Test Questions without Answers
Chapter 19. Markets and the Government III.
Taxation and the Redistribution of Income
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?
- 18,67 percent
- 16,83 percent
- 20 percent
- 20,74 percent
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Chapter 19–Question 2
A zero bracket makes a proportional tax progressive. True or false? Explain your answer.
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Chapter 19–Question 3
The excess burden of an indirect tax is borne by the people who cease to buy the taxed commodity. Explain.
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Chapter 19–Question 4
Indirect taxes are always regressive. Explain.
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Chapter 19–Question 5
Draw the Laffer curve and explain why Laffer assumed that lower tax rates can raise tax revenues.
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Chapter 19–Question 6
An income tax is progressive
- because the rich pay more taxes than the middle class
- because the tax rate declines as income rises
- because the tax rate increases as income increases
- because absolute amounts paid in taxes vary with income
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Chapter 19–Question 7
Some countries levy a lower VAT rate on food and baby clothing, Do you think that this is equitable? Efficient?
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Chapter 19–Question 8
In 2006, US payroll taxes amounted to 15.3 per cent including a 2.9 percent Medicare tax. FICA is imposed on the first $94,200 of annual wages.
1) Is the US payroll tax progressive, proportional or regressive?
2) There is a mistake in question 1). Do you see it?
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