Question 1

The largest category of federal government spending is growing because

Accepted Answer

A)   the U.S. must spend more on national defense due to the war against terror.
B)   the elderly population is increasing due to rising life expectancies.
C)   expenditures on space exploration have increased dramatically.
D)   expenditures on school voucher programs have increased dramatically.E) A) and C)
F) B) and C)

Question 2

A payroll tax is also referred to as a social insurance tax.

Accepted Answer

A) True 
 B)False

Question 3

Scenario 12-3
Suppose Roger and Regina receive great satisfaction from their consumption of cheesecake. Regina would be willing to purchase only one slice and would pay up to $8 for it. Roger would be willing to pay $11 for his first slice,$9 for his second slice, and $5 for his third slice. The current market price is $5 per slice.
-Refer to Scenario 12-3. Assume that the government places a $4 tax on each slice of cheesecake and that the new equilibrium price is $9. How much tax revenue will be generated from sales to Regina and Roger?

Accepted Answer

A)   zero
B)   $4
C)   $8
D)   $12E) B) and D)
F) B) and C)

Question 4

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) None of the above
F) C) and D)

Question 5

If James earns $80,000 in taxable income and pays $20,000 in taxes, his average tax rate is 25 percent.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Which of the following programs is not included in the federal income security spending?

Accepted Answer

A)   Social Security
B)   welfare
C)   education
D)   unemployment compensationE) C) and D)
F) A) and B)

Question 8

In 2011, social insurance taxes represented approximately what percentage of total receipts for the federal government?

Accepted Answer

A)   5%
B)   12%
C)   36%
D)   44%E) None of the above
F) A) and C)

Question 9

Table 12-3
 
-Refer to Table 12-3. What is the average tax rate for a person who makes $60,000?

Accepted Answer

A)   20%
B)   30%
C)   40%
D)   50%E) A) and B)
F) None of the above

Question 10

Nancy paid a tax of $0.50 on the last dollar she earned in 1999. Nancy's marginal tax rate in 1999 was

Accepted Answer

A)   more than 50 percent.
B)   exactly 50 percent.
C)   higher than her average tax rate.
D)   lower than her average tax rate.E) A) and B)
F) None of the above

Question 11

Tax evasion is legal, but tax avoidance is illegal.

Accepted Answer

A) True 
 B)False

Question 12

What has been the relationship over the past century between the U.S. economy's income and the percentage of that income that the government collects in revenues?

Accepted Answer

Both have increased over time, but the p...

Question 13

Table 12-25
 
-Refer to Table 12-25. Do any of the plans achieve vertical equity?

Accepted Answer

Yes. People with hig...

Question 14

The U.S. federal government collects taxes in a number of ways. Rank the following sources of revenue from the largest to the smallest.

Accepted Answer

A)   corporate income taxes, individual income taxes, social insurance taxes
B)   social insurance taxes, individual income taxes, corporate income taxes
C)   individual income taxes, social insurance taxes, corporate income taxes
D)   individual income taxes, corporate income taxes, social insurance taxesE) A) and B)
F) A) and C)

Question 15

Suppose a country imposes a lump-sum income tax of $5,000 on each individual in the country. What is the average 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 average tax rate cannot be determined without knowing the entire tax schedule.E) A) and D)
F) B) and C)

Question 16

In general, Democrats tend to prefer

Accepted Answer

A)   higher marginal tax rates to promote vertical equity, while Republicans tend to prefer lower marginal tax rates to promote incentives to work and save.
B)   lower marginal tax rates to promote vertical equity, while Republicans tend to prefer higher marginal tax rates to promote incentives to work and save.
C)   higher marginal tax rates to promote incentives to work and save, while Republicans tend to prefer lower marginal tax rates to promote vertical equity.
D)   lower marginal tax rates to promote incentives to work and save, while Republicans tend to prefer higher marginal tax rates to promote vertical equity.E) All of the above
F) A) and B)

Question 17

Table 12-3
 
-Refer to Table 12-3. What is the marginal tax rate for a person who makes $60,000?

Accepted Answer

A)   20%
B)   30%
C)   40%
D)   50%E) None of the above
F) A) and B)

Question 18

The administrative burden of complying with tax laws is a cost to the government but not to taxpayers.

Accepted Answer

A) True 
 B)False

Question 19

Athos, Porthos,and Aramis each like to take fencing lessons. The price of a fencing lesson is $11. Athos values a lesson at $16, Porthos at $14, and Aramis at $12. Suppose that if the government taxes fencing lessons at $2 each, the price will rise to $13. A consequence of the tax is that consumer surplus shrinks by

Accepted Answer

A)   $4 and tax revenues increase by $6, so there is a deadweight loss of $2.
B)   $6 and tax revenues increase by $6, so there is no deadweight loss.
C)   $5 and tax revenues increase by $6, so there is no deadweight loss.
D)   $5 and tax revenues increase by $4, so there is a deadweight loss of $1.E) A) and C)
F) B) and D)

Question 20

A budget deficit

Accepted Answer

A)   occurs when government receipts are less than spending.
B)   occurs when government spending is less than receipts.
C)   occurs when government receipts are equal to spending.
D)   is the accumulation of years of government overspending.E) None of the above
F) B) and C)

Exam 12: The Design of the Tax System

Tax evasion is legal, but tax avoidance is illegal.

Correct Answer
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Table 12-3 -Refer to Table 12-3. What is the average tax rate for a person who makes $60,000?

Correct Answer
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A payroll tax is also referred to as a social insurance tax.

Correct Answer
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Table 12-3 -Refer to Table 12-3. What is the marginal tax rate for a person who makes $60,000?

Correct Answer
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Table 12-25 -Refer to Table 12-25. Do any of the plans achieve vertical equity?

Correct Answer
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Yes. People with hig...
View Answer

What has been the relationship over the past century between the U.S. economy's income and the percentage of that income that the government collects in revenues?

Correct Answer
verified
Both have increased over time, but the p...
View Answer

In general, Democrats tend to prefer

Correct Answer
verified

Nancy paid a tax of $0.50 on the last dollar she earned in 1999. Nancy's marginal tax rate in 1999 was

Correct Answer
verified

If James earns $80,000 in taxable income and pays $20,000 in taxes, his average tax rate is 25 percent.

Correct Answer
verified

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

Correct Answer
verified

The largest category of federal government spending is growing because

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

Correct Answer
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A budget deficit

Correct Answer
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Correct Answer
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The administrative burden of complying with tax laws is a cost to the government but not to taxpayers.

Correct Answer
verified

Which of the following programs is not included in the federal income security spending?

Correct Answer
verified

In 2011, social insurance taxes represented approximately what percentage of total receipts for the federal government?

Correct Answer
verified

Suppose a country imposes a lump-sum income tax of $5,000 on each individual in the country. What is the average income tax rate for an individual who earns $40,000 during the year?

Correct Answer
verified

The U.S. federal government collects taxes in a number of ways. Rank the following sources of revenue from the largest to the smallest.

Correct Answer
verified

Correct Answer
verified

Exam 12: The Design of the Tax System

Tax evasion is legal, but tax avoidance is illegal.

Correct AnswerverifiedShow Answer

Table 12-3 -Refer to Table 12-3. What is the average tax rate for a person who makes $60,000?

Correct AnswerverifiedShow Answer

A payroll tax is also referred to as a social insurance tax.

Correct AnswerverifiedShow Answer

Table 12-3 -Refer to Table 12-3. What is the marginal tax rate for a person who makes $60,000?

Correct AnswerverifiedShow Answer

Table 12-25 -Refer to Table 12-25. Do any of the plans achieve vertical equity?

Correct AnswerverifiedYes. People with hig...View AnswerShow Answer

What has been the relationship over the past century between the U.S. economy's income and the percentage of that income that the government collects in revenues?

Correct AnswerverifiedBoth have increased over time, but the p...View AnswerShow Answer

In general, Democrats tend to prefer

Correct AnswerverifiedShow Answer

Nancy paid a tax of $0.50 on the last dollar she earned in 1999. Nancy's marginal tax rate in 1999 was

Correct AnswerverifiedShow Answer

If James earns $80,000 in taxable income and pays $20,000 in taxes, his average tax rate is 25 percent.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The largest category of federal government spending is growing because

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A budget deficit

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The administrative burden of complying with tax laws is a cost to the government but not to taxpayers.

Correct AnswerverifiedShow Answer

Which of the following programs is not included in the federal income security spending?

Correct AnswerverifiedShow Answer

In 2011, social insurance taxes represented approximately what percentage of total receipts for the federal government?

Correct AnswerverifiedShow Answer

Suppose a country imposes a lump-sum income tax of $5,000 on each individual in the country. What is the average income tax rate for an individual who earns $40,000 during the year?

Correct AnswerverifiedShow Answer

The U.S. federal government collects taxes in a number of ways. Rank the following sources of revenue from the largest to the smallest.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
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Yes. People with hig...
View Answer

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Both have increased over time, but the p...
View Answer

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Correct Answer
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