Question 1

Table 12-9
 
-Refer to Table 12-9.A lump-sum tax is illustrated by tax

Accepted Answer

A)  a.
B)  B.
C)  C.
D)  D.E) B) and C)
F) All of the above

Question 2

You are trying to design a tax system that will simultaneously achieve both of the following goals: 1) a person with no income would pay no taxes,and 2) a high-income person would pay a higher fraction of income in taxes than a low-income person.Which of the following statements is correct?

Accepted Answer

A)  A lump-sum tax would achieve the second goal but not the first.
B)  A regressive tax would achieve the second goal but not the first.
C)  A progressive tax could achieve both goals.
D)  A proportional tax could achieve the second goal but not the first.E) A) and D)
F) B) and C)

Question 3

The payroll tax differs from the individual income tax because the payroll tax is primarily earmarked to pay for

Accepted Answer

A)  employer-provided pensions.
B)  Social Security and Medicare.
C)  employer-provided health benefits.
D)  job loss and training programs.E) C) and D)
F) A) and B)

Question 4

Which tax system requires all taxpayers to pay the same percentage of their income in taxes?

Accepted Answer

A)  a regressive tax
B)  a proportional tax
C)  a progressive tax
D)  a horizontal equity taxE) A) and D)
F) A) and C)

Question 5

Like spending on Social Security,the share of federal government spending on Medicare has risen substantially over time.This is most likely a result of

Accepted Answer

A)  a rising population of poor in the economy.
B)  the elderly population growing more rapidly than the overall population.
C)  an immigration policy that promotes an influx of migrant farm workers.
D)  All of the above are important factors.E) None of the above
F) B) and C)

Question 6

Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000.What are the tax liability and the marginal tax rate for a person whose income is $50,000?

Accepted Answer

A)  12 percent and 20 percent, respectively
B)  12 percent and $50,000, respectively
C)  $6,000 and 12 percent, respectively
D)  $6,000 and 20 percent, respectivelyE) A) and B)
F) A) and C)

Question 7

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) All of the above
F) C) and D)

Question 8

Vertical 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 pay taxes based on the benefits they receive from the government.
D)  should pay a proportional tax rather than a progressive tax.E) B) and C)
F) A) and D)

Question 9

Which of the following contributes to the projected rise in government spending on Social Security and Medicare as a percentage of GDP?

Accepted Answer

A)  increasing life expectancies
B)  falling fertility rates
C)  increasing health care costs
D)  All of the above are correct.E) All of the above
F) A) and D)

Question 10

Rate these taxes as sources of revenue to the federal government from most to least important.

Accepted Answer

A)  individual income taxes, social insurance taxes, corporate income taxes
B)  social insurance taxes, corporate income taxes, individual income taxes
C)  corporate income taxes, individual income taxes, social insurance taxes
D)  corporate income taxes, social insurance taxes, individual income taxesE) C) and D)
F) B) and C)

Question 11

Which of the following in not a reason that a lump-sum tax imposes a minimal administrative burden on taxpayers?

Accepted Answer

A)  Everyone can easily compute the amount of tax owed.
B)  There is no benefit to hiring an accountant to do your taxes.
C)  Everyone owes the same amount of tax, regardless of earnings.
D)  The government can easily forecast tax revenues.E) None of the above
F) A) and B)

Question 12

The largest source of revenue for the federal government is the

Accepted Answer

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

Question 13

Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000.What are the tax liability and the marginal tax rate for a person whose income is $30,000?

Accepted Answer

A)  both are 10 percent
B)  10 percent and $2,000, respectively
C)  $3,000 and 10 percent, respectively
D)  $3,000 and 20 percent, respectivelyE) A) and B)
F) A) and C)

Question 14

The single largest expenditure by state and local governments is on

Accepted Answer

A)  highways.
B)  police.
C)  public welfare.
D)  education.E) B) and C)
F) A) and D)

Question 15

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.George earns $40,000,and Elaine earns $60,000.Which of the following statements is correct?

Accepted Answer

A)  George's marginal tax rate is 60 percent, and his average tax rate is 50 percent.
B)  George's marginal tax rate is 50 percent, and his average tax rate is 40 percent.
C)  Elaine's marginal tax rate is 50 percent, and her average tax rate is 45 percent.
D)  Elaine's marginal tax rate is 60 percent, and her average tax rate is 40 percent.E) B) and C)
F) A) and D)

Question 16

If a tax system is designed so that individuals with similar incomes pay similar taxes,the system achieves vertical equity.

Accepted Answer

A) True 
 B)False

Question 17

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 18

Scenario 12-1
Suppose Jim and Joan receive great satisfaction from their consumption of cheesecake. Joan would be willing to purchase only one slice and would pay up to $6 for it. Jim would be willing to pay $9 for his first slice, $7 for his second slice, and $3 for his third slice. The current market price is $3 per slice.
-Refer to Scenario 12-1.Assume that the government places a $4 tax on each slice of cheesecake and that the new equilibrium price is $7.What is Joan's consumer surplus from cheesecake?

Accepted Answer

A)  zero
B)  $2
C)  $3
D)  $6E) A) and B)
F) B) and D)

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

Table 12-1
 
-Refer to Table 12-1.If Chris has $100,000 in taxable income,his tax liability will be

Accepted Answer

A)  $8,302.
B)  $22,627.
C)  $28,000.
D)  $29,650.E) B) and D)
F) B) and C)

Exam 12: The Design of the Tax System

You are trying to design a tax system that will simultaneously achieve both of the following goals: 1) a person with no income would pay no taxes,and 2) a high-income person would pay a higher fraction of income in taxes than a low-income person.Which of the following statements is correct?

Correct Answer
verified

Tax evasion is

Correct Answer
verified

Vertical equity in taxation refers to the idea that people

Correct Answer
verified

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

Correct Answer
verified

Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000.What are the tax liability and the marginal tax rate for a person whose income is $30,000?

Correct Answer
verified

Table 12-9 -Refer to Table 12-9.A lump-sum tax is illustrated by tax

Correct Answer
verified

The single largest expenditure by state and local governments is on

Correct Answer
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Which of the following in not a reason that a lump-sum tax imposes a minimal administrative burden on taxpayers?

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.George earns $40,000,and Elaine earns $60,000.Which of the following statements is correct?

Correct Answer
verified

Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000.What are the tax liability and the marginal tax rate for a person whose income is $50,000?

Correct Answer
verified

Table 12-1 -Refer to Table 12-1.If Chris has $100,000 in taxable income,his tax liability will be

Correct Answer
verified

If a tax system is designed so that individuals with similar incomes pay similar taxes,the system achieves vertical equity.

Correct Answer
verified

Which tax system requires all taxpayers to pay the same percentage of their income in taxes?

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 payroll tax differs from the individual income tax because the payroll tax is primarily earmarked to pay for

Correct Answer
verified

Like spending on Social Security,the share of federal government spending on Medicare has risen substantially over time.This is most likely a result of

Correct Answer
verified

Correct Answer
verified

Which of the following contributes to the projected rise in government spending on Social Security and Medicare as a percentage of GDP?

Correct Answer
verified

The largest source of revenue for the federal government is the

Correct Answer
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Rate these taxes as sources of revenue to the federal government from most to least important.

Correct Answer
verified

Exam 12: The Design of the Tax System

You are trying to design a tax system that will simultaneously achieve both of the following goals: 1) a person with no income would pay no taxes,and 2) a high-income person would pay a higher fraction of income in taxes than a low-income person.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Tax evasion is

Correct AnswerverifiedShow Answer

Vertical equity in taxation refers to the idea that people

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000.What are the tax liability and the marginal tax rate for a person whose income is $30,000?

Correct AnswerverifiedShow Answer

Table 12-9 -Refer to Table 12-9.A lump-sum tax is illustrated by tax

Correct AnswerverifiedShow Answer

The single largest expenditure by state and local governments is on

Correct AnswerverifiedShow Answer

Which of the following in not a reason that a lump-sum tax imposes a minimal administrative burden on taxpayers?

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.George earns $40,000,and Elaine earns $60,000.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Suppose the government imposes a tax of 10 percent on the first $40,000 of income and 20 percent on all income above $40,000.What are the tax liability and the marginal tax rate for a person whose income is $50,000?

Correct AnswerverifiedShow Answer

Table 12-1 -Refer to Table 12-1.If Chris has $100,000 in taxable income,his tax liability will be

Correct AnswerverifiedShow Answer

If a tax system is designed so that individuals with similar incomes pay similar taxes,the system achieves vertical equity.

Correct AnswerverifiedShow Answer

Which tax system requires all taxpayers to pay the same percentage of their income in taxes?

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 payroll tax differs from the individual income tax because the payroll tax is primarily earmarked to pay for

Correct AnswerverifiedShow Answer

Like spending on Social Security,the share of federal government spending on Medicare has risen substantially over time.This is most likely a result of

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following contributes to the projected rise in government spending on Social Security and Medicare as a percentage of GDP?

Correct AnswerverifiedShow Answer

The largest source of revenue for the federal government is the

Correct AnswerverifiedShow Answer

Rate these taxes as sources of revenue to the federal government from most to least important.

Correct AnswerverifiedShow Answer

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