Question 1

A budget deficit occurs when government receipts fall short of government spending.

Accepted Answer

A) True 
 B)False

Question 2

The argument that each person should pay taxes according to how well the individual can shoulder the burden is called

Accepted Answer

A)   the ability-to-pay principle.
B)   the equity principle.
C)   the benefits principle.
D)   regressive.E) B) and C)
F) All of the above

Question 3

Tax evasion is legal,but tax avoidance is illegal.

Accepted Answer

A) True 
 B)False

Question 4

A tax that is higher for men than for women violates the criterion of

Accepted Answer

A)   horizontal equity.
B)   vertical equity.
C)   the ability-to-pay principle.
D)   the marriage tax.E) A) and B)
F) A) and C)

Question 5

Changing the basis of taxation from income earned to amount spent will

Accepted Answer

A)   necessarily reduce tax revenues.
B)   lower effective interest rates on savings.
C)   distort incentives to earn income.
D)   eliminate disincentives to save.E) All of the above
F) B) and D)

Question 6

Which of the following statements is correct?

Accepted Answer

A)   Equity is more important than efficiency as a goal of the tax system.
B)   Efficiency is more important than equity as a goal of the tax system.
C)   Both equity and efficiency are important goals of the tax system.
D)   Neither equity nor efficiency is an important goal of the tax system.E) None of the above
F) A) and B)

Question 7

Which of the following tax systems is the most fair?

Accepted Answer

A)   proportional taxes
B)   regressive taxes
C)   progressive taxes
D)   There is no objective way to assess fairness among the three systems.E) B) and C)
F) A) and B)

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Table 12-2
Consider the tax rates shown in the table below.
 
-Refer to Table 12-2.If John has taxable income of $72,000,his marginal tax rate is

Accepted Answer

A)   14%.
B)   26%.
C)   31%.
D)   34%.E) A) and C)
F) C) and D)

Question 10

Sue earns income of $80,000 per year.Her average tax rate is 30 percent.Sue paid 20 percent in taxes on the first $30,000 she earned.What was the marginal tax rate on the rest of her income?

Accepted Answer

A)   20 percent
B)   24 percent
C)   30 percent
D)   36 percentE) B) and C)
F) A) and B)

Question 11

By law,all states must have a state income tax.

Accepted Answer

A) True 
 B)False

Question 12

In practice,the U.S.income tax system is filled with special provisions that alter a family's tax based on its specific circumstances.

Accepted Answer

A) True 
 B)False

Question 13

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) A) and B)
F) A) and C)

Question 14

Table 12-6
 
-Refer to Table 12-6.What is the marginal tax rate for a person who makes $130,000?

Accepted Answer

A)   30%
B)   40%
C)   50%
D)   60%E) B) and D)
F) All of the above

Question 15

Who observed that "in this world nothing is certain but death and taxes"?

Accepted Answer

A)   Mark Twain
B)   P.T.Barnum
C)   Ben Franklin
D)   Richard NixonE) C) and D)
F) None of the above

Question 16

Horizontal 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 be taxed according to their ability to pay.
D)   should receive government benefits according to how much they have been taxed.E) A) and B)
F) B) and C)

Question 17

Stacy places a $20 value on a bottle of wine,and Andrea places a $17 value on it.The equilibrium price for a bottle of wine is $15.Suppose the government levies a tax of $3 on each bottle of wine,and the equilibrium price of a bottle of wine increases to $18.What is total consumer surplus after the tax is levied?

Accepted Answer

A)   $0
B)   $2
C)   $5
D)   $6E) A) and B)
F) A) and C)

Question 18

Compared to most European countries,the U.S.tax burden is

Accepted Answer

A)   about the same as most European countries.
B)   higher than most European countries.
C)   lower than most European countries.
D)   higher than all European countries.E) C) and D)
F) B) and C)

Question 19

The U.S.tax burden is high compared to many European countries,but is low compared to many other nations in the world.

Accepted Answer

A) True 
 B)False

Question 20

A person's average tax rate equals her

Accepted Answer

A)   tax obligation divided by her marginal tax rate.
B)   increase in taxes if her income were to rise by $1.
C)   tax obligation divided by her income.
D)   increase in taxes if her marginal tax rate were to rise 1%.E) None of the above
F) B) and D)

Exam 12: The Design of the Tax System

Who observed that "in this world nothing is certain but death and taxes"?

Correct Answer
verified

A budget deficit occurs when government receipts fall short of government spending.

Correct Answer
verified

Sue earns income of $80,000 per year.Her average tax rate is 30 percent.Sue paid 20 percent in taxes on the first $30,000 she earned.What was the marginal tax rate on the rest of her income?

Correct Answer
verified

Table 12-6 -Refer to Table 12-6.What is the marginal tax rate for a person who makes $130,000?

Correct Answer
verified

Tax evasion is legal,but tax avoidance is illegal.

Correct Answer
verified

In practice,the U.S.income tax system is filled with special provisions that alter a family's tax based on its specific circumstances.

Correct Answer
verified

The U.S.tax burden is high compared to many European countries,but is low compared to many other nations in the world.

Correct Answer
verified

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

Correct Answer
verified

A person's average tax rate equals her

Correct Answer
verified

Table 12-2 Consider the tax rates shown in the table below. -Refer to Table 12-2.If John has taxable income of $72,000,his marginal tax rate is

Correct Answer
verified

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

Correct Answer
verified

Which of the following tax systems is the most fair?

Correct Answer
verified

By law,all states must have a state income tax.

Correct Answer
verified

The argument that each person should pay taxes according to how well the individual can shoulder the burden is called

Correct Answer
verified

A tax that is higher for men than for women violates the criterion of

Correct Answer
verified

Horizontal equity in taxation refers to the idea that people

Correct Answer
verified

Compared to most European countries,the U.S.tax burden is

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

Correct Answer
verified

Changing the basis of taxation from income earned to amount spent will

Correct Answer
verified

Exam 12: The Design of the Tax System

Who observed that "in this world nothing is certain but death and taxes"?

Correct AnswerverifiedShow Answer

A budget deficit occurs when government receipts fall short of government spending.

Correct AnswerverifiedShow Answer

Sue earns income of $80,000 per year.Her average tax rate is 30 percent.Sue paid 20 percent in taxes on the first $30,000 she earned.What was the marginal tax rate on the rest of her income?

Correct AnswerverifiedShow Answer

Table 12-6 -Refer to Table 12-6.What is the marginal tax rate for a person who makes $130,000?

Correct AnswerverifiedShow Answer

Tax evasion is legal,but tax avoidance is illegal.

Correct AnswerverifiedShow Answer

In practice,the U.S.income tax system is filled with special provisions that alter a family's tax based on its specific circumstances.

Correct AnswerverifiedShow Answer

The U.S.tax burden is high compared to many European countries,but is low compared to many other nations in the world.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A person's average tax rate equals her

Correct AnswerverifiedShow Answer

Table 12-2 Consider the tax rates shown in the table below. -Refer to Table 12-2.If John has taxable income of $72,000,his marginal tax rate is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following tax systems is the most fair?

Correct AnswerverifiedShow Answer

By law,all states must have a state income tax.

Correct AnswerverifiedShow Answer

The argument that each person should pay taxes according to how well the individual can shoulder the burden is called

Correct AnswerverifiedShow Answer

A tax that is higher for men than for women violates the criterion of

Correct AnswerverifiedShow Answer

Horizontal equity in taxation refers to the idea that people

Correct AnswerverifiedShow Answer

Compared to most European countries,the U.S.tax burden is

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Changing the basis of taxation from income earned to amount spent will

Correct AnswerverifiedShow Answer

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