Question 1

The number of people living below the poverty line divided by the total number of people in a nation is the nation's

Accepted Answer

A) poverty rate. 
B) starving ratio. 
C) hardship rate. 
D) poverty ratio. 
E) poor rate. 
A) poverty rate. 
B) starving ratio. 
C) hardship rate. 
D) poverty ratio. 
E) poor rate.

Question 2

If the government imposes a tax on snack food, which has a higher elasticity of demand than non-snack food, then the deadweight loss from the tax

Accepted Answer

A) is zero. 
B) is larger for snack food than it would be if the same tax were imposed on non-snack food. 
C) is the same for snack food as it would be if the same tax were imposed on non-snack food. 
D) is lower for snack food than it would be if the same tax were imposed on non-snack food. 
E) cannot be determined. 
A) is zero. 
B) is larger for snack food than it would be if the same tax were imposed on non-snack food. 
C) is the same for snack food as it would be if the same tax were imposed on non-snack food. 
D) is lower for snack food than it would be if the same tax were imposed on non-snack food. 
E) cannot be determined.

Question 3

If a tax is imposed on a good to be paid by the seller of the good, what will happen to the market price and quantity? State whether the price will go up or down and whether the change in price will be as large as the tax.

Accepted Answer

The price of the product paid

Question 4

A means-tested transfer program intended to help poor preschool children is

Accepted Answer

A) earned income tax credit. 
B) Head Start. 
C) UNICEF. 
D) Medicaid. 
E) Aid to Families with Dependent Children. 
A) earned income tax credit. 
B) Head Start. 
C) UNICEF. 
D) Medicaid. 
E) Aid to Families with Dependent Children.

Question 5

The effect of the personal income tax on the amount of labor employed in the economy is greatest when

Accepted Answer

A) demand and supply are both relatively elastic. 
B) demand and supply are both relatively inelastic. 
C) demand is relatively inelastic and supply is relatively elastic. 
D) demand is relatively elastic and supply is relatively inelastic. 
E) both supply and demand do not exist. 
A) demand and supply are both relatively elastic. 
B) demand and supply are both relatively inelastic. 
C) demand is relatively inelastic and supply is relatively elastic. 
D) demand is relatively elastic and supply is relatively inelastic. 
E) both supply and demand do not exist.

Question 6

As a result of government tax and transfer policies,

Accepted Answer

A) the Lorenz curve is more bowed than it otherwise would be. 
B) more people live in poverty. 
C) the poor are poorer. 
D) work incentives have not changed compared to when there were no such programs. 
E) the Gini coefficient is lower. 
A) the Lorenz curve is more bowed than it otherwise would be. 
B) more people live in poverty. 
C) the poor are poorer. 
D) work incentives have not changed compared to when there were no such programs. 
E) the Gini coefficient is lower.

Question 7

A government payment to an individual because he/she is elderly is called a(n)

Accepted Answer

A) security transfer. 
B) social insurance transfer. 
C) pension transfer. 
D) near-death transfer. 
E) old-age transfer. 
A) security transfer. 
B) social insurance transfer. 
C) pension transfer. 
D) near-death transfer. 
E) old-age transfer.

Question 8

For a mandated benefit to decrease total employment, demand would have to

Accepted Answer

A) increase more than supply. 
B) decrease more than supply. 
C) shift down less than supply. 
D) shift down more than supply. 
E) shift up more than supply. 
A) increase more than supply. 
B) decrease more than supply. 
C) shift down less than supply. 
D) shift down more than supply. 
E) shift up more than supply.

Question 9

Exhibit 14-3  
-Refer to Exhibit 14-3. Calculate the average tax rate of an individual whose taxable income is $65,000 and who has total deductions and exemptions of $10,000.

Accepted Answer

22 percent
Tax on first = $25,000 = $25,

Question 10

The table below gives the income distribution in two countries, A and B. Draw the Lorenz Curve for each country. Which country has the larger Gini coefficient?

Accepted Answer

Country A has the larger Gini

Question 11

Taxes cause deadweight losses because they

Accepted Answer

A) raise market prices. 
B) lower firm profits. 
C) distort economic incentives. 
D) increase revenue for the government. 
E) benefit firms at the expense of consumers. 
A) raise market prices. 
B) lower firm profits. 
C) distort economic incentives. 
D) increase revenue for the government. 
E) benefit firms at the expense of consumers.

Question 12

U.S. government tax and transfer policies have tended to lower income inequality.

Accepted Answer

A) True 
 B)False

Question 13

Property taxes are the largest sources of revenue for local governments.

Accepted Answer

A) True 
 B)False

Question 14

Exhibit 14-5  
-Refer to Exhibit 14-5. In looking at Rural's income distribution, one could say that

Accepted Answer

A) the fourth quintile makes twice as much income as the remainder of the country's population. 
B) the poorest 60 percent of the population receives 20 percent of the nation's income. 
C) the 20 percent of the population with the highest income makes as much as the poorest 60 percent of the population. 
D) the poorest fifth of the population receives one-fifth of the country's income. 
E) the poor are getting poorer as the rich get richer. 
A) the fourth quintile makes twice as much income as the remainder of the country's population. 
B) the poorest 60 percent of the population receives 20 percent of the nation's income. 
C) the 20 percent of the population with the highest income makes as much as the poorest 60 percent of the population. 
D) the poorest fifth of the population receives one-fifth of the country's income. 
E) the poor are getting poorer as the rich get richer.

Question 15

A corporate income tax is based on employees' income in a corporation.

Accepted Answer

A) True 
 B)False

Question 16

Many politicians argue against taxing home heating oil because it is a regressive tax. Explain. If the demand for heating oil is very elastic, what happens to the quantity demanded after the tax is imposed? Who will bear most of the burden of the tax in this case?

Accepted Answer

A tax on home heating oil will be regres

Question 17

Twenty percent of the population grouped in terms of a range of income is called a(n)

Accepted Answer

A) quint. 
B) quintile. 
C) Gini coefficient. 
D) fifth statistic. 
E) income fifth. 
A) quint. 
B) quintile. 
C) Gini coefficient. 
D) fifth statistic. 
E) income fifth.

Question 18

An excise tax on a good will always produce a deadweight loss.

Accepted Answer

A) True 
 B)False

Question 19

If everybody had the same income, the Lorenz curve would

Accepted Answer

A) be a curve that intersects the line of income equality at the point at which 50 percent of the population earns 50 percent of the income. 
B) be the line of income equality. 
C) bow down below the line of income equality. 
D) bow up above the line of income equality. 
E) be a line below and parallel to the line of income equality. 
A) be a curve that intersects the line of income equality at the point at which 50 percent of the population earns 50 percent of the income. 
B) be the line of income equality. 
C) bow down below the line of income equality. 
D) bow up above the line of income equality. 
E) be a line below and parallel to the line of income equality.

Question 20

All transfer payments are means-tested.

Accepted Answer

A) True 
 B)False

Exam 14: Taxes, Transfers, and Income Distribution

The number of people living below the poverty line divided by the total number of people in a nation is the nation's

If the government imposes a tax on snack food, which has a higher elasticity of demand than non-snack food, then the deadweight loss from the tax

If a tax is imposed on a good to be paid by the seller of the good, what will happen to the market price and quantity? State whether the price will go up or down and whether the change in price will be as large as the tax.

A means-tested transfer program intended to help poor preschool children is

The effect of the personal income tax on the amount of labor employed in the economy is greatest when

As a result of government tax and transfer policies,

A government payment to an individual because he/she is elderly is called a(n)

For a mandated benefit to decrease total employment, demand would have to

Exhibit 14-3 -Refer to Exhibit 14-3. Calculate the average tax rate of an individual whose taxable income is $65,000 and who has total deductions and exemptions of $10,000.

The table below gives the income distribution in two countries, A and B. Draw the Lorenz Curve for each country. Which country has the larger Gini coefficient?

Taxes cause deadweight losses because they

U.S. government tax and transfer policies have tended to lower income inequality.

Property taxes are the largest sources of revenue for local governments.

Exhibit 14-5 -Refer to Exhibit 14-5. In looking at Rural's income distribution, one could say that

A corporate income tax is based on employees' income in a corporation.

Many politicians argue against taxing home heating oil because it is a regressive tax. Explain. If the demand for heating oil is very elastic, what happens to the quantity demanded after the tax is imposed? Who will bear most of the burden of the tax in this case?

Twenty percent of the population grouped in terms of a range of income is called a(n)

An excise tax on a good will always produce a deadweight loss.

If everybody had the same income, the Lorenz curve would

All transfer payments are means-tested.

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Efficiency of Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Trade

International Finance

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