Question 1

Which of the following is not an advantage of a lump-sum tax in comparison to other types of taxes?
A)It would not cause deadweight loss.
B)It imposes a minimal administrative burden on taxpayers.
C)It is more equitable.
D)It is more efficient.

Accepted Answer

A lump-sum tax is not more equitable than other types of taxes as it imposes the same amount of tax on everyone, irrespective of their income or ability to pay. This makes it regressive in nature and can be unfair for low-income households.

Question 2

Who observed that "in this world nothing is certain but death and taxes"?
A)Mark Twain
B)P.T. Barnum
C)Ben Franklin
D)Richard Nixon

Accepted Answer

This quote is commonly attributed to Benjamin Franklin, although it has also been attributed to other individuals throughout history.

Question 3

From the time of Benjamin Franklin to the present, the percentage of the average American's income that goes to pay taxes has
A)decreased from about 20 percent to about 10 percent.
B)remained constant at about 10 percent.
C)has risen from less than 2 percent to about 33.3 percent.
D)has risen from less than 5 percent to about 25 percent.

Accepted Answer

The answer of From the time of Benjamin Franklin to...

Question 4

​Suppose a state has the following individual income tax structure.The first $20,000 that an individual earns is taxed at 5%. The next $30,000 is taxed at 10%. Any income exceeding $50,000 is taxed at 20%.Based on this tax structure, if a person's income is equal to $60,000, his average tax rate is equal to:
A)​15%
B)​10%
C)​11.67%
D)​20%

Accepted Answer

To find the average tax rate, we need to take the total amount of taxes paid and divide it by the total income.

The first $20,000 is taxed at 5%, so the tax on that portion is: $20,000 x 0.05 = $1,000.

The next $30,000 is taxed at 10%, so the tax on that portion is: $30,000 x 0.10 = $3,000.

The remaining $10,000 is taxed at 20%, so the tax on that portion is: $10,000 x 0.20 = $2,000.

Therefore, the total tax paid is $1,000 + $3,000 + $2,000 = $6,000.

To find the average tax rate, we divide the total tax paid by the total income:

$6,000 ÷ $60,000 = 0.10 or 10%

So the answer is (C) 11.67%.

Question 5

One advantage of a lump-sum tax over other taxes is that it
A)is both equitable and efficient.
B)doesn't cause deadweight loss.
C)would place a larger tax burden on the rich.
D)would raise more revenues.

Accepted Answer

A lump-sum tax is a fixed amount of tax that does not depend on income or any other economic characteristic of the taxpayer. Since it does not affect behavior and does not create any disincentives to work or produce, it does not cause deadweight loss. However, a lump-sum tax is not equitable, as it places a higher burden on lower-income individuals. It also may not raise as much revenue as other taxes that are based on income or consumption. Therefore, the best choice is B, which correctly identifies one advantage of a lump-sum tax.

Question 6

​The federal government decides to impose a 15% excise tax on luxury yachts. An economist would suggest that:
A)​this is an effective way to indirectly tax the wealthy
B)​the tax incidence will fall largely on those who buy luxury yachts
C)​if prospective buyers decide to purchase other luxury goods instead, the tax incidence will largely fall on those who build and sell luxury yachts
D)the price of luxury yachts will rise by 15%

Accepted Answer

The answer of ​The federal government decides to impose a...

Question 7

Table 12-12 
-Refer to Table 12-12. If the government imposes a $3,000 lump-sum tax, the marginal tax rate for Charles would be
A)0 percent.
B)5 percent.
C)6.7 percent.
D)10 percent.

Accepted Answer

The answer of Table 12-12 
-Refer to Table 12-12. If...

Question 8

Lump-sum taxes are rarely used in the real world because
A)while lump-sum taxes have low administrative burdens, they have high deadweight losses.
B)while lump-sum taxes have low deadweight losses, they have high administrative burdens.
C)lump-sum taxes are often viewed as unfair because they take the same amount of money from both poor and rich.
D)lump-sum taxes are very inefficient.

Accepted Answer

The answer of Lump-sum taxes are rarely used in the...

Question 9

Suppose a country imposes a lump-sum income tax of $5,000 on each individual in the country. What is the average income tax rate for an individual who earns $40,000 during the year?
A)0%
B)10%
C)More than 10%
D)The average tax rate cannot be determined without knowing the entire tax schedule.

Accepted Answer

The answer of Suppose a country imposes a lump-sum income...

Question 10

Today the typical American pays approximately what percent of income in taxes, including all federal, state, and local taxes?
A)5 percent
B)25 percent
C)35 percent
D)50 percent

Accepted Answer

According to data from the Tax Foundation, the average American pays approximately 25% of their income in federal, state, and local taxes. This includes income taxes, payroll taxes, sales taxes, property taxes, and various other types of taxes.

Question 11

​Assume a small town decides to build a park by imposing a $2,000 lump-sum tax on each household. If a household's income rises from $50,000 to $75,000, its marginal tax rate is:
A)​0%
B)​2.67%
C)​4%
D)​8%

Accepted Answer

The answer of ​Assume a small town decides to build...

Question 12

Suppose a state has the following individual income tax structure. The first $20,000 that an individual earns is taxed at 5%. The next $30,000 is taxed at 10%. Any income exceeding $50,000 is taxed at 20%. Based on this tax structure, if a person's income rises from $45,000 to $55,000, his marginal tax rate is:
A)​25%
B)​20%
C)​10%
D)​15%

Accepted Answer

The answer of Suppose a state has the following individual...

Question 13

In 1789, the average American paid approximately what percent of income in taxes?
A)5%
B)15%
C)33%
D)50%

Accepted Answer

In 1789, the federal government did not impose an income tax. Instead, the government relied on import tariffs and excise taxes to generate revenue. Therefore, the average American did not pay any income tax, making option A the correct choice.

Question 14

With a lump-sum tax,the average tax rate for high income taxpayers will be
A)the same as the average tax rate for low income taxpayers.
B)lower than the average tax rate for low income taxpayers.
C)higher than the average tax rate for high income taxpayers.
D)Any of the above could be true under a regressive tax system.

Accepted Answer

The answer of With a lump-sum tax,the average tax rate...

Question 15

Table 12-12 
-Refer to Table 12-12. If the government imposes a $2,000 lump-sum tax, the average tax rate for Marcia and Charles would be
A)5 percent and 6.7 percent, respectively.
B)8 percent and 6 percent, respectively.
C)12 percent and 9 percent, respectively.
D)13 percent and 10 percent, respectively.

Accepted Answer

The answer of Table 12-12 
-Refer to Table 12-12. If...

Question 16

If a government simplified its tax system the likeliest result would be a decrease in
A)consumer surplus.
B)producer surplus.
C)in deadweight loss.
D)tax revenues.

Accepted Answer

Simplifying the tax system would lead to a decrease in deadweight loss, as it would reduce the inefficiencies and costs associated with compliance and administration of a complex tax system. It may also lead to increased economic activity and efficiency. It is not likely to directly affect consumer or producer surplus, and the effect on tax revenues would depend on other factors such as the structure and rates of the taxes.

Question 17

With a lump-sum tax, the
A)marginal tax rate is always less than the average tax rate.
B)average tax rate is always less than the marginal tax rate.
C)marginal tax rate falls as income rises.
D)marginal tax rate rises as income rises.

Accepted Answer

The answer of With a lump-sum tax, the
A)marginal tax rate...

Question 18

Suppose a country imposes a lump-sum income tax of $6,000 on each individual in the country. What is the average income tax rate for an individual who earns $60,000 during the year?
A)0%
B)10%
C)More than 10%
D)The average tax rate cannot be determined without knowing the entire tax schedule.

Accepted Answer

Since the lump-sum tax is the same amount for everyone, the average tax rate for an individual earning $60,000 would be ($6,000 / $60,000) x 100% = 10%. Therefore, the best choice is B, 10%.

Question 19

Suppose a country imposes a lump-sum income tax of $5,000 on each individual in the country. What is the marginal income tax rate for an individual who earns $40,000 during the year?
A)0%
B)10%
C)More than 10%
D)The marginal tax rate cannot be determined without knowing the entire tax schedule.

Accepted Answer

The answer of Suppose a country imposes a lump-sum income...

Question 20

In 1789 the percentage of the average American's income that went to pay taxes was about
A)5%. Today it is about 50%.
B)5%. Today it is about 25%.
C)50%. Today it is about 33%.
D)25%. Today it is about 33%.

Accepted Answer

The answer of In 1789 the percentage of the average...

Quiz 12: The Design of the Tax System

Which of the following is not an advantage of a lump-sum tax in comparison to other types of taxes?

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

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

One advantage of a lump-sum tax over other taxes is that it

​The federal government decides to impose a 15% excise tax on luxury yachts. An economist would suggest that:

Table 12-12 -Refer to Table 12-12. If the government imposes a $3,000 lump-sum tax, the marginal tax rate for Charles would be

Lump-sum taxes are rarely used in the real world because

Suppose a country imposes a lump-sum income tax of $5,000 on each individual in the country. What is the average income tax rate for an individual who earns $40,000 during the year?

Today the typical American pays approximately what percent of income in taxes, including all federal, state, and local taxes?

​Assume a small town decides to build a park by imposing a $2,000 lump-sum tax on each household. If a household's income rises from $50,000 to $75,000, its marginal tax rate is:

In 1789, the average American paid approximately what percent of income in taxes?

With a lump-sum tax,the average tax rate for high income taxpayers will be

Table 12-12 -Refer to Table 12-12. If the government imposes a $2,000 lump-sum tax, the average tax rate for Marcia and Charles would be

If a government simplified its tax system the likeliest result would be a decrease in

With a lump-sum tax, the

Suppose a country imposes a lump-sum income tax of $6,000 on each individual in the country. What is the average income tax rate for an individual who earns $60,000 during the year?

Suppose a country imposes a lump-sum income tax of $5,000 on each individual in the country. What is the marginal income tax rate for an individual who earns $40,000 during the year?

In 1789 the percentage of the average American's income that went to pay taxes was about

The federal government decides to impose a 15% excise tax on luxury yachts. An economist would suggest that:

Assume a small town decides to build a park by imposing a $2,000 lump-sum tax on each household. If a household's income rises from $50,000 to $75,000, its marginal tax rate is: