Question 1

Under a progressive tax system,the marginal tax rate could be equal to the average tax rate only when a taxpayer

Accepted Answer

A)  has a very high income.
B)  has a very low income.
C)  is self-employed.
D)  invests in a retirement plan.E) A) and B)
F) A) and C)

Question 2

In designing a tax system,policymakers have two objectives that are often conflicting.They are

Accepted Answer

A)  maximizing revenue and minimizing costs to taxpayers.
B)  efficiency and minimizing costs to taxpayers.
C)  efficiency and equity.
D)  maximizing revenue and reducing the national debt.E) A) and B)
F) A) and C)

Question 3

One advantage of a lump-sum tax over other taxes is that it

Accepted Answer

A)  is both equitable and efficient.
B)  doesn't cause deadweight loss.
C)  would place a larger tax burden on the rich.
D)  would raise more revenues.E) C) and D)
F) All of the above

Question 4

A person's marginal tax rate equals

Accepted Answer

A)  her tax obligation divided by her average tax rate.
B)  the increase in taxes she would pay as a percentage of the rise in her income.
C)  her tax obligation divided by her income.
D)  the increase in taxes if her average tax rate were to rise by 1%.E) B) and C)
F) None of the above

Question 5

In addition to tax payments,the two other primary costs that a tax system inevitably imposes on taxpayers are

Accepted Answer

A)  deadweight losses and administrative burdens.
B)  deadweight losses and frustration with the political system.
C)  administrative burdens and tax-preparation costs.
D)  administrative burdens and the risk of punishment for failure to comply with tax laws.E) A) and B)
F) B) and C)

Question 6

The benefits principle of taxation can be used to argue that wealthy citizens should pay higher taxes than poorer ones on the basis that

Accepted Answer

A)  police services are more frequently used in poor neighborhoods.
B)  the wealthy benefit more from services provided by government than the poor.
C)  the poor are more active in political processes.
D)  the poor receive welfare payments.E) All of the above
F) A) and B)

Question 7

Why do some policymakers support a consumption tax rather than an earnings tax?

Accepted Answer

A)  The average tax rate would be lower under a consumption tax.
B)  A consumption tax would encourage people to save earned income.
C)  A consumption tax would raise more revenues than an income tax.
D)  The marginal tax rate would be higher under an earnings tax.E) C) and D)
F) A) and B)

Question 8

The resources that a taxpayer devotes to complying with the tax laws are a type of

Accepted Answer

A)  consumption tax.
B)  value-added tax.
C)  deadweight loss.
D)  producer surplus.E) None of the above
F) All of the above

Question 9

With a lump-sum tax,the

Accepted Answer

A)  marginal tax rate is always less than the average tax rate.
B)  average tax rate is always less than the marginal tax rate.
C)  marginal tax rate falls as income rises.
D)  marginal tax rate rises as income rises.E) A) and D)
F) A) and B)

Question 10

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 11

If a tax generates a reduction in surplus that is exactly offset by the tax revenue collected by the government,the tax does not have a deadweight loss.

Accepted Answer

A) True 
 B)False

Question 12

If your income is 40,000 dinars and your income tax liability is 5,000 dinars,your marginal tax rate is

Accepted Answer

A)  8 percent.
B)  12.5 percent.
C)  20 percent.
D)  unknown.We do not have enough information to answer this question.E) C) and D)
F) B) and D)

Question 13

An efficient tax system is one that imposes small

Accepted Answer

A)  deadweight losses and administrative burdens.
B)  marginal rates and deadweight losses.
C)  administrative burdens and transfers of money.
D)  marginal rates and transfers of money.E) B) and C)
F) C) and D)

Question 14

A lump sum tax can never have horizontal equity.

Accepted Answer

A) True 
 B)False

Question 15

One characteristic of an efficient tax system is that it minimizes the costs associated with revenue collection.

Accepted Answer

A) True 
 B)False

Question 16

The government raises revenue through taxation to pay for the services it provides.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following statements is correct?

Accepted Answer

A)  Both tax avoidance and tax evasion are legal.
B)  Both tax avoidance and tax evasion are illegal.
C)  Tax avoidance is legal,whereas tax evasion is illegal.
D)  Tax avoidance is illegal,whereas tax evasion is legal.E) B) and C)
F) A) and C)

Question 18

Corporate income taxes are based on the amount of revenue a corporation earns.

Accepted Answer

A) True 
 B)False

Question 19

If all taxpayers pay the same percentage of income in taxes,the tax system is progressive.

Accepted Answer

A) True 
 B)False

Question 20

Deadweight losses arise because a tax causes some individuals to change their behavior.

Accepted Answer

A) True 
 B)False

Exam 12: The Design of the Tax System

With a lump-sum tax,the

Correct AnswerverifiedShow Answer

Vertical equity in taxation refers to the idea that people

Correct AnswerverifiedShow Answer

One advantage of a lump-sum tax over other taxes is that it

Correct AnswerverifiedShow Answer

In addition to tax payments,the two other primary costs that a tax system inevitably imposes on taxpayers are

Correct AnswerverifiedShow Answer

Why do some policymakers support a consumption tax rather than an earnings tax?

Correct AnswerverifiedShow Answer

Corporate income taxes are based on the amount of revenue a corporation earns.

Correct AnswerverifiedShow Answer

If all taxpayers pay the same percentage of income in taxes,the tax system is progressive.

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

A person's marginal tax rate equals

Correct AnswerverifiedShow Answer

A lump sum tax can never have horizontal equity.

Correct AnswerverifiedShow Answer

Deadweight losses arise because a tax causes some individuals to change their behavior.

Correct AnswerverifiedShow Answer

The government raises revenue through taxation to pay for the services it provides.

Correct AnswerverifiedShow Answer

An efficient tax system is one that imposes small

Correct AnswerverifiedShow Answer

The resources that a taxpayer devotes to complying with the tax laws are a type of

Correct AnswerverifiedShow Answer

The benefits principle of taxation can be used to argue that wealthy citizens should pay higher taxes than poorer ones on the basis that

Correct AnswerverifiedShow Answer

In designing a tax system,policymakers have two objectives that are often conflicting.They are

Correct AnswerverifiedShow Answer

If your income is 40,000 dinars and your income tax liability is 5,000 dinars,your marginal tax rate is

Correct AnswerverifiedShow Answer

Under a progressive tax system,the marginal tax rate could be equal to the average tax rate only when a taxpayer

Correct AnswerverifiedShow Answer

One characteristic of an efficient tax system is that it minimizes the costs associated with revenue collection.

Correct AnswerverifiedShow Answer

If a tax generates a reduction in surplus that is exactly offset by the tax revenue collected by the government,the tax does not have a deadweight loss.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified