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Exam 12: The Design of the Tax System

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Question 41

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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. Suppose the government imposes a tax of $12 on skiing, which raises the price of a weekend ski pass to $57. What is the value of the surplus that accrues to all four skiers from their weekend trip?

A) $41.
B) $95.
C) $144.
D) $185.

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

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Question 42

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Which of the following is an example of a payroll tax?

A) a tax on the wages that a firm pays its workers
B) a "sin" tax on distilled alcohol
C) a tax on corporate profits
D) the portion of federal income taxes earmarked to pay for national defense

E) None of the above
F) All of the above

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Question 43

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Medicare is the

In 2011 the largest percentage of federal government spending was on

The average American pays a higher percent of his income in taxes today than he would have in the late 18th century.

Scenario 12-5 Senator Filch argues that a tax must be paid by people who benefit from government services. Senator Fudge argues that a tax must be paid in accordance with a person's ability to bear the tax burden. Senator Malfoy argues that people with a greater ability to pay a tax should pay a larger amount. Senator Moody argues that taxpayers with similar abilities to pay should contribute the same amount. -Refer to Scenario 12-5. Which Senator is advocating for taxes based on horizontal equity?

Suppose that the government collected taxes in the following fashion: people who earn less than $50,000 pay 25 percent in taxes, people who earn between $50,000 and $100,000 pay 35 percent in taxes, people who earn between $100,000 and $200,000 pay 30 percent in taxes, and people who earn more than $200,000 pay 28 percent in taxes. Which of the following statements is correct?

From the time of Benjamin Franklin to the present, the percentage of the average American's income that goes to pay taxes has

Of all the taxes collected in the U.S. economy, what percentage is collected by the federal government?

Bert faces a progressive tax structure that has the following marginal tax rates: 0 percent on the first $10,000, 10 percent on the next $10,000, 15 percent on the next $10,000, 25 percent on the next $10,000, and 50 percent on all additional income. If Bert earns $75,000, what is his average tax rate?

With a lump-sum tax, the

If the government imposes a tax of $3,000 on everyone, the tax would be a(n)

In 2011, the federal government spent 9 percent of the budget on net interest. Which of the following statements regarding net interest is correct?

Which of the following types of taxes achieves vertical equity: a proportional tax, regressive tax, and/or progressive tax?

The income tax requires that taxpayers pay 10 percent on the first $50,000 of income and 20 percent on all income over $50,000. Andy paid $9,000 in taxes. What were his marginal and average tax rates?

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 $1 on a movie ticket and that, as a result, the price of a movie ticket increases to $6. If Bob and Lisa both purchase a movie ticket, what is the deadweight loss from the tax?

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. Suppose the government imposes a tax of $12 on skiing, which raises the price of a weekend ski pass to $57. How much tax revenue is collected from these four skiers?

List the three most important expenditure programs of the federal government. How do they differ from the three most important expenditure programs of state and local governments? Explain why it makes more sense for the federal government to purchase "national defense" rather than state governments.

Some colleges charge all students the same fee for a weekly dining services meal plan. Suppose that students differ by how much food they consume each week. For example, members of the women's swimming team consume, on average, twice as much food as the average female college student, and the average male college student consumes 20 percent more food than the average female college student. The dining services fee is most like a(n)

The U.S. federal government finances budget deficits by