DCHAPTER 1 QUESTIONS AND
ANSWERS GRADED A+
Which of the following common decisions would most likely NOT be influenced by the United States
income tax laws? - Choosing a public school for your children
True or false: The general purpose of a tax is to provide incentives that will stimulate and improve the
economy. - False
Is it true that a "tax" is essentially the same as a fine or penalty? - No
A tax imposed on a legal product or service that may be addictive in nature is known as a(n): - sin tax
The formula to calculate the amount of tax is the tax (1) multiplied by the tax (2). - 1. base
2. rate
Which of the following decisions would most likely NOT be influenced by our tax system? - Choosing a
vacation destination
Which of the following terms describes the level of taxes imposed on the tax base and is usually
expressed as a percentage? - Tax rate
The general purpose of a tax is to raise (1) to fund the operations of the (2). - 1. funds
2. government
True or false: A tax can be defined as a fine or penalty. - false
Arlene is single and has taxable income of $34,000. Her tax liability is currently $4,636. She has the
opportunity to earn an additional $6,000 this year. Her tax liability will grow to $5,771 if she receives the
additional income. What is Arlene's marginal tax rate for the additional $6,000? - 18.92%
Which of the following statements is true regarding sin taxes? - Sin taxes discourage undesirable, yet
legal, behaviors such as smoking and drinking.
Marcus and Lydia Brown are married and filing jointly and have $155,000 in taxable income. Lydia has
been offered a job promotion which will increase their taxable income to $174,000 in 2019. This
additional income will move them into the next graduated tax bracket (24%). Which of the following
statements is correct? - A portion of the additional $19,000 will be taxed at 22% and a portion will be
taxed at 24%.
Shelby bought a dress costing $200 from Arlene's Dress Shop in a state where there is a sales tax rate of
5%. Shelby had to pay (1) dollars in sales tax. - 1. $10
Which of the following sentences describes the marginal tax rate? - The tax rate applied to the next
additional increment of a taxpayer's taxable income (or deductions)
, The tax (1) determines the level of taxes imposed on the tax base and is usually expressed as a
percentage. - 1. rate
A(n) ______ tax structure applies the same tax rate to all levels of income, while a(n) ______ tax
structure applies higher tax rates as the tax base increases and a(n) ______ tax structure applies lower
tax rates as the tax base increases. - proportional, progressive, regressive
What is the general purpose of a tax? - To fund the operations of the government
A sales tax is an example of a tax that uses a(n) (1) tax rate structure when compared to its tax base. - 1.
proportional
Arlene is single and has taxable income of $18,000. Her tax liability is currently $2,236. She has the
opportunity to earn an additional $5,000 if she accepts and completes a special project at work. There
are no additional expenses to offset the $5,000 income. Consequently, Arlene will have a tax liability of
$2,986 if she accepts the special project. Arlene has a marginal tax rate of (1)%. - 1. 15%
Jose has been offered a new job. The new job will pay more than his current job. Jose is hesitant to take
the new job because it will cause his income to exceed the maximum amount in his current tax bracket.
He is concerned that the increase in taxes will exceed his increased income from the new job. - This is
not possible. Only the portion of income that exceeds Jose's current bracket will be taxed at the higher
rate, not his total taxable income.
Which of the following sentences describes the average tax rate? - The average level of taxation on each
dollar of the taxpayer's taxable income
Which of the following taxes uses a progressive tax rate structure? - Federal individual income tax
Blade pays tax of $5,000 on taxable income of $50,000 while Caden pays tax of $10,000 on taxable
income of $100,000. What type of tax rate structure appears to be in force? - Proportional
The social security tax is an example of a(n) (1) tax structure because as the tax base increases, the taxes
paid increase, but the marginal tax rate decreases. - 1. regressive
Which of the following taxes uses a proportional tax rate structure? - Federal corporate income tax
The federal individual income tax system in the United States uses a(n) (1) tax structure. - 1. progressive
Which of the following taxes uses a regressive tax rate structure? - Social security tax
True or false: The federal estate tax is the MOST significant tax assessed by the U.S. government because
it generates more revenue for the government than other types of federal taxes. - False
The first personal income tax was enacted in 1861 to fund the (1) (2). (Enter one word per blank) - 1. Civil
2. War
Which tax is assessed to provide medical insurance for individuals who are elderly or disabled? -
Medicare tax
The purpose of (1) tax is to provide temporary income for individuals terminated from their jobs without
cause. - 1. unemployment
ANSWERS GRADED A+
Which of the following common decisions would most likely NOT be influenced by the United States
income tax laws? - Choosing a public school for your children
True or false: The general purpose of a tax is to provide incentives that will stimulate and improve the
economy. - False
Is it true that a "tax" is essentially the same as a fine or penalty? - No
A tax imposed on a legal product or service that may be addictive in nature is known as a(n): - sin tax
The formula to calculate the amount of tax is the tax (1) multiplied by the tax (2). - 1. base
2. rate
Which of the following decisions would most likely NOT be influenced by our tax system? - Choosing a
vacation destination
Which of the following terms describes the level of taxes imposed on the tax base and is usually
expressed as a percentage? - Tax rate
The general purpose of a tax is to raise (1) to fund the operations of the (2). - 1. funds
2. government
True or false: A tax can be defined as a fine or penalty. - false
Arlene is single and has taxable income of $34,000. Her tax liability is currently $4,636. She has the
opportunity to earn an additional $6,000 this year. Her tax liability will grow to $5,771 if she receives the
additional income. What is Arlene's marginal tax rate for the additional $6,000? - 18.92%
Which of the following statements is true regarding sin taxes? - Sin taxes discourage undesirable, yet
legal, behaviors such as smoking and drinking.
Marcus and Lydia Brown are married and filing jointly and have $155,000 in taxable income. Lydia has
been offered a job promotion which will increase their taxable income to $174,000 in 2019. This
additional income will move them into the next graduated tax bracket (24%). Which of the following
statements is correct? - A portion of the additional $19,000 will be taxed at 22% and a portion will be
taxed at 24%.
Shelby bought a dress costing $200 from Arlene's Dress Shop in a state where there is a sales tax rate of
5%. Shelby had to pay (1) dollars in sales tax. - 1. $10
Which of the following sentences describes the marginal tax rate? - The tax rate applied to the next
additional increment of a taxpayer's taxable income (or deductions)
, The tax (1) determines the level of taxes imposed on the tax base and is usually expressed as a
percentage. - 1. rate
A(n) ______ tax structure applies the same tax rate to all levels of income, while a(n) ______ tax
structure applies higher tax rates as the tax base increases and a(n) ______ tax structure applies lower
tax rates as the tax base increases. - proportional, progressive, regressive
What is the general purpose of a tax? - To fund the operations of the government
A sales tax is an example of a tax that uses a(n) (1) tax rate structure when compared to its tax base. - 1.
proportional
Arlene is single and has taxable income of $18,000. Her tax liability is currently $2,236. She has the
opportunity to earn an additional $5,000 if she accepts and completes a special project at work. There
are no additional expenses to offset the $5,000 income. Consequently, Arlene will have a tax liability of
$2,986 if she accepts the special project. Arlene has a marginal tax rate of (1)%. - 1. 15%
Jose has been offered a new job. The new job will pay more than his current job. Jose is hesitant to take
the new job because it will cause his income to exceed the maximum amount in his current tax bracket.
He is concerned that the increase in taxes will exceed his increased income from the new job. - This is
not possible. Only the portion of income that exceeds Jose's current bracket will be taxed at the higher
rate, not his total taxable income.
Which of the following sentences describes the average tax rate? - The average level of taxation on each
dollar of the taxpayer's taxable income
Which of the following taxes uses a progressive tax rate structure? - Federal individual income tax
Blade pays tax of $5,000 on taxable income of $50,000 while Caden pays tax of $10,000 on taxable
income of $100,000. What type of tax rate structure appears to be in force? - Proportional
The social security tax is an example of a(n) (1) tax structure because as the tax base increases, the taxes
paid increase, but the marginal tax rate decreases. - 1. regressive
Which of the following taxes uses a proportional tax rate structure? - Federal corporate income tax
The federal individual income tax system in the United States uses a(n) (1) tax structure. - 1. progressive
Which of the following taxes uses a regressive tax rate structure? - Social security tax
True or false: The federal estate tax is the MOST significant tax assessed by the U.S. government because
it generates more revenue for the government than other types of federal taxes. - False
The first personal income tax was enacted in 1861 to fund the (1) (2). (Enter one word per blank) - 1. Civil
2. War
Which tax is assessed to provide medical insurance for individuals who are elderly or disabled? -
Medicare tax
The purpose of (1) tax is to provide temporary income for individuals terminated from their jobs without
cause. - 1. unemployment
