Question

The highest federal marginal income tax rates in 2017 and 2018 are

33% in 2017 and 29.6% in 2018

37% in 2017 and 39.6% in 2018

42.3% in 2017 and 39.6% in 2018

39.6% in 2017 and 37% in 2018

Question 2

With a progressive tax structure, which of the following is always true?

Income Tax = Taxable Income * Marginal Tax Rate.

The marginal tax rate equals the average tax rate.

The average tax rate is less than the marginal tax rate.

The average tax rate is greater than the marginal tax rate.

Question 3

If the tax rate on hotel rooms in Sacramento is 15%, the compensated elasticity of demand is 1.1, and total revenue from all hotel room rentals is $100,000 per day, how much excess burden is created each day?

$2475

$1237.50

$8250

$16,500

Question 4

If the tax rate doubles from 15% to 30%, what will happen to the excess burden from the tax on hotel rooms?

Excess burden will quadruple.

Excess burden will be cut in half.

Excess burden will stay the same.

Excess burden will double.

Question 5

Equivalent variation measures

The same thing as excess burden.

The difference between the price of the good before the tax and the price after the tax.

The amount of tax that could be collected as a lump sum to create the same drop in utility as a distortionary tax on a single good.

The substitution effect.

Question 6

Say the optimal tax rate on cars is 9%, and the price elasticity of demand for cars is 1.5. If the elasticity of demand for motorcycles is 2, what is the optimal tax rate on motorcycles?

6.75%

5.5%

4.5%

9%

Question 7

Which type of income does not receive special tax treatment?

Interest earned on a standard savings account.

Capital gains on assets held more than a year.

Dividends from stocks.

Retirement savings in a 401K.

Question 8

The tax due on income of $50,000 if the marginal tax brackets are 10% for income 0-10,000, 15% for income 10,000-30,000, and 25% for income 30,000-80,000 is

$12,500

$8,000

$9,000

$20,000

Question 9

The compensated demand curve is

Flatter than the ordinary demand curve, because it shows income and substitution effects.

Steeper than the ordinary demand curve, because it only shows substitution effects.

Steeper than the ordinary demand curve, because it only shows income effects.

Flatter than the ordinary demand curve, because it shows only income effects.

Question 10

Taxes on commodities create excess burden because

they raise tax revenue greater than the amount that could be collected as a lump sum tax.

they distort relative prices, and create costs above the amount of tax revenue raised.

they raise tax revenue equal to equivalent variation.

create costs equal to the amount of tax revenue raised.

Question 11

Income taxes create

no excess burden, because workers don't adjust hours of work.

no excess burden, because they do not distort prices.

excess burden, because they distort the relative price of leisure.

excess burden, because workers don't adjust hours of work.

Question 12

When calculating taxable income, the amount per family member that could be subtracted from adjusted gross income is called a(n)

exemption.

tax credit.

tax refund.

deduction.

Question 13

Capital gains taxes are collected on

the real increase in the value of the asset at the time the asset is sold.

the total nominal value of the asset at the time the asset is sold.

the nominal increase in the value of the asset at the time the asset is sold.

the nominal increase in the value of the asset each year the asset is held.

Question 14

Roth IRAs create tax savings because

contributions are not tax deductible, but interest accumulates tax free, but withdrawals during retirement are subject to taxation.

contributions are not tax deductible, but interest accumulates tax free and there is no tax when the money is withdrawn during retirement.

contributions are tax deductible and interest accumulates tax free, but withdrawals are subject to taxation during retirement.

contributions are tax deductible, interest accumulates tax free, and there is no tax when the money is withdrawn during retirement.