Question 1

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

Question 2

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

Question 3

Some colleges charge all students the same fee for access to campus computing services. Suppose that students differ by how many hours of campus computing services they use. For example, some students print all their papers and assignment in the campus computer labs, while others use their own printers in their apartments. The computing services fee is most like a(n)

Accepted Answer

A)  excise tax that conforms to the benefits principle.
B)  excise tax that violates the benefits principle.
C)  lump-sum tax that conforms to the benefits principle.
D)  lump-sum tax that violates the benefits principle.E) B) and D)
F) A) and C)

Question 4

Table 12-9
United States Income Tax Rates for a Single Individual, 2012 and 2013. 
-Refer to Table 12-9. Bill is a single person whose taxable income is $35,000 a year. What is his average tax rate in 2013?

Accepted Answer

A)  15.3%
B)  17.6%
C)  21.3%
D)  24.8%E) A) and B)
F) A) and C)

Question 5

When a tax is justified on the basis that the taxpayers who pay the tax receive specific government services from payment of the tax, the tax

Accepted Answer

A)  is considered horizontally equitable.
B)  burden is minimized.
C)  satisfies the benefits principle.
D)  is considered vertically equitable.E) B) and D)
F) B) and C)

Question 6

Scenario 12-4
A taxpayer faces the following tax rates on her income:
20 percent of the first $40,000 of her income;
30 percent of all her income above $40,000.
-Refer to Scenario 12-4. At what level of income would the taxpayer's marginal tax rate be 30 percent and her average tax rate be 25 percent?

Accepted Answer

A)  $42,000
B)  $57,000
C)  $60,000
D)  $80,000E) B) and C)
F) A) and D)

Question 7

Table 12-25 
-Refer to Table 12-25. Which plan illustrates a proportional tax?

Accepted Answer

Plan B illustrates a proportio...

Question 8

Suppose that the government taxes income in the following fashion: 30 percent of the first $20,000, 50 percent of the next $30,000, and 60 percent of all income over $50,000. Ted earns $40,000, and Robin earns $60,000. Which of the following statements is correct?

Accepted Answer

A)  Ted's marginal tax rate is 60 percent, and his average tax rate is 50 percent.
B)  Ted's marginal tax rate is 50 percent, and his average tax rate is 40 percent.
C)  Robin's marginal tax rate is 50 percent, and her average tax rate is 45 percent.
D)  Robin's marginal tax rate is 60 percent, and her average tax rate is 40 percent.E) B) and C)
F) All of the above

Question 9

If the government imposes a tax of $3,000 on everyone, the tax would be a(n)

Accepted Answer

A)  income tax.
B)  consumption tax.
C)  lump-sum tax.
D)  marginal tax.E) A) and B)
F) A) and C)

Question 10

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 $2 tax on each slice of cheesecake and that the new equilibrium price is $7. What is the deadweight loss of the tax?

Accepted Answer

A)  zero
B)  $3
C)  $6
D)  $8E) A) and B)
F) All of the above

Question 11

Briefly describe the tradeoff between equity and efficiency of tax systems using a few examples.

Accepted Answer

Although most Americans agree that equit...

Question 12

Because taxes distort incentives, they typically result in

Accepted Answer

A)  deadweight losses.
B)  reductions in consumer surplus.
C)  reductions in producer surplus.
D)  All of the above are correct.E) A) and B)
F) A) and C)

Question 13

From 1950 to today, government spending on Social Security, Medicare, and Medicaid as a percentage of GDP has

Accepted Answer

A)  decreased from about ten percent to less than one percent.
B)  increased from less than one percent to about ten percent.
C)  remained constant at less than one percent.
D)  remained constant at about ten percent.E) A) and B)
F) None of the above

Question 14

​Suppose a state has the following individual income tax structure.The first $20,000 that an individual earns is taxed at 5%. The next $30,000 is taxed at 10%. Any income exceeding $50,000 is taxed at 20%.Based on this tax structure, if a person's income is equal to $60,000, his average tax rate is equal to:

Accepted Answer

A)  ​15%
B)  ​10%
C)  ​11.67%
D)  ​20%E) C) and D)
F) B) and C)

Question 15

Table 12-24 
-Refer to Table 12-24. Does the tax system achieve vertical equity?

Accepted Answer

Yes. People with hig...

Question 16

To fully understand the progressivity of government policies, one should only look at the proportion of total income that individuals pay in taxes each year.

Accepted Answer

A) True 
 B)False

Question 17

Scenario 12-1
Ken places a $20 value on a cigar, and Mark places a $17 value on it. The equilibrium price for this brand of cigar is $15.
-Refer to Scenario 12-1. How much total consumer surplus do Ken and Mark get when each purchases one cigar?

Accepted Answer

A)  $1
B)  $2
C)  $5
D)  $7E) A) and B)
F) None of the above

Question 18

The U.S. tax burden is high compared to many European countries..

Accepted Answer

A) True 
 B)False

Question 19

The argument that each person should pay taxes according to how well the individual can shoulder the burden is called

Accepted Answer

A)  the ability-to-pay principle.
B)  the equity principle.
C)  the benefits principle.
D)  regressive.E) B) and D)
F) A) and B)

Question 20

Table 12-1 
-Refer to Table 12-1. Assume that the price of a weekend ski pass is $45 and that the price reflects the actual unit cost of providing a weekend of skiing. Suppose the government imposes a tax of $12 on skiing, which raises the price of a weekend ski pass to $57. What is the value of the surplus that accrues to all four skiers from their weekend trip?

Accepted Answer

A)  $41.
B)  $95.
C)  $144.
D)  $185.E) A) and D)
F) A) and C)

Exam 12: The Design of the Tax System

Briefly describe the tradeoff between equity and efficiency of tax systems using a few examples.

Correct Answer
verified
Although most Americans agree that equit...
View Answer

The U.S. tax burden is high compared to many European countries..

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The argument that each person should pay taxes according to how well the individual can shoulder the burden is called

Correct Answer
verified

Correct Answer
verified

Because taxes distort incentives, they typically result in

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

Correct Answer
verified

Suppose that the government taxes income in the following fashion: 30 percent of the first $20,000, 50 percent of the next $30,000, and 60 percent of all income over $50,000. Ted earns $40,000, and Robin earns $60,000. Which of the following statements is correct?

Correct Answer
verified

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 A exhibits

Correct Answer
verified

Table 12-24 -Refer to Table 12-24. Does the tax system achieve vertical equity?

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

To fully understand the progressivity of government policies, one should only look at the proportion of total income that individuals pay in taxes each year.

Correct Answer
verified

Table 12-25 -Refer to Table 12-25. Which plan illustrates a proportional tax?

Correct Answer
verified
Plan B illustrates a proportio...
View Answer

Scenario 12-1 Ken places a $20 value on a cigar, and Mark places a $17 value on it. The equilibrium price for this brand of cigar is $15. -Refer to Scenario 12-1. How much total consumer surplus do Ken and Mark get when each purchases one cigar?

Correct Answer
verified

When a tax is justified on the basis that the taxpayers who pay the tax receive specific government services from payment of the tax, the tax

Correct Answer
verified

Table 12-9 United States Income Tax Rates for a Single Individual, 2012 and 2013. -Refer to Table 12-9. Bill is a single person whose taxable income is $35,000 a year. What is his average tax rate in 2013?

Correct Answer
verified

From 1950 to today, government spending on Social Security, Medicare, and Medicaid as a percentage of GDP has

Correct Answer
verified

If the government imposes a tax of $3,000 on everyone, the tax would be a(n)

Correct Answer
verified

Exam 12: The Design of the Tax System

Briefly describe the tradeoff between equity and efficiency of tax systems using a few examples.

Correct AnswerverifiedAlthough most Americans agree that equit...View AnswerShow Answer

The U.S. tax burden is high compared to many European countries..

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The argument that each person should pay taxes according to how well the individual can shoulder the burden is called

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Because taxes distort incentives, they typically result in

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

Correct AnswerverifiedShow Answer

Suppose that the government taxes income in the following fashion: 30 percent of the first $20,000, 50 percent of the next $30,000, and 60 percent of all income over $50,000. Ted earns $40,000, and Robin earns $60,000. Which of the following statements is correct?

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 A exhibits

Correct AnswerverifiedShow Answer

Table 12-24 -Refer to Table 12-24. Does the tax system achieve vertical equity?

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

To fully understand the progressivity of government policies, one should only look at the proportion of total income that individuals pay in taxes each year.

Correct AnswerverifiedShow Answer

Table 12-25 -Refer to Table 12-25. Which plan illustrates a proportional tax?

Correct AnswerverifiedPlan B illustrates a proportio...View AnswerShow Answer

Scenario 12-1 Ken places a $20 value on a cigar, and Mark places a $17 value on it. The equilibrium price for this brand of cigar is $15. -Refer to Scenario 12-1. How much total consumer surplus do Ken and Mark get when each purchases one cigar?

Correct AnswerverifiedShow Answer

When a tax is justified on the basis that the taxpayers who pay the tax receive specific government services from payment of the tax, the tax

Correct AnswerverifiedShow Answer

Table 12-9 United States Income Tax Rates for a Single Individual, 2012 and 2013. -Refer to Table 12-9. Bill is a single person whose taxable income is $35,000 a year. What is his average tax rate in 2013?

Correct AnswerverifiedShow Answer

From 1950 to today, government spending on Social Security, Medicare, and Medicaid as a percentage of GDP has

Correct AnswerverifiedShow Answer

If the government imposes a tax of $3,000 on everyone, the tax would be a(n)

Correct AnswerverifiedShow Answer

Correct Answer
verified
Although most Americans agree that equit...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

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

Correct Answer
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Correct Answer
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Plan B illustrates a proportio...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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