Question 1

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

Question 2

Table 12-23
The dollar amounts in the last three columns are the taxes owed under the three different tax systems.
 
-Refer to Table 12-23. Which of the three tax systems is regressive?

Accepted Answer

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

Question 3

What are the characteristic(s) of an efficient tax system?

Accepted Answer

One tax system is more efficie...

Question 4

Pat calculates that for every extra dollar she earns, she owes the government 40 cents. Her total income now is $44,000, on which she pays taxes of $11,000. Determine her average tax rate and her marginal tax rate.

Accepted Answer

A)   Her average tax rate is 40 percent and her marginal tax rate is 25 percent.
B)   Her average tax rate is 40 percent and her marginal tax rate is 40 percent.
C)   Her average tax rate is 25 percent and her marginal tax rate is 25 percent.
D)   Her average tax rate is 25 percent and her marginal tax rate is 40 percent.E) A) and C)
F) All of the above

Question 5

Which of the following statements is correct?

Accepted Answer

A)   The average tax rate gauges the sacrifice made by a taxpayer, whereas the marginal tax rate gauges the distortion of taxes on consumer decisions.
B)   The marginal tax rate gauges the sacrifice made by a taxpayer, whereas the average tax rate gauges the distortion of taxes on consumer decisions.
C)   The average tax rate measures how much the tax system discourages people from working.
D)   The marginal tax rate measures total taxes paid divided by total income.E) None of the above
F) B) and C)

Question 6

From 2009 to 2012, the federal budget deficits were the largest budget shortfalls since World War II. The primary reason for the record-large deficits was

Accepted Answer

A)   the recession experienced during this time.
B)   severe budget tightening by members of Congress.
C)   the shift in political power from Republicans to Democrats.
D)   All of the above are correct.E) B) and C)
F) A) and D)

Question 7

Table 12-15
 
-Refer to Table 12-15. In this tax system which of the following is possible?

Accepted Answer

A)   vertical and horizontal equity
B)   vertical but not horizontal equity
C)   horizontal but not vertical equity
D)   neither horizontal nor vertical equityE) B) and C)
F) A) and B)

Question 8

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) None of the above
F) A) and B)

Question 9

If tax revenues from a cigarette tax are used to pay for healthcare expenses related to lung cancer, the cigarette tax could be justified using the .

Accepted Answer

The answer of If tax revenues from a cigarette tax...

Question 10

The income tax requires that taxpayers pay 10percent on the first $40,000 of income and 20 percent on all income over $40,000. Emily paid $9,000 in taxes. What were her marginal and average tax rates?

Accepted Answer

A)   20 percent and 13.8 percent, respectively
B)   20 percent and 15 percent, respectively
C)   10 percent and 13.8 percent respectively
D)   10 percent and 15 percent respectivelyE) All of the above
F) A) and B)

Question 11

Suppose the government taxes 10 percent of the first $40,000 of income and 20 percent of all income over $40,000. Shahina paid $10,000 in taxes. What were her marginal and average tax rates?

Accepted Answer

A)   20 percent and 15 percent, respectively
B)   20 percent and 14 percent, respectively
C)   10 percent and 15 percent respectively
D)   10 percent and 14 percent respectivelyE) A) and D)
F) B) and D)

Question 12

Which tax system requires higher-income taxpayers to pay a higher percentage of their income in taxes?

Accepted Answer

A)   a progressive tax
B)   a proportional tax
C)   a regressive tax
D)   a lump-sum taxE) C) and D)
F) B) and D)

Question 13

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 B 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) C) and D)
F) None of the above

Question 14

Table 12-22
 
-Refer to Table 12-22. A regressive tax is illustrated by tax

Accepted Answer

A)   A only.
B)   B or D.
C)   C only.
D)   A or D.E) B) and C)
F) B) and D)

Question 15

Briefly evaluate the advantages and disadvantages of a lump-sum tax.

Accepted Answer

A lump-sum tax is the most efficient tax...

Question 16

Table 12-9
United States Income Tax Rates for a Single Individual, 2012 and 2013.
 
-Refer to Table 12-9. Samantha is a single person whose taxable income is $100,000 a year. What happened to her average tax rate between 2012 and 2013?

Accepted Answer

A)   It increased.
B)   It decreased.
C)   It did not change.
D)   We do not have enough information to answer this question.E) A) and B)
F) A) and C)

Question 17

Table 12-17
The following table shows the marginal tax rates for unmarried individuals for two years.
2009 2010
 
-Refer to Table 12-17. Suppose one goal of the tax system was to achieve vertical equity. While people may disagree about what is "equitable," based on the marginal tax rates given for the two years, which of the following statements is true?

Accepted Answer

A)   Vertical equity is possible in both years.
B)   Vertical equity is possible in 2009 but not in 2010.
C)   Vertical equity is not possible in 2009 but is possible in 2010.
D)   Vertical equity is not possible in either year.E) B) and D)
F) All of the above

Question 18

The equity of a tax system concerns whether the tax burden is distributed equally among the population.

Accepted Answer

A) True 
 B)False

Question 19

Table 12-9
United States Income Tax Rates for a Single Individual, 2012 and 2013.
 
-Refer to Table 12-9. Jake is a single person whose taxable income is $20,000 a year. What happened to his average tax rate between 2012 and 2013?

Accepted Answer

A)   It increased.
B)   It decreased.
C)   It did not change.
D)   We do not have enough information to answer this question.E) B) and D)
F) None of the above

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 12: The Design of the Tax System

Table 12-22 -Refer to Table 12-22. A regressive tax is illustrated by tax

Correct Answer
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Pat calculates that for every extra dollar she earns, she owes the government 40 cents. Her total income now is $44,000, on which she pays taxes of $11,000. Determine her average tax rate and her marginal tax rate.

Correct Answer
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Correct Answer
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Table 12-15 -Refer to Table 12-15. In this tax system which of the following is possible?

Correct Answer
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If tax revenues from a cigarette tax are used to pay for healthcare expenses related to lung cancer, the cigarette tax could be justified using the .

Correct Answer
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Table 12-9 United States Income Tax Rates for a Single Individual, 2012 and 2013. -Refer to Table 12-9. Jake is a single person whose taxable income is $20,000 a year. What happened to his average tax rate between 2012 and 2013?

Correct Answer
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Table 12-23 The dollar amounts in the last three columns are the taxes owed under the three different tax systems. -Refer to Table 12-23. Which of the three tax systems is regressive?

Correct Answer
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Briefly evaluate the advantages and disadvantages of a lump-sum tax.

Correct Answer
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A lump-sum tax is the most efficient tax...
View Answer

Suppose the government taxes 10 percent of the first $40,000 of income and 20 percent of all income over $40,000. Shahina paid $10,000 in taxes. What were her marginal and average tax rates?

Correct Answer
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From 2009 to 2012, the federal budget deficits were the largest budget shortfalls since World War II. The primary reason for the record-large deficits was

Correct Answer
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The equity of a tax system concerns whether the tax burden is distributed equally among the population.

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

What are the characteristic(s) of an efficient tax system?

Correct Answer
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One tax system is more efficie...
View 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 B exhibits

Correct Answer
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Table 12-9 United States Income Tax Rates for a Single Individual, 2012 and 2013. -Refer to Table 12-9. Samantha is a single person whose taxable income is $100,000 a year. What happened to her average tax rate between 2012 and 2013?

Correct Answer
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Which of the following statements is correct?

Correct Answer
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The income tax requires that taxpayers pay 10percent on the first $40,000 of income and 20 percent on all income over $40,000. Emily paid $9,000 in taxes. What were her marginal and average tax rates?

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

Which tax system requires higher-income taxpayers to pay a higher percentage of their income in taxes?

Correct Answer
verified

Exam 12: The Design of the Tax System

Table 12-22 -Refer to Table 12-22. A regressive tax is illustrated by tax

Correct AnswerverifiedShow Answer

Pat calculates that for every extra dollar she earns, she owes the government 40 cents. Her total income now is $44,000, on which she pays taxes of $11,000. Determine her average tax rate and her marginal tax rate.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Table 12-15 -Refer to Table 12-15. In this tax system which of the following is possible?

Correct AnswerverifiedShow Answer

If tax revenues from a cigarette tax are used to pay for healthcare expenses related to lung cancer, the cigarette tax could be justified using the .

Correct AnswerverifiedShow Answer

Table 12-9 United States Income Tax Rates for a Single Individual, 2012 and 2013. -Refer to Table 12-9. Jake is a single person whose taxable income is $20,000 a year. What happened to his average tax rate between 2012 and 2013?

Correct AnswerverifiedShow Answer

Table 12-23 The dollar amounts in the last three columns are the taxes owed under the three different tax systems. -Refer to Table 12-23. Which of the three tax systems is regressive?

Correct AnswerverifiedShow Answer

Briefly evaluate the advantages and disadvantages of a lump-sum tax.

Correct AnswerverifiedA lump-sum tax is the most efficient tax...View AnswerShow Answer

Suppose the government taxes 10 percent of the first $40,000 of income and 20 percent of all income over $40,000. Shahina paid $10,000 in taxes. What were her marginal and average tax rates?

Correct AnswerverifiedShow Answer

From 2009 to 2012, the federal budget deficits were the largest budget shortfalls since World War II. The primary reason for the record-large deficits was

Correct AnswerverifiedShow Answer

The equity of a tax system concerns whether the tax burden is distributed equally among the population.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What are the characteristic(s) of an efficient tax system?

Correct AnswerverifiedOne tax system is more efficie...View AnswerShow 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 B exhibits

Correct AnswerverifiedShow Answer

Table 12-9 United States Income Tax Rates for a Single Individual, 2012 and 2013. -Refer to Table 12-9. Samantha is a single person whose taxable income is $100,000 a year. What happened to her average tax rate between 2012 and 2013?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

The income tax requires that taxpayers pay 10percent on the first $40,000 of income and 20 percent on all income over $40,000. Emily paid $9,000 in taxes. What were her marginal and average tax rates?

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

Which tax system requires higher-income taxpayers to pay a higher percentage of their income in taxes?

Correct AnswerverifiedShow Answer

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A lump-sum tax is the most efficient tax...
View Answer

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One tax system is more efficie...
View Answer

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