Question 1

Table 12-2
Consider the tax rates shown in the table below.
  Tax Rate  Income Range 8%0−15,00016%15,000−35,00024%35,000−75,00034%75,000−145,00036%145,000−330,00038% over 330,000\begin{array} { | c | c | } \hline 	ext { Tax Rate } & 	ext { Income Range } \\hline 8 \% & 0 - 15,000 \\hline 16 \% & 15,000 - 35,000 \\hline 24 \% & 35,000 - 75,000 \\hline 34 \% & 75,000 - 145,000 \\hline 36 \% & 145,000 - 330,000 \\hline 38 \% & 	ext { over } 330,000 \\hline\end{array} Tax Rate 8%16%24%34%36%38%​ Income Range 0−15,00015,000−35,00035,000−75,00075,000−145,000145,000−330,000 over 330,000​​ 
-Refer to Table 12-2.If Mateo has taxable income of 165,000 dinar,his tax liability is

Accepted Answer

A)  23,800.
B)  36,000.
C)  45,000.
D)  47,698. E) A) and B)
F) A) and C)

Question 2

Changing the basis of taxation from income earned to amount spent will

Accepted Answer

A)  necessarily reduce tax revenues.
B)  lower effective interest rates on savings.
C)  distort incentives to earn income.
D)  eliminate disincentives to save.E) None of the above
F) B) and C)

Question 3

When the government levies a tax on a corporation,

Accepted Answer

A)  all the burden of the tax ultimately falls on the corporation's owners.
B)  the corporation is more like a tax collector than a taxpayer.
C)  output must increase to compensate for reduced profits.
D)  less deadweight loss will occur since corporations are entities and not people who respond to incentives.E) A) and D)
F) C) and D)

Question 4

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

Question 5

Which tax system requires higher-income taxpayers to have lower tax rates,even though they pay a larger amount of tax when compared to lower-income taxpayers?

Accepted Answer

A)  a proportional tax
B)  a progressive tax
C)  a regressive tax
D)  a lump-sum taxE) None of the above
F) All of the above

Question 6

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 7

With a lump-sum tax,

Accepted Answer

A)  the average tax rate for high income taxpayers will be the same as the average tax rate for low income taxpayers.
B)  the average tax rate for high income taxpayers will be lower than the average tax rate for low income taxpayers.
C)  the average tax rate for high income taxpayers will be higher than the average tax rate for high income taxpayers.
D)  Any of the above could be true under a regressive tax system.E) None of the above
F) A) and C)

Question 8

Economists play an important role in the complex debates over tax policy by

Accepted Answer

A)  identifying efficiency as the most important goal of tax policy.
B)  identifying equity as the most important goal of tax policy.
C)  shedding light on the tradeoff between efficiency and equity in tax policy.
D)  None of the above is correct.E) A) and C)
F) A) and D)

Question 9

The concept that people should pay taxes based on the benefits they receive from government services is called

Accepted Answer

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

Question 10

A budget surplus occurs when government receipts fall short of government spending.

Accepted Answer

A) True 
 B)False

Question 11

Use Table A to complete Table B. $\begin{array}{l}
\text { TABLE A }\
\begin{array}{|l|l|}
\hline \text { On Taxable Income } & \text { The Tax Rate Is } \
\hline \text { Up to } 27,050 & 15.0 \% \
\hline \text { From } 27,051 \text { to } 65,550 & 27.5 \% \
\hline \text { From } 65,551 \text { to } 136,750 & 30.5 \% \
\hline \text { From } 136,751 \text { to } 297,350 & 35.5 \% \
\hline \text { Over } 297,350 & 39.1 \% \
\hline
\end{array}
\end{array}$

$\begin{array}{l}
\text { TABLE B }\
\begin{array}{|l|l|l|l|}
\hline \text { Taxpayer } & \text { Income } & \text { Tax Amount } & \text { Average Tax Rate } \
\hline \text { John } & 52,700 & & \
\hline \text { Todd } & 132,500 & & \
\hline \text { Glen } & 237,000 & & \
\hline \text { Jake } & 315,250 & & \
\hline
\end{array}
\end{array}$

Accepted Answer

$$\begin{array} { | l | l | l | l | } 
\hline \text { Taxpayer } & \text { Income } & \text { Tax Amount } & \text { Average Tax Rate } \
\hline \text { John } & 52,700 & 11,111.25 & 21 \% \
\hline \text { Todd } & 132,500 & 35,064.75 & 26 \% \
\hline \text { Glen } & 237,000 & 71,949.75 & 30 \% \
\hline \text { Jake } & 315,250 & 100,372.90 & 32 \% \
\hline
\end{array}$$

Question 12

Many people consider lump-sum taxes to be unfair to low-income taxpayers.

Accepted Answer

A) True 
 B)False

Question 13

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

Question 14

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 15

Deadweight losses occur in markets in which

Accepted Answer

A)  firms decide to downsize.
B)  the government imposes a tax.
C)  profits fall because of low consumer demand.
D)  equilibrium prices fall.E) None of the above
F) B) and C)

Question 16

Horizontal equity in taxation refers to the idea that people

Accepted Answer

A)  in unequal conditions should be treated differently.
B)  in equal conditions should pay equal taxes.
C)  should be taxed according to their ability to pay.
D)  should receive government benefits according to how much they have been taxed.E) C) and D)
F) B) and D) B

Question 17

The most efficient tax possible is a

Accepted Answer

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

Question 18

In order to construct a more complete picture of the economic burden of government across income classes,economists usually

Accepted Answer

A)  include tax payments as well as transfer payments received.
B)  focus only on the tax payments of wealthy tax payers.
C)  limit their analysis to taxes based on the ability-to-pay principle.
D)  focus their analysis on issues of tax efficiency.E) B) and D)
F) C) and D) A

Question 19

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

Question 20

A family's tax liability is the amount of money it owes in taxes.

Accepted Answer

A) True 
 B)False

Exam 12: The Design of the Tax System

Correct Answer
verified

Changing the basis of taxation from income earned to amount spent will

Correct Answer
verified

When the government levies a tax on a corporation,

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

Which tax system requires higher-income taxpayers to have lower tax rates,even though they pay a larger amount of tax when compared to lower-income taxpayers?

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

With a lump-sum tax,

Correct Answer
verified

Economists play an important role in the complex debates over tax policy by

Correct Answer
verified

The concept that people should pay taxes based on the benefits they receive from government services is called

Correct Answer
verified

A budget surplus occurs when government receipts fall short of government spending.

Correct Answer
verified

Many people consider lump-sum taxes to be unfair to low-income taxpayers.

Correct Answer
verified

Tax incidence refers to

Correct Answer
verified

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

Deadweight losses occur in markets in which

Correct Answer
verified

Horizontal equity in taxation refers to the idea that people

Correct Answer
verified
B

The most efficient tax possible is a

Correct Answer
verified

In order to construct a more complete picture of the economic burden of government across income classes,economists usually

Correct Answer
verified
A

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

Correct Answer
verified

A family's tax liability is the amount of money it owes in taxes.

Correct Answer
verified

Exam 12: The Design of the Tax System

Correct AnswerverifiedShow Answer

Changing the basis of taxation from income earned to amount spent will

Correct AnswerverifiedShow Answer

When the government levies a tax on a corporation,

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

Which tax system requires higher-income taxpayers to have lower tax rates,even though they pay a larger amount of tax when compared to lower-income taxpayers?

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

With a lump-sum tax,

Correct AnswerverifiedShow Answer

Economists play an important role in the complex debates over tax policy by

Correct AnswerverifiedShow Answer

The concept that people should pay taxes based on the benefits they receive from government services is called

Correct AnswerverifiedShow Answer

A budget surplus occurs when government receipts fall short of government spending.

Correct AnswerverifiedShow Answer

Many people consider lump-sum taxes to be unfair to low-income taxpayers.

Correct AnswerverifiedShow Answer

Tax incidence refers to

Correct AnswerverifiedShow Answer

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

Deadweight losses occur in markets in which

Correct AnswerverifiedShow Answer

Horizontal equity in taxation refers to the idea that people

Correct AnswerverifiedB

The most efficient tax possible is a

Correct AnswerverifiedShow Answer

In order to construct a more complete picture of the economic burden of government across income classes,economists usually

Correct AnswerverifiedA

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

Correct AnswerverifiedShow Answer

A family's tax liability is the amount of money it owes in taxes.

Correct AnswerverifiedShow Answer

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B

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A

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