Question 1

A budget deficit occurs when government receipts exceed government spending.

Accepted Answer

A) True 
 B)False

Question 2

The marginal tax rate for a lump-sum tax

Accepted Answer

A)  is always positive.
B)  is always negative.
C)  is zero.
D)  can take on any value but must be greater than the average tax rate.E) B) and D)
F) A) and C)

Question 3

Table 12-11 
-Refer to Table 12-11. If Bud has taxable income of $78,000, his tax liability is

Accepted Answer

A)  $7,800.
B)  $9,900.
C)  $10,200.
D)  $15,020.E) B) and C)
F) A) and D)

Question 4

When the marginal tax rate equals the average tax rate, the tax is

Accepted Answer

A)  proportional.
B)  progressive.
C)  regressive.
D)  egalitarian.E) A) and B)
F) A) and C)

Question 5

What are the two largest categories of federal tax receipts?

Accepted Answer

individual income taxes (43 pe...

Question 6

Sue earns income of $80,000 per year. Her average tax rate is 50 percent. Sue paid $5,000 in taxes on the first $30,000 she earned. What was the marginal tax rate on the first $30,000 she earned, and what was the marginal tax rate on the remaining $50,000?

Accepted Answer

A)  6.25 percent and 50.00 percent, respectively
B)  10.00 percent and 70.00 percent, respectively
C)  16.67 percent and 60.00 percent, respectively
D)  16.67 percent and 70.00 percent, respectivelyE) A) and B)
F) C) and D)

Question 7

Which of the following statements is correct?

Accepted Answer

A)  Both tax avoidance and tax evasion are legal.
B)  Both tax avoidance and tax evasion are illegal.
C)  Tax avoidance is legal, whereas tax evasion is illegal.
D)  Tax avoidance is illegal, whereas tax evasion is legal.E) C) and D)
F) All of the above

Question 8

In the 1980s, President Ronald Reagan argued that high tax rates distorted economic incentives to work and save. In the 1990s, President Bill Clinton argued that the rich were not paying their fair share of taxes. Which of the following statements best summarizes the economic theories behind the differing philosophies?

Accepted Answer

A)  President Reagan was concerned about vertical equity, whereas President Clinton was concerned about horizontal equity.
B)  President Reagan was concerned about average tax rates, whereas President Clinton was concerned about horizontal equity.
C)  President Reagan was concerned about marginal tax rates, whereas President Clinton was concerned about vertical equity.
D)  None of the above is correct.E) A) and B)
F) A) and C)

Question 9

Suppose the government taxes 30 percent of the first $70,000 and 50 percent of all income above $70,000. For a person earning $200,000, the marginal tax rate is

Accepted Answer

A)  30 percent, and the average tax rate is 50 percent.
B)  30 percent, and the average tax rate is 43 percent.
C)  50 percent, and the average tax rate is 40 percent.
D)  50 percent, and the average tax rate is 43 percent.E) A) and B)
F) All of the above

Question 10

As government debt increases,

Accepted Answer

A)  Congress will reduce spending by an equal proportion.
B)  the government must spend more revenue on interest payments.
C)  a trade-off with government deficits is inevitable.
D)  tax rates must rise to cover the deficit.E) B) and D)
F) A) and D)

Question 11

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

Question 12

Suppose Tyler values a basketball at $20. Jacqui values a basketball at $25. The pre-tax price of a basketball $10. The government imposes a tax of $5 on each basketball, and the price rises to $15. The deadweight loss from the tax is

Accepted Answer

A)  $25.
B)  $15.
C)  $10.
D)  $0.E) A) and C)
F) None of the above

Question 13

If your income is $40,000 and your income tax liability is $5,000, your marginal tax rate is

Accepted Answer

A)  8 percent.
B)  12.5 percent.
C)  20 percent.
D)  unknown. We do not have enough information to answer this question.E) A) and B)
F) A) and C)

Question 14

Table 12-13
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 12-13. In this economy Tax C 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) A) and C)
F) B) and C)

Question 15

Which tax system requires all taxpayers to pay the same percentage of their income in taxes?

Accepted Answer

A)  a regressive tax
B)  a proportional tax
C)  a progressive tax
D)  a horizontal equity taxE) C) and D)
F) A) and D)

Question 16

When taxes are imposed on a commodity,

Accepted Answer

A)  there is never a deadweight loss.
B)  some consumers alter their consumption by not purchasing the taxed commodity.
C)  tax revenue will rise by the amount of the tax multiplied by the before-tax level of consumption.
D)  the taxes do not distort incentives.E) A) and D)
F) None of the above

Question 17

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 18

Corporate income taxes are based on the amount of revenue a corporation earns.

Accepted Answer

A) True 
 B)False

Question 19

Table 12-10 
-Refer to Table 12-10. If Si has $100,000 in taxable income, his marginal tax rate is

Accepted Answer

A)  25%.
B)  28%.
C)  33%.
D)  35%.E) C) and D)
F) A) and C)

Question 20

Table 12-9
United States Income Tax Rates for a Single Individual, 2012 and 2013. 
-Refer to Table 12-9. Jake is a single person whose taxable income is $20,000 a year. What happened to his 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) All of the above
F) A) and C)

Exam 12: The Design of the Tax System

When the marginal tax rate equals the average tax rate, the tax is

Correct Answer
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As government debt increases,

Correct Answer
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What are the two largest categories of federal tax receipts?

Correct Answer
verified
individual income taxes (43 pe...
View Answer

Table 12-11 -Refer to Table 12-11. If Bud has taxable income of $78,000, his tax liability is

Correct Answer
verified

If your income is $40,000 and your income tax liability is $5,000, your marginal tax rate is

Correct Answer
verified

Sue earns income of $80,000 per year. Her average tax rate is 50 percent. Sue paid $5,000 in taxes on the first $30,000 she earned. What was the marginal tax rate on the first $30,000 she earned, and what was the marginal tax rate on the remaining $50,000?

Correct Answer
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Correct Answer
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Table 12-13 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 12-13. In this economy Tax C exhibits

Correct Answer
verified

Table 12-10 -Refer to Table 12-10. If Si has $100,000 in taxable income, his marginal tax rate is

Correct Answer
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Which of the following statements is correct?

Correct Answer
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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 12-9 United States Income Tax Rates for a Single Individual, 2012 and 2013. -Refer to Table 12-9. Jake is a single person whose taxable income is $20,000 a year. What happened to his average tax rate between 2012 and 2013?

Correct Answer
verified

The marginal tax rate for a lump-sum tax

Correct Answer
verified

A budget deficit occurs when government receipts exceed government spending.

Correct Answer
verified

The largest category of federal government spending is growing because

Correct Answer
verified

When taxes are imposed on a commodity,

Correct Answer
verified

Suppose Tyler values a basketball at $20. Jacqui values a basketball at $25. The pre-tax price of a basketball $10. The government imposes a tax of $5 on each basketball, and the price rises to $15. The deadweight loss from the tax is

Correct Answer
verified

Suppose the government taxes 30 percent of the first $70,000 and 50 percent of all income above $70,000. For a person earning $200,000, the marginal tax rate is

Correct Answer
verified

Corporate income taxes are based on the amount of revenue a corporation earns.

Correct Answer
verified

Which tax system requires all taxpayers to pay the same percentage of their income in taxes?

Correct Answer
verified

Exam 12: The Design of the Tax System

When the marginal tax rate equals the average tax rate, the tax is

Correct AnswerverifiedShow Answer

As government debt increases,

Correct AnswerverifiedShow Answer

What are the two largest categories of federal tax receipts?

Correct Answerverifiedindividual income taxes (43 pe...View AnswerShow Answer

Table 12-11 -Refer to Table 12-11. If Bud has taxable income of $78,000, his tax liability is

Correct AnswerverifiedShow Answer

If your income is $40,000 and your income tax liability is $5,000, your marginal tax rate is

Correct AnswerverifiedShow Answer

Sue earns income of $80,000 per year. Her average tax rate is 50 percent. Sue paid $5,000 in taxes on the first $30,000 she earned. What was the marginal tax rate on the first $30,000 she earned, and what was the marginal tax rate on the remaining $50,000?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Table 12-13 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 12-13. In this economy Tax C exhibits

Correct AnswerverifiedShow Answer

Table 12-10 -Refer to Table 12-10. If Si has $100,000 in taxable income, his marginal tax rate is

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

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 12-9 United States Income Tax Rates for a Single Individual, 2012 and 2013. -Refer to Table 12-9. Jake is a single person whose taxable income is $20,000 a year. What happened to his average tax rate between 2012 and 2013?

Correct AnswerverifiedShow Answer

The marginal tax rate for a lump-sum tax

Correct AnswerverifiedShow Answer

A budget deficit occurs when government receipts exceed government spending.

Correct AnswerverifiedShow Answer

The largest category of federal government spending is growing because

Correct AnswerverifiedShow Answer

When taxes are imposed on a commodity,

Correct AnswerverifiedShow Answer

Suppose Tyler values a basketball at $20. Jacqui values a basketball at $25. The pre-tax price of a basketball $10. The government imposes a tax of $5 on each basketball, and the price rises to $15. The deadweight loss from the tax is

Correct AnswerverifiedShow Answer

Suppose the government taxes 30 percent of the first $70,000 and 50 percent of all income above $70,000. For a person earning $200,000, the marginal tax rate is

Correct AnswerverifiedShow Answer

Corporate income taxes are based on the amount of revenue a corporation earns.

Correct AnswerverifiedShow Answer

Which tax system requires all taxpayers to pay the same percentage of their income in taxes?

Correct AnswerverifiedShow Answer

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individual income taxes (43 pe...
View Answer

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

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