Principles of Microeconomics

N. GREGORY MANKIW

Chapter 12

The Design of the Tax System - all with Video Answers

Educators

Chapter Questions

Problem 1

The two largest sources of tax revenue for the U.S.
federal government are
a. personal and corporate income taxes.
b. personal income taxes and payroll taxes for social
insurance.
c. corporate income taxes and payroll taxes for social
insurance.
d. payroll taxes for social insurance and property taxes.

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Problem 2

Aiden gives piano lessons. He has an opportunity cost
of $\$ 50$ per lesson and charges $\$ 60 .$ He has two stu-
dents: Brandon, who has a willingness to pay of $\$ 70,$
and Chloe, who has a willingness to pay of $\$ 90 .$ When
the government puts a $\$ 20$ tax on piano lessons and
Aiden raises his price to $\$ 80,$ the deadweight loss is
_____ and the tax revenue is _____.
a. $\$ 10, \$ 20$
b. $\$ 10, \$ 40$
c. $\$ 20, \$ 20$
d. $\$ 20, \$ 40$

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Numerade Educator

Problem 3

If the tax code exempts the first $\$ 20,000$ of income
from taxation and then taxes 25 percent of all income
above that level, then a person who earns $\$ 50,000$
has an average tax rate of _____ percent and a marginal tax rate of _____ percent.
a. $15,25$
b. $25,15$
c. $25,30$
d. $30,25$

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Problem 4

A toll is a tax on citizens who use toll roads. This pol-
icy can be viewed as an application of
a. the benefits principle.
b. horizontal equity.
c. vertical equity.
d. tax progressivity.

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Problem 5

In the United States, taxpayers in the top 1 percent
of the income distribution pay about _____ percent of
their income in federal taxes.
a. 5
b. 10
c. 20
d. 30

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Problem 6

If the corporate income tax induces businesses to
reduce their capital investment, then
a. the tax does not have any deadweight loss.
b. corporate shareholders benefit from the tax.
c. workers bear some of the burden of the tax.
d. the tax achieves the goal of vertical equity.

Jiapeng Guo

Numerade Educator