Frequent Exam Questions with Answers
Taxation
Chapter 19 ― Question 1
A person earns $30,000 a year. The zero bracket is $3,000 The tax rate for up to $20,000 is 15 percent. Thereafter it is 25 percent. What is the individual's average tax rate?
- 18,70 percent
- 16,83 percent
- 20 percent
- 20,74 percent
*B. The question is tricky. Income is $30,000 Taxable income is $27,000. Overall tax due is $5,050. This is 16,83 percent of 30,000. Remember that the average tax rate is (total taxes/total income) x 100.
Chapter 19 ― Question 2
A zero bracket makes a proportional tax progressive. True or false? Explain your answer.
* True. The flat rate tax is always higher than the average tax rate. The tax rate is not imposed on the entire income.
Chapter 19 ― Question 3
The excess burden of an indirect tax is borne by the people who cease to buy the taxed commodity. True or False? Explain your answer.
* True. The excess burden is a burden over and above the tax. It consists in a loss of total surplus. The people who cease to buy the taxed commodity no longer enjoy a consumer surplus.
If you like, print this page for offline comparison or studying.