Question 1

If James earns $80,000 in taxable income and pays $20,000 in taxes, his average tax rate is 25 percent.

Accepted Answer

A) True 
 B)False

Question 2

In many cases, tax loopholes are designed by Congress to

Accepted Answer

A)   give special treatment to specific types of behavior.
B)   reduce the overall administrative burden of the tax system.
C)   raise revenues for special projects.
D)   All of the above are correct.E) B) and D)
F) All of the above

Question 3

Taxes create deadweight losses because they

Accepted Answer

A)   reduce costs for firms.
B)   distort incentives.
C)   cause prices to decrease.
D)   create revenue for the government.E) None of the above
F) A) and B)

Question 4

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

Question 5

European countries tend to rely more on consumption taxes than does the United States.

Accepted Answer

A) True 
 B)False

Question 6

The "other" category of federal spending consists of many less expensive functions of government, including all of the following except

Accepted Answer

A)   housing credit programs.
B)   farm support programs.
C)   funding for the National Institutes of Health.
D)   the federal court system.E) B) and D)
F) A) and B)

Question 7

Table 12-16 
-Refer to Table 12-16. The tax system is

Accepted Answer

A)   proportional.
B)   regressive.
C)   progressive.
D)   lump sum.E) All of the above
F) None of the above

Question 8

Table 12-6
The table below shows the marginal tax rates for an unmarried taxpayer for various levels of taxable income. 
-Refer to Table 12-6. For this tax schedule, what is the average tax rate for an individual with $280,000 in taxable income?

Accepted Answer

A)   39.9%
B)   40.2%
C)   42.7%
D)   44.8%E) A) and D)
F) A) and C)

Question 9

One reason for the projected increase, over the next several decades, in government spending as a percentage of GDP is the projected increase in the size of the elderly population.

Accepted Answer

A) True 
 B)False

Question 10

Suppose a country imposes a lump-sum income tax of $5,000 on each individual in the country. What is the average income tax rate for an individual who earns $40,000 during the year?

Accepted Answer

A)   0%
B)   10%
C)   More than 10%
D)   The average tax rate cannot be determined without knowing the entire tax schedule.E) A) and D)
F) A) and B)

Question 11

The administrative burden of any tax system is part of the inefficiency it creates.

Accepted Answer

A) True 
 B)False

Question 12

The most efficient tax possible is a

Accepted Answer

A)   lump-sum tax.
B)   marginal tax.
C)   proportional tax.
D)   value-added tax.E) None of the above
F) B) and C)

Question 13

Horizontal and vertical equity are the two primary measures of efficiency of a tax system.

Accepted Answer

A) True 
 B)False

Question 14

According to the benefits principle, it is fair for people to pay taxes based on the benefits they receive from the government.

Accepted Answer

A) True 
 B)False

Question 15

In 2011, the U.S. federal government collected approximately what percentage of the taxes in the economy?

Accepted Answer

A)   10%
B)   40%
C)   50%
D)   67%E) C) and D)
F) A) and C)

Question 16

Scenario 12-2
Suppose that Bob places a value of $10 on a movie ticket and that Lisa places a value of $7 on a movie ticket. In addition, suppose the price of a movie ticket is $5.
-Refer to Scenario 12-2. Suppose the government levies a tax of $3 on a movie ticket and that, as a result, the price of a movie ticket increases to $8. What is the deadweight loss from the tax?

Accepted Answer

A)   $0
B)   $1
C)   $2
D)   $3E) A) and B)
F) A) and C)

Question 17

Wilma values a decorative garden rock at $15, while Fred values it at $10. The price of a decorative garden rock is $9. If the government imposes a $2 tax per decorative garden rock and the price of the rock rises to $11, what part of the deadweight loss comes from Wilma, and what part comes from Fred?

Accepted Answer

A)   none comes from Wilma; $1 comes from Fred
B)   none comes from Wilma; $3 comes from Fred
C)   $2 comes from Wilma; $1 comes from Fred
D)   $4 comes from Wilma; $3 comes from FredE) All of the above
F) C) and D)

Question 18

The largest category of federal spending is national defense.

Accepted Answer

A) True 
 B)False

Question 19

When the marginal tax rate exceeds the average tax rate, the tax is

Accepted Answer

A)   proportional.
B)   regressive.
C)   non-egalitarian.
D)   progressive.E) B) and D)
F) All of the above

Question 20

Table 12-20
The following table presents the total tax liability for an unmarried taxpayer under four different tax schedules for the income levels shown. 
-Refer to Table 12-20. Which tax schedules are regressive?

Accepted Answer

A)   Tax Schedule A and Tax Schedule B
B)   Tax Schedule B and Tax Schedule C
C)   Tax Schedule C and Tax Schedule D
D)   None of the Tax Schedules are regressive.E) A) and D)
F) All of the above

Exam 12: The Design of the Tax System

The most efficient tax possible is a

Correct Answer
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The largest category of federal spending is national defense.

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
verified

European countries tend to rely more on consumption taxes than does the United States.

Correct Answer
verified

In 2011, the U.S. federal government collected approximately what percentage of the taxes in the economy?

Correct Answer
verified

The "other" category of federal spending consists of many less expensive functions of government, including all of the following except

Correct Answer
verified

Table 12-6 The table below shows the marginal tax rates for an unmarried taxpayer for various levels of taxable income. -Refer to Table 12-6. For this tax schedule, what is the average tax rate for an individual with $280,000 in taxable income?

Correct Answer
verified

When the marginal tax rate exceeds the average tax rate, the tax is

Correct Answer
verified

Suppose a country imposes a lump-sum income tax of $5,000 on each individual in the country. What is the average income tax rate for an individual who earns $40,000 during the year?

Correct Answer
verified

Correct Answer
verified

According to the benefits principle, it is fair for people to pay taxes based on the benefits they receive from the government.

Correct Answer
verified

Taxes create deadweight losses because they

Correct Answer
verified

The administrative burden of any tax system is part of the inefficiency it creates.

Correct Answer
verified

In many cases, tax loopholes are designed by Congress to

Correct Answer
verified

Horizontal and vertical equity are the two primary measures of efficiency of a tax system.

Correct Answer
verified

One reason for the projected increase, over the next several decades, in government spending as a percentage of GDP is the projected increase in the size of the elderly population.

Correct Answer
verified

Table 12-20 The following table presents the total tax liability for an unmarried taxpayer under four different tax schedules for the income levels shown. -Refer to Table 12-20. Which tax schedules are regressive?

Correct Answer
verified

If James earns $80,000 in taxable income and pays $20,000 in taxes, his average tax rate is 25 percent.

Correct Answer
verified

Correct Answer
verified

Table 12-16 -Refer to Table 12-16. The tax system is

Correct Answer
verified

Exam 12: The Design of the Tax System

The most efficient tax possible is a

Correct AnswerverifiedShow Answer

The largest category of federal spending is national defense.

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

European countries tend to rely more on consumption taxes than does the United States.

Correct AnswerverifiedShow Answer

In 2011, the U.S. federal government collected approximately what percentage of the taxes in the economy?

Correct AnswerverifiedShow Answer

The "other" category of federal spending consists of many less expensive functions of government, including all of the following except

Correct AnswerverifiedShow Answer

Table 12-6 The table below shows the marginal tax rates for an unmarried taxpayer for various levels of taxable income. -Refer to Table 12-6. For this tax schedule, what is the average tax rate for an individual with $280,000 in taxable income?

Correct AnswerverifiedShow Answer

When the marginal tax rate exceeds the average tax rate, the tax is

Correct AnswerverifiedShow Answer

Suppose a country imposes a lump-sum income tax of $5,000 on each individual in the country. What is the average income tax rate for an individual who earns $40,000 during the year?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

According to the benefits principle, it is fair for people to pay taxes based on the benefits they receive from the government.

Correct AnswerverifiedShow Answer

Taxes create deadweight losses because they

Correct AnswerverifiedShow Answer

The administrative burden of any tax system is part of the inefficiency it creates.

Correct AnswerverifiedShow Answer

In many cases, tax loopholes are designed by Congress to

Correct AnswerverifiedShow Answer

Horizontal and vertical equity are the two primary measures of efficiency of a tax system.

Correct AnswerverifiedShow Answer

One reason for the projected increase, over the next several decades, in government spending as a percentage of GDP is the projected increase in the size of the elderly population.

Correct AnswerverifiedShow Answer

Table 12-20 The following table presents the total tax liability for an unmarried taxpayer under four different tax schedules for the income levels shown. -Refer to Table 12-20. Which tax schedules are regressive?

Correct AnswerverifiedShow Answer

If James earns $80,000 in taxable income and pays $20,000 in taxes, his average tax rate is 25 percent.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Table 12-16 -Refer to Table 12-16. The tax system is

Correct AnswerverifiedShow Answer

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