41
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13) Ann pays $3,850 in taxes on an income of $38,500. Therefore her
A) marginal tax rate must be ten percent.
B) taxes must be progressive in nature.
C) average tax rate must be ten percent.
D) personal exemption is ten percent.
E) proportional tax rate is undefined.
Skill: Level 2: Using definitions
Section: Checkpoint 8.2
Author: TS
AACSB: Reflective thinking
14) The average tax rate equals
A) (total tax ÷ change in income) × 100.
B) (change in tax ÷ total income) × 100.
C) (total tax ÷ total income) × 100.
D) (change in tax ÷ change in income) × 100.
E) (marginal tax are × total income) × 100.
Skill: Level 3: Using models
Section: Checkpoint 8.2
Author: PH
AACSB: Reflective thinking
15) The average tax rate
A) can be calculated by summing all the marginal tax rates up to the level of income for which
the average is being calculated.
B) is the marginal tax rate divided by the total tax.
C) is the percentage of income paid as taxes.
D) equals income divided by amount of taxes paid.
E) equals the marginal tax rate multiplied by total taxable income.
Skill: Level 2: Using definitions
Section: Checkpoint 8.2
Author: SA
AACSB: Reflective thinking
42
Copyright © 2011 Pearson Education, Inc.
16) If the average tax rate increases as income increases, the tax is
A) progressive.
B) proportional.
C) regressive.
D) an excise tax.
E) a decreasing marginal-rate tax.
Skill: Level 2: Using definitions
Section: Checkpoint 8.2
Author: SB
AACSB: Reflective thinking
17) If the average tax rate increases as income increases, then the
A) tax is regressive tax.
B) tax is a progressive tax.
C) tax is a proportional tax.
D) income is tax exempt so that no tax needs to be paid on it.
E) marginal tax rate must be falling as income increases.
Skill: Level 1: Definition
Section: Checkpoint 8.2
Author: SA
AACSB: Reflective thinking
18) If the average tax rate increases as income increases, the tax is a
A) progressive tax.
B) regressive tax.
C) proportional tax.
D) marginal tax.
E) production-efficient tax.
Skill: Level 1: Definition
Section: Checkpoint 8.2
Author: JC
AACSB: Reflective thinking
43
Copyright © 2011 Pearson Education, Inc.
19) If the average tax rate remains constant as income changes, the tax is
A) progressive.
B) proportional.
C) regressive.
D) definitely fair.
E) impossible to determine with the information given.
Skill: Level 2: Using definitions
Section: Checkpoint 8.2
Author: TS
AACSB: Reflective thinking
20) A tax that has the same average rate at all levels is
A) a proportional tax.
B) a regressive tax.
C) a marginal tax.
D) a sales tax.
E) an efficient-price tax.
Skill: Level 1: Definition
Section: Checkpoint 8.2
Author: JC
AACSB: Reflective thinking
21) When each taxpayer pays the same average tax rate regardless of the taxpayer’s income, the
tax is
A) a regressive tax.
B) a progressive tax.
C) an estate tax.
D) a proportional tax.
E) an efficient-price tax.
Skill: Level 2: Using definitions
Section: Checkpoint 8.2
Author: PH
AACSB: Reflective thinking
44
Copyright © 2011 Pearson Education, Inc.
22) If the average tax rate ________ as income increases, then the tax is a ________ tax.
A) does not change; proportional
B) does not change; regressive
C) decreases; progressive
D) decreases; proportional
E) increases; regressive
Skill: Level 2: Using definitions
Section: Checkpoint 8.2
Author: CD
AACSB: Reflective thinking
23) With a proportional tax, as income increases the amount of tax paid
A) eventually phases out to zero.
B) rises as a percentage of income.
C) falls as a percentage income.
D) remains constant as a percentage of income.
E) first rises and then falls as a percentage of income.
Skill: Level 2: Using definitions
Section: Checkpoint 8.2
Author: SA
AACSB: Reflective thinking
24) If the average tax rate falls as income increases, the tax is
A) progressive.
B) proportional.
C) regressive.
D) vertically unfair.
E) impossible to determine with the information given.
Skill: Level 1: Definition
Section: Checkpoint 8.2
Author: TS
AACSB: Reflective thinking
45
Copyright © 2011 Pearson Education, Inc.
25) A tax for which the average tax rate decreases as income increases is defined as
A) a proportional tax.
B) a regressive tax.
C) a progressive tax.
D) a sales tax.
E) an efficient-quantity tax.
Skill: Level 1: Definition
Section: Checkpoint 8.2
Author: JC
AACSB: Reflective thinking
26) Suppose everybody paid the same total amount of tax regardless of their income. This type
of tax system would be
A) regressive.
B) proportional.
C) progressive.
D) marginal.
E) efficient.
Skill: Level 3: Using models
Section: Checkpoint 8.2
Author: PH
AACSB: Reflective thinking
27) Assume that the government passes a tax so that every individual must pay $100. This tax is
a
A) progressive tax.
B) proportional tax.
C) regressive tax.
D) marginal tax.
E) type of tax that is impossible to determine without more information.
Skill: Level 4: Applying models
Section: Checkpoint 8.2
Author: TS
AACSB: Reflective thinking
46
Copyright © 2011 Pearson Education, Inc.
28) The sales tax in Dutchess County, New York, is 7.5 percent. This sales tax is
A) fair because everyone pays the same tax.
B) proportional.
C) regressive.
D) progressive.
E) an example of the benefit principle of taxation.
Skill: Level 2: Using definitions
Section: Checkpoint 8.2
Author: MR
AACSB: Reflective thinking
29) If Sam pays $2,000 in taxes on an income of $20,000 and $2,800 in taxes on an income of
$30,000, the tax rate is
A) regressive.
B) proportional.
C) progressive.
D) vertically fair
E) not enough information is given to determine the answer.
Skill: Level 2: Using definitions
Section: Checkpoint 8.2
Author: TS
AACSB: Reflective thinking
30) If there is an income tax levied on workers, the labor demand curve ________ and the labor
supply curve ________.
A) shifts rightward; does not shift
B) shifts leftward; does not shift
C) does not shift; shifts rightward
D) does not shift; shifts leftward
E) shifts leftward; shifts leftward
Skill: Level 3: Using models
Section: Checkpoint 8.2
Author: SB
AACSB: Reflective thinking
47
Copyright © 2011 Pearson Education, Inc.
31) If there is an income tax levied on employers, the labor demand curve ________ and the
labor supply curve ________.
A) shifts rightward; does not shift
B) shifts leftward; does not shift
C) does not shift; shifts rightward
D) does not shift; shifts leftward
E) shifts leftward; shifts leftward
Skill: Level 3: Using models
Section: Checkpoint 8.2
Author: SB
AACSB: Reflective thinking
32) What happens to the acceptable wage rate at each level of employment once an income tax is
levied on workers?
A) Nothing, it remains the same.
B) It increases by the amount of the tax that must be paid.
C) Workers and employers split the tax, so the acceptable wage increases by half the tax.
D) Because workers have to work more to make up for the tax, the acceptable wage rate falls by
some amount that cannot be determined.
E) Because workers have to work more to make up for the tax, the acceptable wage rate falls by
the precise amount of the tax that must be paid.
Skill: Level 2: Using definitions
Section: Checkpoint 8.2
Author: TS
AACSB: Reflective thinking
33) Suppose that, after government imposed an income tax, the wages paid by employers rose
$1.00 and the wages received by employees fell by $0.20. What does that reveal about the
elasticities of supply and demand?
A) Supply is more elastic than demand.
B) Demand is more elastic than supply.
C) Supply and demand are equally elastic.
D) Both the supply and demand are inelastic.
E) Nothing because more information is needed to learn about the elasticities.
Skill: Level 4: Applying models
Section: Checkpoint 8.2
Author: SB
AACSB: Analytical reasoning
48
Copyright © 2011 Pearson Education, Inc.
34) The deadweight loss of a tax on labor income is
A) larger for high-wage workers than for low-wage workers.
B) not part of the total burden of a tax.
C) not a burden workers do not pay that tax.
D) zero for all workers because the supply of labor is perfectly inelastic.
E) zero for low income workers and small for high income workers.
Skill: Level 2: Using definitions
Section: Checkpoint 8.2
Author: SA
AACSB: Reflective thinking
35) A tax on labor income ________ a deadweight loss for low-wage workers and ________ a
deadweight loss for high-wage workers.
A) creates; creates
B) creates; does not create
C) does not create; creates
D) does not create; does not creates
E) eliminates; eliminates
Skill: Level 2: Using definitions
Section: Checkpoint 8.2
Author: MR
AACSB: Reflective thinking
36) Taxes on labor income ________ a deadweight loss and ________ the supply of labor.
A) create; decrease
B) do not create; increase
C) create; increase
D) do not create; decrease
E) create; do not change
Skill: Level 2: Using definitions
Section: Checkpoint 8.2
Author: PH
AACSB: Reflective thinking
49
Copyright © 2011 Pearson Education, Inc.
37) The figure above shows the labor supply and labor demand curves for personal trainers in the
state of Florida. The initial equilibrium hourly wage is $10. Suppose the state of Florida
institutes an income tax of $6 an hour in order to buy voting machines for the next election. With
the tax in place, the labor supply curve will
A) remain at LS.
B) shift to LS1.
C) shift to LS2.
D) change so that it becomes the same as LD.
E) None of the above answers is correct.
Skill: Level 3: Using models
Section: Checkpoint 8.2
Author: JC
AACSB: Analytical reasoning
50
Copyright © 2011 Pearson Education, Inc.
38) The figure above shows the labor supply and labor demand curves for personal trainers in the
state of Florida. The initial equilibrium hourly wage is $10. Suppose the state of Florida
institutes an income tax of $6 an hour in order to buy voting machines for the next election. How
much of the tax is paid by employers?
A) $0
B) $2
C) $4
D) $6
E) $600
Skill: Level 3: Using models
Section: Checkpoint 8.2
Author: JC
AACSB: Analytical reasoning
39) The figure above shows the labor supply and labor demand curves for personal trainers in the
state of Florida. The initial equilibrium hourly wage is $10. Suppose the state of Florida
institutes an income tax of $6 an hour in order to buy voting machines for the next election. How
much of the tax is paid by employees?
A) $0
B) $2
C) $4
D) $6
E) $600
Skill: Level 3: Using models
Section: Checkpoint 8.2
Author: JC
AACSB: Analytical reasoning
40) The figure above shows the labor supply and labor demand curves for personal trainers in the
state of Florida. The initial equilibrium hourly wage is $10. Suppose the state of Florida
institutes an income tax of $6 an hour in order to buy voting machines for the next election. The
deadweight loss from this tax equals the region
A) abe.
B) bce.
C) cef.
D) efg.
E) cdf.
Skill: Level 3: Using models
Section: Checkpoint 8.2
Author: JC
AACSB: Analytical reasoning