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Exam 12: The Design of the Tax System

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Question 131

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If revenue from a cigarette tax is used to pay for healthcare for people with lung cancer, the cigarette tax may be justified on the basis of

A) the benefits principle.
B) the ability-to-pay principle.
C) vertical equity.
D) horizontal equity.

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

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Question 132

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If the government were to impose a tax that assigned everyone the same tax liability, it would be

A) a lump-sum tax.
B) an equitable tax.
C) supported by the poor.
D) a progressive tax.

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

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Question 133

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Suppose Tyler values a basketball at $20. Jacqui values a basketball at $25. The pre-tax price of a basketball $10. The government imposes a tax of $5 on each basketball, and the price rises to $15. The deadweight loss from the tax is

A person's marginal tax rate equals

Table 12-23 The dollar amounts in the last three columns are the taxes owed under the three different tax systems. -Refer to Table 12-23. Which of the three tax systems is regressive?

One tax system is less efficient than another if it

"A $1,000 tax paid by a poor person may be a larger sacrifice than a $10,000 tax paid by a wealthy person" is an argument in favor of

Deadweight losses are associated with

Table 12-14 -Refer to Table 12-14. The tax system is

Which of the following statements is correct?

A budget deficit occurs when government receipts fall short of government spending.

Suppose the government taxes 10 percent of the first $20,000 in income, 20 percent of the next $20,000 in income, and 30 percent of all income over $40,000. Calculate the marginal tax rate and the average tax rate for a person who earns $100,000.

An advantage of a consumption tax is that it does not distort the incentive to save.

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 taxes based on a person's ability to pay?

If tax revenues from a cigarette tax are used to pay for healthcare expenses related to lung cancer, the cigarette tax could be justified using the .

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 $3 on a movie ticket and that, as a result, the price of a movie ticket increases to $8. What is total consumer surplus after the tax is imposed?

A tax system based on the ability-to-pay principle claims that all citizens should

Table 12-11 -Refer to Table 12-11. If Peggy has taxable income of $43,000, her tax liability is

To fully understand the progressivity of government policies, one should only look at the proportion of total income that individuals pay in taxes each year.

Table 12-24 -Refer to Table 12-24. The tax system is an example of a tax.