Jan has an income of 30,000 and pays 4,500 in taxes. When Jan's income rises to 40,000 . her tax bill rises to 6,500 . What is Jan's marginal tax rate?
a. 5 percent.
b. 15 percent.
c. 16.25 percent.
d. 20 percent.
QUESTION 2Juanita, a lawyer, can type faster than Jill, her secretary. Jill, on the other hand, does not have the ability or skills to practice law. Applying the principles of international trade to this situation, an economic consultant advises Juanita to:
a. fire Jill, practice law during the day, and do her own typing at night.
b. practice law and leave all the typing to the secretary.
c. divide her time equally between typing and practicing law.
d. quit practicing law and take a job as a secretary.
e. have Jill attend law school.
QUESTION 3In the view of the classical school, unemployment:
a. is a permanent condition.
b. disappears when everyone who is willing to work at the equilibrium wage finds employment.
c. exists because people do not interfere with the competitive process.
d. is only temporary because all wages and prices are rigid.
e. is necessary and good for the economy.
QUESTION 4Which of the following U.S. taxes is the most consistent with the ability-to-pay principle?
a. The excise tax on gasoline.
b. The federal income tax.
c. State sales taxes.
d. The Social Security payroll tax.
QUESTION 5If Japan gives up ten bushels of rice to produce one bicycle, while the United States gives up five bushels of rice to produce one bicycle, then:
a. the opportunity cost of producing bicycles in the United States is higher than in Japan.
b. Japan has a comparative advantage in the production of bicycles.
c. the United States has an absolute advantage in the production of rice.
d. total output will be highest if the United States specializes in rice and Japan specializes in bicycles.
e. total output will be highest if Japan specializes in rice and the United States specializes in bicycles.
QUESTION 6The hands-off view of the classical school rests on which of the following two simple propositions about markets?
a. Demand creates its own supply and markets are basically competitive.
b. Industrial policy is inevitable and all prices are flexible.
c. Market failure occurs and prices are rigid.
d. Wages are sticky downward and market failure is inevitable.
e. Markets are basically competitive and prices are flexible.
QUESTION 7Sales and excise taxes are:
a. progressive.
b. proportional.
c. regressive.
d. fixed-revenue.
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