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Exam 12: The Design of the Tax System

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Question 251

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

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) C) and D)
F) B) and D)

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Question 252

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Suppose a recent increase in federal gasoline taxes is estimated to cause a $150 million reduction in the total surplus (consumer plus producer surplus) in the gasoline market. If tax revenues increased by $100 million, what is the deadweight loss associated with the tax? As a result of the tax, 10,000 people sold their cars and started riding their bicycles to work. How much of the burden of the deadweight loss is incurred by the bicycle riders?

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The direct deadweight loss is $50 millio...

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Question 253

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Table 12-10 -Refer to Table 12-10. If Miss Kay has $80,000 in taxable income, her average tax rate is

Suppose the government taxes 10 percent of the first $30,000 in income, 20 percent of the next $20,000 in income, and 30 percent of all income over $50,000. Calculate the marginal tax rate and the average tax rate for a person who earns $70,000.

Scenario 12-3 Suppose Roger and Regina receive great satisfaction from their consumption of cheesecake. Regina would be willing to purchase only one slice and would pay up to $8 for it. Roger would be willing to pay $11 for his first slice,$9 for his second slice, and $5 for his third slice. The current market price is $5 per slice. -Refer to Scenario 12-3. How much consumer surplus does Regina receive from consuming her slice of cheesecake?

Economics alone cannot determine the best way to balance the goals of efficiency and equity.

Vertical equity and horizontal equity are associated with

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

Income taxes and property taxes generate the highest tax revenue for state and local governments.

In 2011, what percentage of federal government receipts came from corporate income taxes?

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?

The share of federal government spending on healthcare has risen substantially over time. This is most likely a result of

A person's marginal tax rate equals

In 2009, the top 1 percent of income earners

Tax evasion is

State and local governments receive the largest portion of their tax revenues from

Table 12-1 -Refer to Table 12-1. Assume that the price of a weekend ski pass is $45 and that the price reflects the actual unit cost of providing a weekend of skiing. What is the value of the surplus that accrues to all four skiers from their weekend trip?

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

For state and local governments, in 2011, education accounted for approximately what percentage of spending?

Resources devoted to complying with the tax laws are a type of deadweight loss.