When compared to nonpoor countries,poor countries usually have

Accepted Answer

A)   very high tax burdens.
B)   similar tax burdens.
C)   relatively low tax burdens.
D)   no taxes because of high poverty levels.E) B) and C)
F) A) and B)

Question 8

One reason that deadweight losses are so difficult to avoid is that

Accepted Answer

A)   taxes affect the decisions that people make.
B)   income taxes are not paid by everyone.
C)   consumption taxes must be universally applied to all commodities.
D)   the administrative burden is hard to calculate.E) C) and D)
F) A) and B)

Question 9

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 D)
F) A) and B)

Question 10

"A $1,000 tax paid by a poor person may be a larger sacrifice than a $10,000 tax paid by a wealthy person" is an argument in favor of

Accepted Answer

A)   the horizontal equity principle.
B)   the benefits principle.
C)   a regressive tax argument.
D)   the ability-to-pay principle.E) B) and C)
F) A) and C)

Question 11

The U.S.federal government spends its revenues in a number of ways.Rank the following spending categories from largest to smallest.

Accepted Answer

A)   Social Security,national defense,income security,net interest
B)   health care,national defense,net interest,income security
C)   Social Security,health care,national defense,Medicare
D)   national defense,Social Security,net interest,income securityE) B) and D)
F) A) and B)

Question 12

Which of the following statements is correct?

Accepted Answer

A)   National defense and health care are the two largest spending categories for the federal government.
B)   Welfare programs and highways are the two largest spending categories for state and local governments.
C)   Sales taxes and property taxes are the two most important revenue sources for state and local governments.
D)   Corporate income taxes are the largest source of revenue for the federal government.E) None of the above
F) A) and D)

Question 13

Zoe,Chloe,and Brody each like to read novels.The current mystery thriller costs $10.Zoe values it at $15,Chloe at $13,and Brody at $11.Suppose that if the government taxes books at 50 cents each the selling price rises to $10.50.A consequence of the tax is that

Accepted Answer

A)   consumer surplus shrinks by $1.50 and tax revenues increase by $1.50,so there is no deadweight loss.
B)   consumer surplus shrinks by $9.00 and tax revenues increase by $1.50,so there is a deadweight loss of $7.50.
C)   consumer surplus shrinks by $7.50 and tax revenues increase by $7.50,so there is no deadweight loss.
D)   consumer surplus shrinks by $7.50 and tax revenues increase by $1.50,so there is a deadweight loss of $6.E) None of the above
F) All of the above

Question 14

A budget surplus occurs when government receipts exceed government spending.

Accepted Answer

A) True 
 B)False

Question 15

Briefly describe some of the demographic trends that are predicted to increase the government's budget deficit.

Accepted Answer

Social Security and Medicare payments wi...

Question 16

Table 12-16
The table below provides information on the 4 households that make up a small economy and how much they would pay in taxes under 3 types of taxes.
 
-Refer to Table 12-16.In this economy Tax B exhibits

Accepted Answer

A)   horizontal and vertical equity.
B)   horizontal equity but not vertical equity.
C)   vertical equity but not horizontal equity.
D)   neither horizontal nor vertical equity.E) None of the above
F) All of the above

Question 17

Taxes on specific goods such as cigarettes,gasoline,and alcoholic beverages are called

Accepted Answer

A)   sales taxes.
B)   excise taxes.
C)   social insurance taxes.
D)   consumption taxes.E) B) and C)
F) A) and B)

Question 18

Which of the following is not a cost of taxes to taxpayers?

Accepted Answer

A)   the tax payment itself
B)   deadweight losses
C)   administrative burdens
D)   goods and services provided by the governmentE) A) and B)
F) B) and C)

Question 19

Table 12-1
 
-Refer to Table 12-1.The tax system is

Accepted Answer

A)   proportional.
B)   regressive.
C)   progressive.
D)   lump sum.E) None of the above
F) B) and C)

Question 20

Table 12-2
Consider the tax rates shown in the table below.
 
-Refer to Table 12-2.If Noah has taxable income of $43,000,his marginal tax rate is

Accepted Answer

A)   8%.
B)   16%.
C)   24%.
D)   34%.E) A) and D)
F) A) and C)

Exam 12: The Design of the Tax System

Table 12-15 -Refer to Table 12-15.In this tax system which of the following is possible?

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Which of the following statements about a value added tax is not correct?

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Table 12-1 -Refer to Table 12-1.The tax system is

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Taxes on specific goods such as cigarettes,gasoline,and alcoholic beverages are called

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Zoe,Chloe,and Brody each like to read novels.The current mystery thriller costs $10.Zoe values it at $15,Chloe at $13,and Brody at $11.Suppose that if the government taxes books at 50 cents each the selling price rises to $10.50.A consequence of the tax is that

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The U.S.federal government spends its revenues in a number of ways.Rank the following spending categories from largest to smallest.

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A lump-sum tax would take different amounts from the poor and the rich.

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Which of the following is not a cost of taxes to taxpayers?

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A budget surplus occurs when government receipts exceed government spending.

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Table 12-2 Consider the tax rates shown in the table below. -Refer to Table 12-2.If Noah has taxable income of $43,000,his tax liability is

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"A $1,000 tax paid by a poor person may be a larger sacrifice than a $10,000 tax paid by a wealthy person" is an argument in favor of

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Table 12-10 The following table shows the marginal tax rates for unmarried individuals for two years. -Refer to Table 12-10.For an individual who earned $35,000 in taxable income in both years,which of the following describes the change in the individual's average tax rate between the two years?

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James earns income of $90,000 per year.His average tax rate is 40%.James paid $5,500 in taxes on the first $40,000 he earned.What was the marginal tax rate on the rest of his income?

Correct AnswerverifiedShow Answer

Briefly describe some of the demographic trends that are predicted to increase the government's budget deficit.

Correct AnswerverifiedSocial Security and Medicare payments wi...View AnswerShow Answer

Which of the following statements is correct?

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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?

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One reason that deadweight losses are so difficult to avoid is that

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When compared to nonpoor countries,poor countries usually have

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Table 12-2 Consider the tax rates shown in the table below. -Refer to Table 12-2.If Noah has taxable income of $43,000,his marginal tax rate is

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Table 12-16 The table below provides information on the 4 households that make up a small economy and how much they would pay in taxes under 3 types of taxes. -Refer to Table 12-16.In this economy Tax B exhibits

Correct AnswerverifiedShow Answer

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Social Security and Medicare payments wi...
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