Question 1

John faces a progressive tax structure that has the following marginal tax rates: 0 percent on the first $10,000,10 percent on the next $10,000,15 percent on the next $10,000,25 percent on the next $10,000,and 40 percent on all additional income.If John earns $50,000 per year,what would be his tax liability

Accepted Answer

A)  $8000
B)  $9000
C)  $16,000
D)  $25,000E) A) and B)
F) A) and D)

Question 2

If one is trying to gauge the sacrifice made by a taxpayer,what is the most appropriate measure to use

Accepted Answer

A)  the average tax rate
B)  the marginal tax rate
C)  the lump-sum tax rate
D)  the sales tax rateE) B) and D)
F) All of the above

Question 3

If transfer payments are included when evaluating tax burdens,what would happen to the average tax rate of the poorest quintile of taxpayers and the richest quintile of taxpayers

Accepted Answer

A)  The average tax rate will be lower for the poorest quintile of taxpayers but higher for the richest quintile of taxpayers.
B)  The average tax rate will be lower for the poorest quintile of taxpayers and lower for the richest quintile of taxpayers
C)  The average tax rate will be higher for the poorest quintile of taxpayers but lower for the richest quintile of taxpayers
D)  The average tax rate will be higher for the poorest quintile of taxpayers and higher for the richest quintile of taxpayersE) C) and D)
F) A) and C)

Question 4

Most analysts expect one of the largest federal spending categories to continue to grow in importance for many years into the future.What category of spending is this

Accepted Answer

A)  national defence
B)  Old Age Security
C)  income security
D)  farm support programsE) A) and C)
F) A) and D)

Question 5

Which country has the largest tax burden

Accepted Answer

A)  Japan
B)  United States
C)  Germany
D)  the United KingdomE) A) and B)
F) A) and C)

Question 6

How does the government tax corporate income

Accepted Answer

A)  on the basis of profit
B)  on the basis of the amount the firm receives for the goods or services it sells
C)  on the basis of the number of employees
D)  on the basis of domestic revenueE) B) and C)
F) A) and D)

Question 7

What kind of taxes are deadweight losses from taxation associated with

Accepted Answer

A)  taxes that distort the incentives that people face
B)  taxes that target expenditures on survivor's benefits for Old Age Security
C)  taxes that have no efficiency losses
D)  lump-sum taxesE) A) and D)
F) B) and C)

Question 8

What does an efficient tax system do

Accepted Answer

A)  It imposes small deadweight losses and administrative burdens.
B)  It imposes small marginal rates and deadweight losses.
C)  It imposes small administrative burdens and transfers of money.
D)  It imposes small marginal rates and transfers of money.E) B) and D)
F) B) and C)

Question 9

Who generates the deadweight loss associated with a tax on a commodity

Accepted Answer

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

Question 10

Resources devoted to complying with the tax laws are a type of deadweight loss.

Accepted Answer

A) True 
 B)False

Question 11

What is one advantage of a lump-sum tax over other taxes

Accepted Answer

A)  It is more equitable as well as efficient.
B)  It doesn't cause a deadweight loss.
C)  It would place a larger tax burden on the rich.
D)  It would actually encourage saving.E) A) and C)
F) All of the above

Question 12

According to vertical equity,what should taxpayers with a greater ability to pay taxes do

Accepted Answer

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

Question 13

What is the difference between lump-sum taxes and other types of taxes

Accepted Answer

A)  They are most frequently used to tax real property.
B)  They do not distort incentives.
C)  They are the most distortional tax.
D)  They are used in taxing sales.E) B) and D)
F) A) and B)

Question 14

If your income is $40,000 and your income tax liability is $6000,which of the following correctly calculates your tax burden

Accepted Answer

A)  Your marginal tax rate is 5 percent.
B)  Your average tax rate is 5 percent.
C)  Your marginal tax rate is 15 percent.
D)  Your average tax rate is 15 percent.E) B) and C)
F) A) and D)

Question 15

If marginal tax rates increase,what results

Accepted Answer

A)  Average tax rates will increase then decrease
B)  Deadweight loss from taxes will be reduced.
C)  Deadweight loss from taxes will rise.
D)  Average tax rates will decrease then increase.E) C) and D)
F) A) and B)

Question 16

Lump-sum taxes are considered unfair to low-income taxpayers.

Accepted Answer

A) True 
 B)False

Question 17

According to the benefits principle,it is fair for people to pay taxes based on the benefits they receive from the government.

Accepted Answer

A) True 
 B)False

Question 18

The most important taxes for provincial and local governments are income taxes and property taxes.

Accepted Answer

A) True 
 B)False

Question 19

Which statement correctly characterizes high marginal tax rates

Accepted Answer

A)  They distort incentives to work.
B)  They are used to encourage saving behaviour.
C)  They will invariably lead to lower average tax rates.
D)  They are not associated with deadweight losses.E) C) and D)
F) A) and B)

Question 20

Which tax system requires higher-income taxpayers to have lower tax rates,even though they pay a larger amount of tax,than lower-income taxpayers

Accepted Answer

A)  regressive
B)  progressive
C)  proportional
D)  percentageE) None of the above
F) All of the above

Exam 12: The Design of the Tax System

Which country has the largest tax burden

Correct Answer
verified

If your income is $40,000 and your income tax liability is $6000,which of the following correctly calculates your tax burden

Correct Answer
verified

If marginal tax rates increase,what results

Correct Answer
verified

How does the government tax corporate income

Correct Answer
verified

The most important taxes for provincial and local governments are income taxes and property taxes.

Correct Answer
verified

Resources devoted to complying with the tax laws are a type of deadweight loss.

Correct Answer
verified

What is one advantage of a lump-sum tax over other taxes

Correct Answer
verified

Correct Answer
verified

Which tax system requires higher-income taxpayers to have lower tax rates,even though they pay a larger amount of tax,than lower-income taxpayers

Correct Answer
verified

According to vertical equity,what should taxpayers with a greater ability to pay taxes do

Correct Answer
verified

Who generates the deadweight loss associated with a tax on a commodity

Correct Answer
verified

Most analysts expect one of the largest federal spending categories to continue to grow in importance for many years into the future.What category of spending is this

Correct Answer
verified

If transfer payments are included when evaluating tax burdens,what would happen to the average tax rate of the poorest quintile of taxpayers and the richest quintile of taxpayers

Correct Answer
verified

Lump-sum taxes are considered unfair to low-income taxpayers.

Correct Answer
verified

Which statement correctly characterizes high marginal tax rates

Correct Answer
verified

What kind of taxes are deadweight losses from taxation associated with

Correct Answer
verified

If one is trying to gauge the sacrifice made by a taxpayer,what is the most appropriate measure to use

Correct Answer
verified

What does an efficient tax system do

Correct Answer
verified

According to the benefits principle,it is fair for people to pay taxes based on the benefits they receive from the government.

Correct Answer
verified

What is the difference between lump-sum taxes and other types of taxes

Correct Answer
verified

Exam 12: The Design of the Tax System

Which country has the largest tax burden

Correct AnswerverifiedShow Answer

If your income is $40,000 and your income tax liability is $6000,which of the following correctly calculates your tax burden

Correct AnswerverifiedShow Answer

If marginal tax rates increase,what results

Correct AnswerverifiedShow Answer

How does the government tax corporate income

Correct AnswerverifiedShow Answer

The most important taxes for provincial and local governments are income taxes and property taxes.

Correct AnswerverifiedShow Answer

Resources devoted to complying with the tax laws are a type of deadweight loss.

Correct AnswerverifiedShow Answer

What is one advantage of a lump-sum tax over other taxes

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which tax system requires higher-income taxpayers to have lower tax rates,even though they pay a larger amount of tax,than lower-income taxpayers

Correct AnswerverifiedShow Answer

According to vertical equity,what should taxpayers with a greater ability to pay taxes do

Correct AnswerverifiedShow Answer

Who generates the deadweight loss associated with a tax on a commodity

Correct AnswerverifiedShow Answer

Most analysts expect one of the largest federal spending categories to continue to grow in importance for many years into the future.What category of spending is this

Correct AnswerverifiedShow Answer

If transfer payments are included when evaluating tax burdens,what would happen to the average tax rate of the poorest quintile of taxpayers and the richest quintile of taxpayers

Correct AnswerverifiedShow Answer

Lump-sum taxes are considered unfair to low-income taxpayers.

Correct AnswerverifiedShow Answer

Which statement correctly characterizes high marginal tax rates

Correct AnswerverifiedShow Answer

What kind of taxes are deadweight losses from taxation associated with

Correct AnswerverifiedShow Answer

If one is trying to gauge the sacrifice made by a taxpayer,what is the most appropriate measure to use

Correct AnswerverifiedShow Answer

What does an efficient tax system do

Correct AnswerverifiedShow Answer

According to the benefits principle,it is fair for people to pay taxes based on the benefits they receive from the government.

Correct AnswerverifiedShow Answer

What is the difference between lump-sum taxes and other types of taxes

Correct AnswerverifiedShow Answer

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