Question 1

Resources devoted to complying with the tax laws are a type of deadweight loss.

Accepted Answer

A) True 
 B)False

Question 2

Table 12-10
The following table shows the marginal tax rates for unmarried individuals for two years.
 
-Refer to Table 12-10.For an individual who earned $35,000 in taxable income in both years,which of the following describes the change in the individual's marginal tax rate between the two years?

Accepted Answer

A)   The marginal tax rate increased from 2009 to 2010.
B)   The marginal tax rate decreased from 2009 to 2010.
C)   The marginal tax rate remained constant from 2009 to 2010.
D)   The change in the marginal tax rate cannot be determined for the two tax schedules shown.E) B) and C)
F) A) and D)

Question 3

Citizens expect the government to provide various goods and services making taxes

Accepted Answer

A)   inefficient.
B)   equitable.
C)   inevitable.
D)   intolerable.E) B) and C)
F) C) and D)

Question 4

The income tax requires that taxpayers pay 10% on the first $40,000 of income and 20 percent on all income over $40,000.Karen paid $6,000 in taxes.What were her marginal and average tax rates?

Accepted Answer

A)   20 percent and 12 percent,respectively
B)   20 percent and 15 percent,respectively
C)   10 percent and 12 percent respectively
D)   10 percent and 15 percent respectivelyE) All of the above
F) C) and D)

Question 5

The tax that generates the most revenue for state and local government is the

Accepted Answer

A)   corporate income tax.
B)   individual income tax.
C)   property tax.
D)   sales tax.E) B) and D)
F) B) and C)

Question 6

Tax evasion is

Accepted Answer

A)   facilitated by legal deductions to taxable income.
B)   the same as tax avoidance.
C)   recommended by the American Accounting Association.
D)   illegal.E) A) and B)
F) A) and C)

Question 7

Table 12-13
The dollar amounts in the last three columns are the taxes owed under the three different tax systems.
 
-Refer to Table 12-13.Which of the three tax systems is proportional?

Accepted Answer

A)   Tax System A
B)   Tax System B
C)   Tax System C
D)   None of the systems are proportional.E) All of the above
F) B) and C)

Question 8

If we want to gauge how much the income tax system distorts incentives,we should use the

Accepted Answer

A)   average tax rate.
B)   ability-to-pay principle.
C)   total tax revenue collected.
D)   marginal tax rate.E) C) and D)
F) All of the above

Question 9

Table 12-8
 
-Refer to Table 12-8.If the government imposes a $3,000 lump-sum tax,the marginal tax rate for Charles would be

Accepted Answer

A)   0 percent.
B)   5 percent.
C)   6.7 percent.
D)   10 percent.E) A) and D)
F) C) and D)

Question 10

Table 12-4
 
-Refer to Table 12-4.Suppose that the government imposes a $2 tax on delights,causing the price to increase from $4.00 to $6.00.Deadweight loss arises because

Accepted Answer

A)   Lucy will pay more tax as a percentage of her value of delights than Ricky.
B)   Ricky must pay the $2.00 tax from his consumer surplus.
C)   Ricky will have to pay a higher price for delights.
D)   Lucy will leave the market.E) B) and D)
F) C) and D)

Question 11

When the government taxes labor earnings we can expect people to

Accepted Answer

A)   work more so they can keep the same standard of living.
B)   work less and enjoy more leisure.
C)   quit their present job and find one that pays better.
D)   stop working altogether and go on welfare.E) A) and B)
F) A) and C)

Question 12

In the United States,the marginal tax rate on individual federal income tax

Accepted Answer

A)   decreases as income increases.
B)   increases as income increases.
C)   is constant at all income levels.
D)   applies only to payroll taxes.E) C) and D)
F) A) and B)

Question 13

Table 12-1
 
-Refer to Table 12-1.If Agatha has $80,000 in taxable income,her average tax rate is

Accepted Answer

A)   18.5%.
B)   20.2%.
C)   21.8%.
D)   25.0%.E) None of the above
F) A) and C)

Question 14

An excise tax is a tax on a specific good,like gasoline.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Table 12-1
 
-Refer to Table 12-1.If Betina has $170,000 in taxable income,her tax liability will be

Accepted Answer

A)   $16,781.
B)   $41,309.
C)   $41,827.
D)   $47,600.E) A) and D)
F) A) and B)

Question 17

Vertical equity states that taxpayers with a greater ability to pay taxes should

Accepted Answer

A)   contribute a decreasing proportion of each increment in income to taxes.
B)   contribute a larger amount than those with a lesser ability to pay.
C)   be less subject to administrative burdens of a tax.
D)   be less subject to tax distortions that lead to deadweight losses.E) A) and D)
F) All of the above

Question 18

Federal government spending on income security rose from 13 percent to 15 percent of total federal spending between 2006 and 2009.The most likely cause of this increase is

Accepted Answer

A)   the recession and consequent increase in the number of unemployed citizens.
B)   the shift in power from Republicans to Democrats.
C)   wasteful spending due to an abundance of resources.
D)   an increase in life expectancies.E) B) and C)
F) All of the above

Question 19

What has been the relationship over the past century between the U.S.economy's income and the percentage of that income that the government collects in revenues?

Accepted Answer

Both have increased over time,but the pe...

Question 20

Suppose Jack values an ice cream sundae at $4.Dianne values an ice cream sundae at $6.The pre-tax price of an ice cream sundae is $2.The government imposes a "fat tax" of $3 on each ice cream sundae,and the price rises to $5.The deadweight loss from the tax is

Accepted Answer

A)   $1.
B)   $2.
C)   $3.
D)   $4.E) A) and B)
F) A) and C)

Exam 12: The Design of the Tax System

Table 12-10 The following table shows the marginal tax rates for unmarried individuals for two years. -Refer to Table 12-10.For an individual who earned $35,000 in taxable income in both years,which of the following describes the change in the individual's marginal tax rate between the two years?

Correct AnswerverifiedShow Answer

Resources devoted to complying with the tax laws are a type of deadweight loss.

Correct AnswerverifiedShow Answer

Tax evasion is

Correct AnswerverifiedShow Answer

Federal government spending on income security rose from 13 percent to 15 percent of total federal spending between 2006 and 2009.The most likely cause of this increase is

Correct AnswerverifiedShow Answer

Table 12-8 -Refer to Table 12-8.If the government imposes a $3,000 lump-sum tax,the marginal tax rate for Charles would be

Correct AnswerverifiedShow Answer

What has been the relationship over the past century between the U.S.economy's income and the percentage of that income that the government collects in revenues?

Correct AnswerverifiedBoth have increased over time,but the pe...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Citizens expect the government to provide various goods and services making taxes

Correct AnswerverifiedShow Answer

Table 12-1 -Refer to Table 12-1.If Betina has $170,000 in taxable income,her tax liability will be

Correct AnswerverifiedShow Answer

If we want to gauge how much the income tax system distorts incentives,we should use the

Correct AnswerverifiedShow Answer

Table 12-4 -Refer to Table 12-4.Suppose that the government imposes a $2 tax on delights,causing the price to increase from $4.00 to $6.00.Deadweight loss arises because

Correct AnswerverifiedShow Answer

Table 12-13 The dollar amounts in the last three columns are the taxes owed under the three different tax systems. -Refer to Table 12-13.Which of the three tax systems is proportional?

Correct AnswerverifiedShow Answer

An excise tax is a tax on a specific good,like gasoline.

Correct AnswerverifiedShow Answer

Table 12-1 -Refer to Table 12-1.If Agatha has $80,000 in taxable income,her average tax rate is

Correct AnswerverifiedShow Answer

The income tax requires that taxpayers pay 10% on the first $40,000 of income and 20 percent on all income over $40,000.Karen paid $6,000 in taxes.What were her marginal and average tax rates?

Correct AnswerverifiedShow Answer

When the government taxes labor earnings we can expect people to

Correct AnswerverifiedShow Answer

Vertical equity states that taxpayers with a greater ability to pay taxes should

Correct AnswerverifiedShow Answer

In the United States,the marginal tax rate on individual federal income tax

Correct AnswerverifiedShow Answer

The tax that generates the most revenue for state and local government is the

Correct AnswerverifiedShow Answer

Suppose Jack values an ice cream sundae at $4.Dianne values an ice cream sundae at $6.The pre-tax price of an ice cream sundae is $2.The government imposes a "fat tax" of $3 on each ice cream sundae,and the price rises to $5.The deadweight loss from the tax is

Correct AnswerverifiedShow Answer

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Both have increased over time,but the pe...
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