Question 1

Explain what the differences are behind a progressive, a regressive and a proportional tax income system.

Accepted Answer

A progressive income tax system would re...

Question 2

Taxes on the wealthy that are used exclusively for anti-poverty programs may be justified on the benefits principle if:

Accepted Answer

A)  the wealthy place a greater dollar value on anti-poverty programs than other classes of taxpayers
B)  anti-poverty programs can be considered public goods
C)  wealthy taxpayers received some personal benefit from anti-poverty programs
D)  all of the above are trueE) A) and C)
F) B) and C)

Question 3

Which of the following is a tax system in which higher income taxpayers pay a higher percentage of their income in taxes?

Accepted Answer

A)  a progressive tax system
B)  a proportional tax system
C)  a regressive tax system
D)  none of the aboveE) None of the above
F) A) and B)

Question 4

According to the information provided, if a tax of $4 is levied on each bottle of micro-brewed beer, what is the total deadweight loss of the tax?

Accepted Answer

A)  $13
B)  $9
C)  $6
D)  $3E) B) and D)
F) B) and C)

Question 5

According to the information provided, how much consumer surplus does Celia receive from consuming her 12-litre bottle of micro-brewed beer?

Accepted Answer

A)  $13
B)  $9
C)  $6
D)  $3E) C) and D)
F) A) and D)

Question 6

According to the information provided, the amount of surplus value that accrues to Dean, Jess, Brent and Frida from their day surfing is:

Accepted Answer

A)  $250
B)  $126
C)  $124
D)  $146E) B) and D)
F) All of the above

Question 7

The average tax rate measures the:

Accepted Answer

A)  fraction of spending paid in taxes
B)  fraction of income paid in taxes
C)  incremental rate of tax on income
D)  average deadweight loss from all taxesE) A) and B)
F) A) and C)

Question 8

A budget deficit is when a government owes money to overseas investors.

Accepted Answer

A) True 
 B)False

Question 9

Amy's marginal tax rate was 18 per cent last year.This means the amount she paid on the last dollar she earned in that year was:

Accepted Answer

A)  more than $0.18
B)  exactly $0.18
C)  more than 18 per cent
D)  less than $0.18E) C) and D)
F) None of the above

Question 10

A tax on expensive speedboats that are purchased only by the wealthy is not likely to satisfy the condition of vertical equity on the basis that:

Accepted Answer

A)  wealthy buyers are most likely to be subject to the implications of the flypaper theory of tax incidence
B)  horizontal equity is most associated with a tax on luxury items
C)  buyers can easily substitute other luxuries for expensive speedboats
D)  it is very unlikely that the burden of the tax will fall on workers who make the expensive speedboatsE) None of the above
F) All of the above

Question 11

High marginal tax rates:

Accepted Answer

A)  are used to encourage saving behaviour
B)  distort incentives to work
C)  will invariably lead to lower average tax rates
D)  are not associated with deadweight lossesE) All of the above
F) None of the above

Question 12

A progressive tax system is one which satisfies the principle of:

Accepted Answer

A)  vertical equity
B)  administrative efficiency
C)  elimination of poverty
D)  reduction in tax evasionE) None of the above
F) A) and B)

Question 13

Income tax is a good example of a lump-sum tax.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following factors will influence the size of the deadweight loss from the individual income tax?
(i)  on average, people will choose to not work as hard as they would if income was not taxed
(ii)  on average, people will choose to save less and consume more
(iii)  on average, people will choose to reduce their leisure time

Accepted Answer

A)  (i) , (ii)  and (iii) 
B)  (i)  and (ii)  only
C)  (i)  and (iii)  only
D)  (ii)  and (iii)  onlyE) A) and B)
F) A) and C)

Question 15

According to the information provided, how much consumer surplus accrues to Frida and Brent individually?

Accepted Answer

A)  $64 and $93, respectively
B)  $85 and $39, respectively
C)  $46 and $35, respectively
D)  $64 and $39, respectivelyE) A) and B)
F) All of the above

Question 16

A 'tax liability' refers to:

Accepted Answer

A)  the fine incurred when a taxpayer is caught evading tax
B)  the amount of tax a taxpayer owes at the end of the financial year
C)  the taxpayer who is liable to pay the tax
D)  the fine incurred when a taxpayer is caught avoiding taxE) A) and D)
F) None of the above

Question 17

In the absence of taxes, Jane would prefer to purchase a large four-wheel drive (4WD) .However, the government has recently decided to place a $10 000 nuisance tax on 4WDs.Which of the following statements best reflects the effect of this tax if Jane decides to purchase a small economy car as a result of the tax?

Accepted Answer

A)  other people who choose to purchase 4WDs will incur the cost of the deadweight loss of the tax
B)  there are no deadweight losses as long as some people still choose to purchase 4WDs
C)  all deadweight losses are mitigated if there is a net decrease in air pollution
D)  Jane is worse off, and her loss of welfare is part of the deadweight loss of the taxE) A) and B)
F) A) and C)

Question 18

Ambiguities or omission in the tax laws generate tax loopholes.

Accepted Answer

A) True 
 B)False

Question 19

One argument against the GST is:

Accepted Answer

A)  that it allows the government to choose what people should and shouldn't buy
B)  that poor people spend a higher proportion of their income on food, so it will affect them disproportionately
C)  that rich people spend a higher proportion of their money overseas, so it won't affect them enough
D)  that it is too regressive in natureE) A) and B)
F) None of the above

Question 20

Which of the following statements regarding the company income tax is most correct?

Accepted Answer

A)  equity considerations are more easily satisfied than efficiency considerations when company income is taxed
B)  the company income tax does not distort the incentives of customers
C)  the company income tax is the best example of why the flypaper theory of tax incidence is correct
D)  many economists believe that workers and customers bear much of the burden of the company income taxE) All of the above
F) B) and D)

Exam 12: The Design of the Tax System

Income tax is a good example of a lump-sum tax.

Correct Answer
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Correct Answer
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Explain what the differences are behind a progressive, a regressive and a proportional tax income system.

Correct Answer
verified
A progressive income tax system would re...
View Answer

Which of the following statements regarding the company income tax is most correct?

Correct Answer
verified

According to the information provided, how much consumer surplus accrues to Frida and Brent individually?

Correct Answer
verified

Amy's marginal tax rate was 18 per cent last year.This means the amount she paid on the last dollar she earned in that year was:

Correct Answer
verified

Correct Answer
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A 'tax liability' refers to:

Correct Answer
verified

Taxes on the wealthy that are used exclusively for anti-poverty programs may be justified on the benefits principle if:

Correct Answer
verified

One argument against the GST is:

Correct Answer
verified

A budget deficit is when a government owes money to overseas investors.

Correct Answer
verified

A tax on expensive speedboats that are purchased only by the wealthy is not likely to satisfy the condition of vertical equity on the basis that:

Correct Answer
verified

Ambiguities or omission in the tax laws generate tax loopholes.

Correct Answer
verified

According to the information provided, the amount of surplus value that accrues to Dean, Jess, Brent and Frida from their day surfing is:

Correct Answer
verified

The average tax rate measures the:

Correct Answer
verified

High marginal tax rates:

Correct Answer
verified

According to the information provided, if a tax of $4 is levied on each bottle of micro-brewed beer, what is the total deadweight loss of the tax?

Correct Answer
verified

According to the information provided, how much consumer surplus does Celia receive from consuming her 12-litre bottle of micro-brewed beer?

Correct Answer
verified

Which of the following is a tax system in which higher income taxpayers pay a higher percentage of their income in taxes?

Correct Answer
verified

A progressive tax system is one which satisfies the principle of:

Correct Answer
verified

Exam 12: The Design of the Tax System

Income tax is a good example of a lump-sum tax.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Explain what the differences are behind a progressive, a regressive and a proportional tax income system.

Correct AnswerverifiedA progressive income tax system would re...View AnswerShow Answer

Which of the following statements regarding the company income tax is most correct?

Correct AnswerverifiedShow Answer

According to the information provided, how much consumer surplus accrues to Frida and Brent individually?

Correct AnswerverifiedShow Answer

Amy's marginal tax rate was 18 per cent last year.This means the amount she paid on the last dollar she earned in that year was:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A 'tax liability' refers to:

Correct AnswerverifiedShow Answer

Taxes on the wealthy that are used exclusively for anti-poverty programs may be justified on the benefits principle if:

Correct AnswerverifiedShow Answer

One argument against the GST is:

Correct AnswerverifiedShow Answer

A budget deficit is when a government owes money to overseas investors.

Correct AnswerverifiedShow Answer

A tax on expensive speedboats that are purchased only by the wealthy is not likely to satisfy the condition of vertical equity on the basis that:

Correct AnswerverifiedShow Answer

Ambiguities or omission in the tax laws generate tax loopholes.

Correct AnswerverifiedShow Answer

According to the information provided, the amount of surplus value that accrues to Dean, Jess, Brent and Frida from their day surfing is:

Correct AnswerverifiedShow Answer

The average tax rate measures the:

Correct AnswerverifiedShow Answer

High marginal tax rates:

Correct AnswerverifiedShow Answer

According to the information provided, if a tax of $4 is levied on each bottle of micro-brewed beer, what is the total deadweight loss of the tax?

Correct AnswerverifiedShow Answer

According to the information provided, how much consumer surplus does Celia receive from consuming her 12-litre bottle of micro-brewed beer?

Correct AnswerverifiedShow Answer

Which of the following is a tax system in which higher income taxpayers pay a higher percentage of their income in taxes?

Correct AnswerverifiedShow Answer

A progressive tax system is one which satisfies the principle of:

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
verified
A progressive income tax system would re...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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