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1. Goals of efficiency and equity in tax policy are
a.
complementary in most countries.
b.
necessary for application of the ability-to-pay principle.
c.
often in conflict with each other.
d.
easier to achieve when tax codes are complex.
2. In choosing the form of a tax, there is often a tradeoff between
a.
allocative and productive efficiency.
b.
profits and revenues.
c.
efficiency and fairness.
d.
fairness and profits.
3. Which of the following tax systems is the most fair?
a.
proportional taxes
b.
regressive taxes
c.
progressive taxes
d.
There is no objective way to assess fairness among the three systems.
4. Economists play an important role in the complex debates over tax policy by
a.
identifying efficiency as the most important goal of tax policy.
b.
identifying equity as the most important goal of tax policy.
c.
shedding light on the tradeoff between efficiency and equity in tax policy.
d.
None of the above is correct.
5. The marginal tax rates on the richest Americans when Ronald Reagan was elected and when he left office were
a.
28 percent and 50 percent, respectively.
b.
70 percent and 40 percent, respectively.
c.
40 percent and 70 percent, respectively.
d.
50 percent and 28 percent, respectively.
6. In general, Democrats tend to prefer
a.
higher marginal tax rates to promote vertical equity, while Republicans tend to prefer lower marginal tax rates
to promote incentives to work and save.
b.
lower marginal tax rates to promote vertical equity, while Republicans tend to prefer higher marginal tax rates
to promote incentives to work and save.
c.
higher marginal tax rates to promote incentives to work and save, while Republicans tend to prefer lower
marginal tax rates to promote vertical equity.
d.
lower marginal tax rates to promote incentives to work and save, while Republicans tend to prefer higher
marginal tax rates to promote vertical equity.
