Because of the Complex Nature of the U

question 58

Multiple Choice

Because of the complex nature of the U.S. income tax system, many people have questions for the Internal Revenue Service (IRS) . Yet, an article published by the Detroit Free Press entitled "Assistance: IRS Help Centers Give the Wrong Information" discusses the propensity of IRS staff employees to give incorrect tax information to tax-payers who call with questions. Then IRS Inspector General Pamela Gardiner told a Senate subcommittee that "the IRS employees at 400 taxpayer assistance centers nationwide encountered 8.5 million taxpayers face-to-face last year. The problem: When inspector general auditors posing as taxpayers asked them to answer tax questions, the answers were right 69% of the time." Suppose an independent commission was formed to test whether the 0.69 accuracy rate is correct or whether it is actually higher or lower. The commission has randomly selected n = 180 tax returns that were completed by IRS assistance employees and found that 105 of the returns were accurately completed. Using an α= 0.05 level, based on the sample data, what conclusion should be reached about the IRS rate of correct tax returns?

• A) The z-critical values from the standard normal table for a two-tailed test with alpha = 0.05 are and z = -1.96. Since z = -0.96 > -1.96, we do not reject the null hypothesis. Thus, based on these sample
• Data, we believe that the accuracy rate is actually higher than the 0.69 rate quoted in the Detroit Free Press
• Article
• B) The z-critical values from the standard normal table for a two-tailed test with alpha = 0.05 are and z = -1.96. Since z = -0.96 > -1.96, we do not reject the null hypothesis. Thus, based on these sample
• Data, we believe that the accuracy rate is actually higher than the 0.58 rate quoted in the Detroit Free Press
• Article
• C) The z-critical values from the standard normal table for a two-tailed test with alpha = 0.05 are and z = -1.96. Since z= -3.19 < -1.96, we reject the null hypothesis. Thus, based on these sample data, we
• Believe that the accuracy rate is actually lower than the 0.69 rate quoted in the Detroit Free Press article.
• D) The z-critical values from the standard normal table for a two-tailed test with alpha = 0.05 are and z = -1.96. Since z = -3.19 < -1.96, we reject the null hypothesis. Thus, based on these sample data, we
• Believe that the accuracy rate is actually lower than the 0.58 rate quoted in the Detroit Free Press article.

---

Definitions:

Ceteris Paribus

A Latin phrase meaning "all other things being equal," used in economics to analyze the effect of one variable on another while holding all other relevant factors constant.

Total Income

The sum of all earnings obtained by an individual or entity, including wages, salaries, benefits, and income from investments, before any deductions.

Complementary

Goods or services that are used together, where the consumption or use of one increases the value or demand for the other.

Fixed Proportions

A production condition where inputs are used in constant ratios, without substitution between them, over a range of output levels.