Question 1

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

Accepted Answer

A)   France
B)   United States
C)   Canada
D)   SwedenE) None of the above
F) C) and D)

Question 2

Individual Retirement Accounts and 401(k) plans make the current U.S.tax system

Accepted Answer

A)   less like European tax systems than it otherwise would be.
B)   more like a payroll tax than it otherwise would be.
C)   more like an income tax than it otherwise would be.
D)   more like a consumption tax than it otherwise would be.E) C) and D)
F) None of the above

Question 3

According to long-run projections,under current law,

Accepted Answer

A)   federal government spending as a percentage of GDP will rise gradually but substantially in the next several decades.
B)   federal taxes as a percentage of GDP will rise gradually but substantially in the next several decades.
C)   the federal government's budget deficit will gradually be eliminated in the next several decades.
D)   All of the above are correct.E) None of the above
F) A) and B)

Question 4

Which of the following is an important reason for the projected increase in government spending as a percentage of GDP over the next several decades?

Accepted Answer

A)   the increase in life expectancy resulting from advances in healthcare
B)   an increase in the average number of children per family.
C)   the increase in the number of jobs lost each year to foreign countries as a result of outsourcing
D)   the reduction in the number of high-cost medical proceduresE) A) and D)
F) B) and D)

Question 5

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 6

According to the ability-to-pay principle,it is fair for people to pay taxes based on the amount of government services that they receive.

Accepted Answer

A) True 
 B)False

Question 7

Individual Retirement Accounts and 401(k) plans make the current U.S.tax system

Accepted Answer

A)   more like a consumption tax and so more like the tax system of many European countries.
B)   more like a consumption tax and so less like the tax system of many European countries.
C)   less like a consumption tax and so more like the tax system of many European countries.
D)   less like a consumption tax and so less like the tax system of many European countries.E) A) and B)
F) A) and C)

Question 8

A person's tax liability refers to

Accepted Answer

A)   the percentage of income that a person must pay in taxes.
B)   the amount of tax a person owes to the government.
C)   the amount of tax the government is required to refund to each person.
D)   deductions that can be legally subtracted from a person's income each year.E) A) and B)
F) None of the above

Question 9

If a government simplified its tax system the likeliest result would be

Accepted Answer

A)   a decrease in consumer surplus.
B)   a decrease in producer surplus.
C)   a decrease in deadweight loss.
D)   a decrease in tax revenues.E) B) and D)
F) B) and C)

Question 10

Which of the following is not an advantage of a lump-sum tax in comparison to other types of taxes?

Accepted Answer

A)   It would not cause deadweight loss.
B)   It imposes a minimal administrative burden on taxpayers.
C)   It is more equitable.
D)   It is more efficient.E) A) and C)
F) A) and B)

Question 11

A budget surplus occurs when government receipts exceed government spending.

Accepted Answer

A) True 
 B)False

Question 12

Suppose the government taxes 30 percent of the first $70,000 and 50 percent of all income above $70,000.For a person earning $100,000,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 36 percent.
C)   50 percent, and the average tax rate is 40 percent.
D)   50 percent, and the average tax rate is 36 percent.E) B) and D)
F) All of the above

Question 13

Vertical equity refers to a tax system in which individuals with similar incomes pay similar taxes.

Accepted Answer

A) True 
 B)False

Question 14

Horizontal equity can be difficult to assess because it is difficult to compare the similarity of tax payers.

Accepted Answer

A) True 
 B)False

Question 15

Scenario 12-4. A taxpayer faces the following tax rates on her income:
 
-Refer to Scenario 12-4.The taxpayer faces

Accepted Answer

A)   an average tax rate of 22.5 percent when her income is $30,000.
B)   an average tax rate of 22.0 percent when her income is $50,000.
C)   a marginal tax rate of 10 percent when her income rises from $40,000 to $40,001.
D)   a marginal tax rate of 50 percent when her income rises from $60,000 to $60,001.E) All of the above
F) None of the above

Question 16

The deadweight loss associated with a tax on a commodity is generated by

Accepted Answer

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

Question 17

Scenario 12-1
Skip places a $20 value on a bottle of wine, and Walt places a $17 value on it. The equilibrium price for a bottle of wine is $15.
-Refer to Scenario 12-1.Suppose the government levies a tax of $1 on each bottle of wine,and the equilibrium price of a bottle of wine increases to $16.What is total consumer surplus after the tax is levied?

Accepted Answer

A)   $2
B)   $3
C)   $4
D)   $5E) C) and D)
F) A) and B)

Question 18

Table 12-9
The table below shows the marginal tax rates for an unmarried taxpayer for various levels of taxable income.
 
-Refer to Table 12-9.For this tax schedule,what is the average tax rate for an individual with $49,000 in taxable income?

Accepted Answer

A)   25.8%
B)   27.5%.
C)   40.0%
D)   43.7%E) All of the above
F) B) and C)

Question 19

An advantage of a consumption tax is that it does not distort the incentive to save.

Accepted Answer

A) True 
 B)False

Question 20

According to the benefits principle,it is fair for people to pay taxes based on their ability to shoulder the tax burden.

Accepted Answer

A) True 
 B)False

Exam 12: The Design of the Tax System.

The deadweight loss associated with a tax on a commodity is generated by

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

Correct Answer
verified

Horizontal equity can be difficult to assess because it is difficult to compare the similarity of tax payers.

Correct Answer
verified

Correct Answer
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Which of the following is an important reason for the projected increase in government spending as a percentage of GDP over the next several decades?

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

A budget surplus occurs when government receipts exceed government spending.

Correct Answer
verified

If a government simplified its tax system the likeliest result would be

Correct Answer
verified

Which of the following is not an advantage of a lump-sum tax in comparison to other types of taxes?

Correct Answer
verified

An advantage of a consumption tax is that it does not distort the incentive to save.

Correct Answer
verified

Scenario 12-4. A taxpayer faces the following tax rates on her income: -Refer to Scenario 12-4.The taxpayer faces

Correct Answer
verified

Individual Retirement Accounts and 401(k) plans make the current U.S.tax system

Correct Answer
verified

According to the benefits principle,it is fair for people to pay taxes based on their ability to shoulder the tax burden.

Correct Answer
verified

Table 12-9 The table below shows the marginal tax rates for an unmarried taxpayer for various levels of taxable income. -Refer to Table 12-9.For this tax schedule,what is the average tax rate for an individual with $49,000 in taxable income?

Correct Answer
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A person's tax liability refers to

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 $100,000,the marginal tax rate is

Correct Answer
verified

Vertical equity refers to a tax system in which individuals with similar incomes pay similar taxes.

Correct Answer
verified

Individual Retirement Accounts and 401(k) plans make the current U.S.tax system

Correct Answer
verified

According to the ability-to-pay principle,it is fair for people to pay taxes based on the amount of government services that they receive.

Correct Answer
verified

According to long-run projections,under current law,

Correct Answer
verified

Exam 12: The Design of the Tax System.

The deadweight loss associated with a tax on a commodity is generated by

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Horizontal equity can be difficult to assess because it is difficult to compare the similarity of tax payers.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is an important reason for the projected increase in government spending as a percentage of GDP over the next several decades?

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

A budget surplus occurs when government receipts exceed government spending.

Correct AnswerverifiedShow Answer

If a government simplified its tax system the likeliest result would be

Correct AnswerverifiedShow Answer

Which of the following is not an advantage of a lump-sum tax in comparison to other types of taxes?

Correct AnswerverifiedShow Answer

An advantage of a consumption tax is that it does not distort the incentive to save.

Correct AnswerverifiedShow Answer

Scenario 12-4. A taxpayer faces the following tax rates on her income: -Refer to Scenario 12-4.The taxpayer faces

Correct AnswerverifiedShow Answer

Individual Retirement Accounts and 401(k) plans make the current U.S.tax system

Correct AnswerverifiedShow Answer

According to the benefits principle,it is fair for people to pay taxes based on their ability to shoulder the tax burden.

Correct AnswerverifiedShow Answer

Table 12-9 The table below shows the marginal tax rates for an unmarried taxpayer for various levels of taxable income. -Refer to Table 12-9.For this tax schedule,what is the average tax rate for an individual with $49,000 in taxable income?

Correct AnswerverifiedShow Answer

A person's tax liability refers to

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 $100,000,the marginal tax rate is

Correct AnswerverifiedShow Answer

Vertical equity refers to a tax system in which individuals with similar incomes pay similar taxes.

Correct AnswerverifiedShow Answer

Individual Retirement Accounts and 401(k) plans make the current U.S.tax system

Correct AnswerverifiedShow Answer

According to the ability-to-pay principle,it is fair for people to pay taxes based on the amount of government services that they receive.

Correct AnswerverifiedShow Answer

According to long-run projections,under current law,

Correct AnswerverifiedShow Answer

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