Question

If revenue from a cigarette tax is used to provide medical care to individuals that develop health problems due to smoking, the cigarette tax may be justified on the basis of the benefits principle of taxation.

Select one:

True

False

Question text

Benjamin earned more than $50,000 and Franklin earned less than $40,000. If the government imposes a $2,000 lump-sum tax, then the average tax rate for Benjamin is less than 4.0% and for Franklin it is more than 5.0%.

Select one:

True

False

Question text

If your income is $50,000 and your income tax liability is $10,000, then your average tax rate is 20 percent but your marginal tax rate must be greater than 20 percent if the tax is proportional.

Select one:

True

False

Answer 1

1. True

Explanation: According to the benefit principle, a tax is justified if people who are taxed are also benefited from it.

2. True

Explanation: Average tax rate = taxes paid/ income * 100.

3. False

Explanation: In proportional tax, average tax rate equals the marginal tax rate.