Question 1

The U.S. tax burden is

Accepted Answer

A)  about the same as most European countries.
B)  higher than most European countries.
C)  lower than most European countries.
D)  higher than all European countries.E) B) and C)
F) None of the above

Question 2

In 2014, what were the two largest sources of federal tax revenues, and what were the two largest expenses of the federal government?

Accepted Answer

In 2014, individual income taxes and soc...

Question 3

Revenues from social insurance taxes are earmarked to pay for Social Security and Medicare.

Accepted Answer

A) True 
 B)False

Question 4

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)  President Reagan and President Clinton were both concerned about horizontal equity.E) A) and D)
F) None of the above

Question 5

If a tax generates a reduction in surplus that is exactly offset by the tax revenue collected by the government, the tax does not have a deadweight loss.

Accepted Answer

A) True 
 B)False

Question 6

Tax evasion is illegal, but tax avoidance is legal.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

As tax laws become more complex,

Accepted Answer

A)  the administrative burden of taxes will increase.
B)  compliance costs are likely to decrease.
C)  the government will collect more in tax revenue.
D)  the amount of tax revenue lost to tax evasion will decrease.E) A) and B)
F) A) and C)

Question 9

Leonard, Sheldon, Raj, and Penny each like to attend comic-book conventions. The price of a ticket to a convention is $50. Leonard values a ticket at $70, Sheldon at $65, Raj at $60, and Penny at $55. Suppose that if the government taxes tickets at $5 each, the price will rise to $55. A consequence of the tax is that consumer surplus shrinks by

Accepted Answer

A)  $50 and tax revenues increase by $20, so there is a deadweight loss of $30.
B)  $30 and tax revenues increase by $20, so there is a deadweight loss of $10.
C)  $20 and tax revenues increase by $20, so there is no deadweight loss.
D)  $50 and tax revenues increase by $20, so there is no deadweight loss.E) None of the above
F) C) and D)

Question 10

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) All of the above

Question 11

Tax incidence refers to

Accepted Answer

A)  what product or service the tax is levied on.
B)  who bears the tax burden.
C)  what sector of the economy is most affected by the tax.
D)  the dollar value of the tax revenues.E) B) and C)
F) A) and D)

Question 12

The largest category of federal spending is national defense.

Accepted Answer

A) True 
 B)False

Question 13

Table 12-10
 
-Refer to Table 12-10. Which plan illustrates a regressive tax?

Accepted Answer

Plan A illustrates a regressiv...

Question 14

Of the following countries, which country's government collects the largest amount of tax revenue as a percentage of that country's total income?

Accepted Answer

A)  Denmark
B)  United States
C)  Canada
D)  GreeceE) B) and C)
F) None of the above

Question 15

The average American pays a higher percent of his income in taxes today than he would have in the late 18th century.

Accepted Answer

A) True 
 B)False

Question 16

Many economists believe that

Accepted Answer

A)  the corporate income tax satisfies the goal of horizontal equity.
B)  the corporate income tax does not distort the incentives of customers.
C)  the corporate income tax is more efficient than the personal income tax.
D)  workers and customers bear much of the burden of the corporate income tax.E) A) and B)
F) A) and C)

Question 17

If tax revenues from a tax on wine, beer, and hard liquor are used to pay for healthcare expenses related to liver damage, the alcohol tax could be justified using the __________.

Accepted Answer

The answer of If tax revenues from a tax on...

Question 18

When the total surplus lost as a result of a tax is less than the amount of tax revenue collected by the government there is a deadweight loss.

Accepted Answer

A) True 
 B)False

Question 19

The marginal tax rate serves as a measure of the extent to which the tax system discourages people from working.

Accepted Answer

A) True 
 B)False

Question 20

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) All of the above

Exam 12: The Design of the Tax System

When the total surplus lost as a result of a tax is less than the amount of tax revenue collected by the government there is a deadweight loss.

Correct Answer
verified

The marginal tax rate serves as a measure of the extent to which the tax system discourages people from working.

Correct Answer
verified

Tax incidence refers to

Correct Answer
verified

If tax revenues from a tax on wine, beer, and hard liquor are used to pay for healthcare expenses related to liver damage, the alcohol tax could be justified using the __________.

Correct Answer
verified

Correct Answer
verified

The marginal tax rate for a lump-sum tax

Correct Answer
verified

If a tax generates a reduction in surplus that is exactly offset by the tax revenue collected by the government, the tax does not have a deadweight loss.

Correct Answer
verified

Correct Answer
verified

Revenues from social insurance taxes are earmarked to pay for Social Security and Medicare.

Correct Answer
verified

The average American pays a higher percent of his income in taxes today than he would have in the late 18th century.

Correct Answer
verified

The U.S. tax burden is

Correct Answer
verified

Many economists believe that

Correct Answer
verified

Table 12-10 -Refer to Table 12-10. Which plan illustrates a regressive tax?

Correct Answer
verified
Plan A illustrates a regressiv...
View Answer

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

Correct Answer
verified

Of the following countries, which country's government collects the largest amount of tax revenue as a percentage of that country's total income?

Correct Answer
verified

As tax laws become more complex,

Correct Answer
verified

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

Correct Answer
verified

The largest category of federal spending is national defense.

Correct Answer
verified

In 2014, what were the two largest sources of federal tax revenues, and what were the two largest expenses of the federal government?

Correct Answer
verified
In 2014, individual income taxes and soc...
View Answer

Tax evasion is illegal, but tax avoidance is legal.

Correct Answer
verified

Exam 12: The Design of the Tax System

When the total surplus lost as a result of a tax is less than the amount of tax revenue collected by the government there is a deadweight loss.

Correct AnswerverifiedShow Answer

The marginal tax rate serves as a measure of the extent to which the tax system discourages people from working.

Correct AnswerverifiedShow Answer

Tax incidence refers to

Correct AnswerverifiedShow Answer

If tax revenues from a tax on wine, beer, and hard liquor are used to pay for healthcare expenses related to liver damage, the alcohol tax could be justified using the __________.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The marginal tax rate for a lump-sum tax

Correct AnswerverifiedShow Answer

If a tax generates a reduction in surplus that is exactly offset by the tax revenue collected by the government, the tax does not have a deadweight loss.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Revenues from social insurance taxes are earmarked to pay for Social Security and Medicare.

Correct AnswerverifiedShow Answer

The average American pays a higher percent of his income in taxes today than he would have in the late 18th century.

Correct AnswerverifiedShow Answer

The U.S. tax burden is

Correct AnswerverifiedShow Answer

Many economists believe that

Correct AnswerverifiedShow Answer

Table 12-10 -Refer to Table 12-10. Which plan illustrates a regressive tax?

Correct AnswerverifiedPlan A illustrates a regressiv...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Of the following countries, which country's government collects the largest amount of tax revenue as a percentage of that country's total income?

Correct AnswerverifiedShow Answer

As tax laws become more complex,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The largest category of federal spending is national defense.

Correct AnswerverifiedShow Answer

In 2014, what were the two largest sources of federal tax revenues, and what were the two largest expenses of the federal government?

Correct AnswerverifiedIn 2014, individual income taxes and soc...View AnswerShow Answer

Tax evasion is illegal, but tax avoidance is legal.

Correct AnswerverifiedShow Answer

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Plan A illustrates a regressiv...
View Answer

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Correct Answer
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Correct Answer
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In 2014, individual income taxes and soc...
View Answer

Correct Answer
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