Question 1

An individual's marginal tax rate equals

Accepted Answer

A)   total tax payments divided by the average tax rate.
B)   the increase in taxes the individual would pay when income rises, expressed as a percentage of the rise in income.
C)   total tax payments divided by income.
D)   the increase in taxes the individual would pay if the average tax rate were to rise 1%.E) A) and C)
F) A) and D)

Question 2

If the government imposed a €1,000 tax on every individual,

Accepted Answer

A)   this would be an equitable tax.
B)   allocative efficiency would have to be sacrificed.
C)   this would be an efficient tax.
D)   this would be an income tax.E) A) and D)
F) None of the above

Question 3

In general, a tax raises the price the buyers pay, lowers the price the sellers receive, and reduces the quantity sold.

Accepted Answer

A) True 
 B)False

Question 4

Illustrate on three demand-and-supply graphs how the size of a tax (small, medium and large) can alter total revenue and deadweight loss.

Accepted Answer

The answer of Illustrate on three demand-and-supply graphs how the...

Question 5

The average tax rate is

Accepted Answer

A)   total taxes paid divided by total income.
B)   the extra taxes paid on an additional dollar of income.
C)   the taxes paid by the marginal worker.
D)   total income divided by total taxes paid.E) C) and D)
F) B) and D)

Question 6

An efficient tax

Accepted Answer

A)   minimizes the administrative burden from the tax.
B)   does all of the things described in these answers.
C)   raises revenue at the smallest possible cost to taxpayers.
D)   minimizes the deadweight loss from the tax.E) A) and D)
F) B) and D)

Question 7

The chief advantage of replacing personal income tax with a consumption tax is that it would remove the disincentive to saving that arises from the levying of personal income tax on income from savings.

Accepted Answer

A) True 
 B)False

Question 8

A tax for which high income taxpayers pay a smaller fraction of their income than do low income taxpayers is known as

Accepted Answer

A)   a proportional tax.
B)   a regressive tax.
C)   an equitable tax.
D)   a progressive tax.E) A) and C)
F) B) and D)

Question 9

The appropriate tax rate to consider to gauge how much the tax system distorts incentives and decision making is the

Accepted Answer

A)   proportional tax rate.
B)   average tax rate.
C)   marginal tax rate.
D)   vertical tax rate.
E)   horizontal tax rate.F) All of the above
G) A) and B)

Question 10

The main arguments in favour of a modified flat-rate tax system (such as a proposal to place a 19% tax on all income over €20,000 with no deductions)  are it would

Accepted Answer

A)   raise more revenue than the current tax system, and it would be simpler.
B)   raise more revenue than the current tax system, and it would lower marginal tax rates.
C)   be simpler and it would lower average tax rates.
D)   be simpler and it would lower marginal tax rates.E) All of the above
F) None of the above

Question 11

An individual's tax total tax payments divided by income is called the

Accepted Answer

A)   marginal social tax rate.
B)   marginal private tax rate.
C)   marginal tax rate.
D)   average tax rate.E) A) and C)
F) All of the above

Question 12

Deadweight loss is greatest when

Accepted Answer

A)   supply is elastic and demand is perfectly inelastic.
B)   demand is elastic and supply is perfectly inelastic.
C)   both supply and demand are relatively inelastic.
D)   both supply and demand are relatively elastic.E) A) and D)
F) C) and D)

Question 13

A larger tax always generates more tax revenue.

Accepted Answer

A) True 
 B)False

Question 14

A progressive tax system is one where

Accepted Answer

A)   marginal tax rates are high.
B)   higher income taxpayers pay more taxes than do lower income taxpayers.
C)   marginal tax rates are low.
D)   higher income taxpayers pay a greater percentage of their income in taxes than do lower income taxpayers.E) A) and C)
F) All of the above

Question 15

Using demand and supply diagrams, show the difference in deadweight loss between (a) a market with inelastic demand and supply and (b) a market with elastic demand and supply.

Accepted Answer

The answer of Using demand and supply diagrams, show the...

Question 16

If the supply curve is perfectly price elastic, a per-unit tax

Accepted Answer

A)   does not create a deadweight loss.
B)   does not reduce consumer surplus.
C)   does not reduce producer surplus.
D)   reduces consumer surplus but increases producer surplus.E) A) and B)
F) A) and C)

Question 17

When a tax on a good starts small and is gradually increased, tax revenue will

Accepted Answer

A)   fall.
B)   rise.
C)   first rise and then fall.
D)   first fall and then rise.
E)   not change at allF) None of the above
G) C) and E)

Question 18

The appropriate tax rate to consider to judge the vertical equity of a tax system is the

Accepted Answer

A)   marginal tax rate.
B)   average tax rate.
C)   horizontal tax rate.
D)   proportional tax rate.E) A) and C)
F) C) and D)

Question 19

Discuss the two main reasons why governments levy taxes.

Accepted Answer

Most governments levy taxes for two main...

Question 20

Corporate taxes are levied on companies

Accepted Answer

A)   and the burden of corporate taxes falls only on companies' owners and workers.
B)   but the burden of corporate taxes falls solely on customers.
C)   but the burden of corporate taxes falls on the workers and customers as well as on the owners of companies.
D)   but governments generally try to avoid taxing companies.E) A) and B)
F) B) and C)

Exam 9: The Tax System

An efficient tax

Correct AnswerverifiedShow Answer

A progressive tax system is one where

Correct AnswerverifiedShow Answer

When a tax on a good starts small and is gradually increased, tax revenue will

Correct AnswerverifiedShow Answer

Illustrate on three demand-and-supply graphs how the size of a tax (small, medium and large) can alter total revenue and deadweight loss.

Correct AnswerverifiedShow Answer

Discuss the two main reasons why governments levy taxes.

Correct AnswerverifiedMost governments levy taxes for two main...View AnswerShow Answer

Corporate taxes are levied on companies

Correct AnswerverifiedShow Answer

A larger tax always generates more tax revenue.

Correct AnswerverifiedShow Answer

The chief advantage of replacing personal income tax with a consumption tax is that it would remove the disincentive to saving that arises from the levying of personal income tax on income from savings.

Correct AnswerverifiedShow Answer

In general, a tax raises the price the buyers pay, lowers the price the sellers receive, and reduces the quantity sold.

Correct AnswerverifiedShow Answer

An individual's tax total tax payments divided by income is called the

Correct AnswerverifiedShow Answer

Using demand and supply diagrams, show the difference in deadweight loss between (a) a market with inelastic demand and supply and (b) a market with elastic demand and supply.

Correct AnswerverifiedShow Answer

Deadweight loss is greatest when

Correct AnswerverifiedShow Answer

The appropriate tax rate to consider to judge the vertical equity of a tax system is the

Correct AnswerverifiedShow Answer

The main arguments in favour of a modified flat-rate tax system (such as a proposal to place a 19% tax on all income over €20,000 with no deductions) are it would

Correct AnswerverifiedShow Answer

A tax for which high income taxpayers pay a smaller fraction of their income than do low income taxpayers is known as

Correct AnswerverifiedShow Answer

The appropriate tax rate to consider to gauge how much the tax system distorts incentives and decision making is the

Correct AnswerverifiedShow Answer

If the government imposed a €1,000 tax on every individual,

Correct AnswerverifiedShow Answer

An individual's marginal tax rate equals

Correct AnswerverifiedShow Answer

The average tax rate is

Correct AnswerverifiedShow Answer

If the supply curve is perfectly price elastic, a per-unit tax

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Most governments levy taxes for two main...
View 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